Looking to start investing in crypto but have no idea how? Here are 3 strategies you can consider!
If you are looking to invest in cryptocurrencies but got no idea how to, you are not alone. Investing in cryptocurrencies can be a daunting task with so many different exchanges, so many different coins, and so many indicators to look out for.
In this article, we consolidate some of the important things to prepare and look out for when investing in Cryptocurrencies!
1.Researching on Crypto
One of the most important things to understand about the cryptocurrency market is that the market is open 24/7, 365 days a year. This means that you can constantly be open to the market and being a volatile asset, crypto can go up or down by 50% - 100% overnight which is something that not many people can stomach.
However, we can reduce the chances of failure by researching tokens or coins that we are interested to invest in. This isn’t about just reading articles about the token or coins, but doing fundamental and some technical analysis.
Understanding what the crypto does, the problem it solves, and the market potential of the problem that it solves can give you a rough idea of how the crypto will perform in the market.
How to start investing in cryptocurrencies?
Once you have done some research and identified the cryptos that you want to invest in, you need some way to purchase it with Fiat, a Credit Card, or a Debit Card. Like the Coins App, it allows you to convert THB into major cryptocurrencies like BTC with a few simple steps.
2.Diversifying your investment in Crypto
Like with any kind of investment, having separate wallets for different functions enables you to diversify your investments which protects you from a sudden dip in the event a certain cryptocurrency loses its value, you have other tokens to cover those losses.
One way to set up your portfolio is to have some stablecoins like USDT or USDC as a backup, buying some bluechip crypto like BTC or ETH which are the two largest cryptos by market capitalization. These should be in a cold wallet or a separate account that you seldom use, as this will act like a savings wallet for you.
The other wallet can be a trading wallet for you to trade crypto, do yield farming, liquidity mining, or staking. Once you get some profits from this wallet, it can then be transferred to your savings wallets. This way, you are constantly taking profits and growing your crypto balances over time.
3.Dollar-cost average(DCA) regularly
If trading isn’t something for you, the other strategy is to deploy Dollar-Cost Averaging (DCA). Not everyone is able to consistently buy the dip and sell the top accurately and consistently. Hence, DCA is a great way for beginners to start investing in crypto. DCA is to consistently purchase crypto regardless of market conditions and crypto prices. How much crypto to purchase can be based on your budget, it can be $10 per month or $1,000 a month, but the rule of thumb is to not invest more than you can afford to lose.
Benefits of DCA
Since we are purchasing consistently regardless of market prices, there will be times we manage to purchase the dips and there are times we will buy the top, but over a long enough timeline, our buy prices will even out.
So if we did DCA from January 2020 to December 2020 and invested $1,000 into BTC we will get something like this:
With $12,000 invested, we got 1.13 BTC which means the average price of our bitcoin is $10,619. This strategy is suitable for beginners because it removes the guesswork of when to purchase bitcoin.
When is the best time to use DCA?
DCA works best in a downward-trending market, which allows you to purchase bitcoin are lower prices. However, in upward-trending markets, DCA might not be the best strategy to deploy.
These are just the tip of the iceberg when it comes to investing with cryptocurrencies, there are many more strategies that are out there but they all come back to being disciplined to follow the strategy and sticking to the plan.
