Thinking of building a cryptocurrency portfolio that will help you earn profit in the long run? Before you decide to put your money in, make sure you have answers to these top four questions. Read more
What is my risk tolerance?
If you want to buy crypto online and hold onto it for the long term, you must have a big appetite for risk. Remember that the cryptocurrency market is volatile where prices increase and decrease dramatically. Unlike traditional markets where it is nearly certain that the prices will be at par at some point in the future, you never know whether the prices have sunken for good.
Even though a lot of people look at cryptocurrencies as an investment, it is more similar to speculation than an investment. It simply rides on an expectation that you will get more in return for your cryptocurrency than what you actually paid.
Why should I invest in crypto?
If you’ve recently become a part of the workforce and your retirement lies somewhere in the distant future, you may want to set aside a minimum of 20% of your investment portfolio for investments that have promising returns. To achieve this cryptocurrencies can prove to be a good option where the profit is much higher. Since cryptocurrencies operate on blockchain technology, several new innovations and technologies could be fuelled by it sooner than you realize.
Where and how doyou buy crypto?
You would not want to overlook this. To buy crypto, you need to approach a peer-to-peer platform or perhaps a crypto exchange. This is because buying cryptocurrency is not as easy as heading to a bank or a financial entity and exchanging fiat currency for a crypto token. It is important to find a safe and secure wallet to store as well as operate your cryptocurrencies. Remember that this is not a traditional form of investment and thus, the supervision and safety that comes with them are missing in the crypto world. The responsibility of keeping crypto assets safe lies with the investor.
Crypto for long-term investment
Today, you can choose from among thousands of crypto token options that are in the market. Bitcoin, a name that is synonymous with cryptocurrencies, enjoys a lot of popularity and the largest market share. It only adds to the ever-increasing value of Bitcoin which makes it a safe long-term investment option. At the other end of this spectrum are lesser-known cryptocurrencies that are leading innovation in this field. Read their white papers to learn more about these and understand if they could bring better returns that could neutralize the potential risk involved.
The cryptocurrency field is unpredictable. You never know what could lead to massive growth. The best example to illustrate this is the dogecoin which literally started as a joke and eventually took off to be one of the most promising cryptocurrencies. But it is wise to see the whole picture before you invest–what goes around, comes around. The dogecoin may have spiked but its rates also dived quickly.
Here are a few tips that will help you make informed decisions as you start trading crypto.
A sound trading strategy is a key to any investment plan. It is wise to have a strategy in place that is in line with your investment goals in order to mitigate losses.
A good practice to avoid overspending on crypto is to cap the amount you choose to invest in a token. You can also use the time-tested technique of using stop losses to cut down your loss. But the most important rule of all is to not put in more at stake than what you can afford to lose.
The crypto market is volatile and therefore, it is better to keep your portfolio diverse than to put all your eggs in one basket. Portfolio diversification is important to prevent overexposure to a single token. This would not lead to major losses if a crypto value dips as you did not put all your money behind just one token.
In the cryptocurrency market, prices swing frequently. You should not fret over a momentary dip in the market in the short term and try to sell your token in panic. If you want to stay in the game for the long term, it is in your best interest to hold onto your investment until you get the appropriate value.
Benefits of long-term investment
- Paves way for financial independence. When you buy and hold on to cryptocurrencies for the long term, you may even be better equipped to deal with inflation.
- A lot of young investors believe in crypto technology. As they steer crypto’s adoption into the mainstream, the value of digital currencies would rise.
- Consider it a valuable reserve in the long run. As real-world applications of cryptocurrencies increase, it would eventually translate to a growth in its value.
Where to invest? Take a look at the top three cryptocurrencies that can bring great returns in the longer run:
- Bitcoin (BTC)
The most obvious one here is Bitcoin. The first cryptocurrency to be launched, Bitcoin supersedes literally every other cryptocurrency in the market when it comes to market value. Like blue-chip stocks, investors must not believe that Bitcoin is just the best of the lot with many upsides. But it sure is one of the best when it comes to preventing losses. Since its loyal investor base is growing rapidly, it is definitely a great option for a long-term investment.
- Ethereum (ETH)
For quite some time now the crypto world has been split into two. On one side you have Bitcoin as well as Ether and the rest of them are on the other side. Ether is second to Bitcoin in terms of the market cap which stands above $210 billion, approximately four times more than any other crypto. Ether is in fact Ethereum’s native token that launched in 2015. Ethereum’s blockchain technology has been used to support decentralized finance, or DeFi, along with non-fungible tokens and the issuing of other altcoins.
- Cardano (ADA)
Transactions done on the Cardano network are faster and more cost-effective. This happens because it has a smaller footprint that benefits investors in many ways. For starters, a transaction done on the Bitcoin network could take up a lot of energy while the same on Cardano will be energy efficient.