Unless you’ve been living under a rock, chances are you’re quite familiar with cryptocurrency. Bitcoin is regularly in the headlines. Anyone with even a basic understanding of cryptocurrency will tell you that 2017 was truly a fantastic year for trading and investing in cryptocurrencies. Everybody wanted to have a crypto portfolio, and Bitcoin as a part of that crypto portfoilo.
During 2017, Bitcoin valuations rose by more than 1500% within just a few months. At the start of the year, Bitcoin was valued at around $938 per BTC. From there, prices quickly hit stratospheric levels at the end of the year with an all-time high of nearly $20,000.
Overnight, billions of dollars were made in just a blink of an eye and interest in Bitcoin exploded onto the mainstream. Since then, Bitcoin valuations have not been anywhere close to the heady days of 2017. However increased institutional interest and widespread acceptance amongst major U.S retailers has seen Bitcoin valuations improve.
Running on the back of a rather miserable 2018, the crypto market has seen a rally in the wake of rising trade tensions and renewed interest. At the time of writing, Bitcoins are currently valued at $10,750. With investors snapping up their holdings of cryptocurrency and with the specter of another halving on the horizon, now may be a good time to begin investing in cryptocurrencies.
Despite the fears of a market crash, it would appear that the market although volatile is far from bottoming out.
1. Do your homework
With the huge returns on investment offered by cryptocurrencies, you may be tempted to dive straight in. After all, with such market sentiment, what could possibly go wrong?
To answer your question, there is plenty that could go wrong. You could lose everything should crypto prices fall suddenly. Or you could even be the victim of a scam or collapsed crypto exchange. Despite the potential for phenomenal rates of return, the crypto market is an extremely volatile one.
Coupled with the relatively unregulated nature of the crypto industry and you’ll realize that your risk exposure is rather significant. When building your crypto portfolio, it’s best that you educate yourself on current market conditions. You also need to keep yourself up to date and keep up to date with the news.
Given the sensitive nature of investing in crypto, prices have been known to fluctuate drastically in just a matter of seconds. By staying on top of the game, you’ll be better equipped to minimize your risk exposure while also jumping on any opportunities.
2. Diversify your investments
Your crypto portfolio should have a good mix of cryptocurrencies. Just like how stock portfolios consist of both blue chip and non-blue chip shares, your crypto portfolio should also be well-balanced.
From low-cost cryptos that haven’t broken into the mainstream to solid options such as Bitcoin and Ethereum. Diversifying your portfolio minimizes your risk exposure. For example, should your low-cost coins and tokens take a sudden dip, your established coins will serve as a buffer to your losses.
On the other hand, should there be a sudden bull run on newer coins and tokens, you’ll stand to earn a tidy sum from their increased valuations. As the old adage goes, never keep all of your eggs in one basket. In the event of a market crash, your diversified portfolio ensures that you can keep your losses to a minimum.
3. Identify your risk appetite
An investor’s risk appetite is defined as the tolerance that an investor has for variability in a particular asset. When you start putting your portfolio together, it’s best that you identify the level of risk that you’d be comfortable with.
Whether you’re looking for massive returns on investment for your crypto holdings or aiming for a steady flow of income, always have your end goal in mind. Overstretching yourself could result in you losing your entire investment. Remember; high returns typically equate to high risks.
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