In the past years, cryptocurrency investments saw high returns. Wherein Bitcoin saw an increase of more than 50 percent and Ethereum also saw an increase of almost 500 percent. And apart from this, there were thousands of percent returns in some of the smaller cryptocurrencies. Given these benefits though, many keep making the effort to get in on the action. And during that time he may be concerned about the matter of his digital safety and security. How can the risks be limited? How to avoid hackers and scammers? How to protect privacy? This blog brings you a complete guide to keeping crypto safe digitally. Where we will discuss how to choose a safe exchange, how to store your crypto effectively, and much more. If you are interested in Bitcoin trading, understanding real-time data analytics can also be beneficial.
Investing in crypto hazard: careful of fluctuation.
Crypto markets are characterized by strong daily fluctuation, meaning that crypto prices can fluctuate wildly over short periods. However, strong fluctuation is also observed because there is a huge market where it is not yet clear what should be the anchor price of these new digital assets. Cryptocurrencies are highly volatile, so if you’re looking for a low-hazard investment, crypto may be too risky to consider. And if, on the other hand, you are considering making an aggressive investment, then with all the risks and benefits that can come from it, we will also inform you about the important variables to keep in mind when investing in cryptocurrencies. should be kept and which strategies would be better to adopt.
Three golden rules for Investing in Crypto
The five golden rules we’ll discuss here can help you make profitable bets when you choose to trade cryptocurrencies.
- First Rule: Cryptocurrencies, unlike other forms of currency, are not in any way influenced by the monetary policies of central banks; as a result, their prices are unrelated to any monetary-related news or events. So, do not follow the news of central banks, you will not get any information related to it here. In addition, you should keep an eye on news related to international regulations on its market. The introduction of limits or authorizations, however, might have a significant impact on the pricing of digital assets.
- Second Rule: Relying on technical analysis indicators. As it has been mentioned earlier, the crypto market has generally been seen to be affected by strong volatility, and less rational instruments are trusted more by investors than those used for other assets. On the other hand, if you want to make your investment profitable in the short term, then identifying the trend of resistance, support, and interest of each crypto can be important. Furthermore, unlike other markets, sophisticated models and tools are available to advanced investors, with technical analysis being undoubtedly one of the most commonly used evaluation tools with crypto.
- Third Rule: The third rule of cryptocurrency investment is to diversify your portfolio. It is not advisable to invest all your savings in a single cryptocurrency. Instead, create a portfolio with multiple cryptocurrencies to reduce overall risk. Calculating the correlation among the digital currency you want just requires a basic understanding of statistics. Look for cryptocurrencies with a correlation coefficient that is far from, preferably negative. This means that their price trends behave differently. When one cryptocurrency’s price goes up or down, the other’s price tends to move in the opposite direction.
By diversifying your portfolio, if one cryptocurrency performs well while others perform poorly, you can still make profits. Conversely, if one cryptocurrency experiences a downturn, the gains from the others can offset the losses. This strategy is employed by large investors to minimize risk.