The question that all potential crypto investors are asking is: how much to invest? The burgeoning crypto universe is subject to strong leaps and bounds, in part because of its relative newness. Therefore, investors should always be extra careful. Here are the factors to consider.
Decide which cryptocurrency you are interested in
You need not only to determine the size of your investment in cryptocurrency, but also to have a strategic understanding of how this digital asset works, since this directly affects the degree of possible risk.
A long-term investor primarily comes from fundamental analysis, therefore, before participating in the development of a cryptocurrency or ICO, you will need to understand how they function, what is their history and what is their novelty.
Particular attention should be paid to what is the purpose of the cryptocurrency, how long it has been on the market, what is its market capitalization and what technical solutions are at its core. The longer a cryptocurrency is on the market, the more confidence it inspires.
The type of investment you are interested in
If you want to enter the cryptocurrency market, you obviously need an action plan. The question is, which deals are you interested in: short-term or long-term?
If you want to trade regularly, it is worth studying market trends, the mechanisms that determine market processes, and the psychology of investors.
For a deeper understanding of the situation, you need to understand market indicators and the basics of fundamental and technical analysis, read developer announcements, news about technological innovations and events that may affect market conditions.
And remember – statistics play an important role in the cryptocurrency market.
For a correct investment strategy, it is necessary to measure the behavior of the market over different time periods. Sometimes it can be difficult to keep track of this, but you cannot ignore the dynamics of the market, especially if you are planning to engage in short-term investments. Simply put, stop your choice on the cryptocurrency that you like, study its charts and try to catch the trend using market indicators.
Find out how widely used this cryptocurrency is
As with most other markets, trust is key for potential cryptocurrency investors. In order to invest their money in a particular cryptocurrency or ICO, an investor must somehow decide that this project is credible enough to support it.
Crypto billionaire entrepreneur and philanthropist Peter Thiel says there are three main factors to make this decision: a unique idea (with a specific application), incremental modernization (that requires a good development team), plus the aptitude to co-ordinate complex tasks.
These three points are the best indicators that a long-term cryptocurrency investor should consider.
In his speech at the Economic Club of New York, Thiel, speaking about the reliability of cryptocurrencies, drew parallels between bitcoin and gold. Both assets are considered to be a store of capital, behind which there is no state, both have an indefinite independent value and are not subject to change.
Follow the big players in the cryptocurrency market
In any activity, the study of the experience of predecessors can only help, not harm in any way. Cryptocurrencies are no exception. In fact, it matters even more here than usual, because due to market volatility, the slightest mistake can cost you a fortune.
You need to invest as much as you are willing to lose. That is, we can talk about a small percentage of your savings. The question is whether these people themselves follow their golden rule. For example, crypto millionaire Eric Finman, at the age of 12, invested $ 1000 in cryptocurrencies. He had a little money, but he chose a high-risk strategy in the hope of a big profit and made millions from it.
Jeremy Gardner at some point put all his marketable assets into crypto investments and became a millionaire.
These people were taking risks desperately by investing in cryptocurrencies. However, it is important to understand that, making all these investments, they were ready to lose everything.
Invest a reasonable amount
The golden rule of “invest as much as you are willing to lose” never fails. Think about this. If you wake up and find that your investment has turned into candy wrappers, can you pay your bills for the next month? If not, then you have invested too much. Of course, losing money is always unpleasant. But if you’ve invested a reasonable amount, you will stay afloat even in the worst case scenario.
95% of investments should be invested in a well-diversified portfolio containing assets of various types, which belong to different sectors of the economy and countries. This will allow the investor to minimize risks and take advantage of profitable opportunities when they arise.