Learning how to invest in cryptocurrencies correctly is essential.
Investing in cryptocurrencies is not for everyone, it requires study, patience, attention, and several other characteristics. Therefore, if you want to start in this market, it is very important to learn some pillars to invest in cryptocurrencies correctly.
Timing is Paramount
It is almost impossible to enter the market at the right time. But the importance of timing to enter the market depends on your strategy. Some trading strategies are more time-dependent than others, while accumulation strategies like DCA (dollar cost averaging) are completely time-dependent.
Choosing a Strategy that Works for You
Entering the market without a strategy is extremely risky. Once you have your strategy, you choose when and how to enter and exit the market. You should come up with a strategy that can easily fit into your life. Furthermore, you can automate your strategy with trading algorithms.
Strategy without Consistency Just a Random Action
Without a consistent trading strategy, you will make random bets that will lead to random results. That doesn’t mean you can’t tweak or optimize your strategy.
Understanding Market Cycles
At the macro level, the market has two cycles, a bull market, and a bear market. In crypto, the duration of a bear market in the past has been around 2 years, while the duration of a bull market varies.
Gaining Time and Experience in the Crypto Market
Investing at least a small amount in cryptocurrencies would be a good incentive to pay more attention to the current state of the cryptocurrency market. Experience is more important than financial advice. If you are new to the cryptocurrency market, you have chosen the right time to join, just in the middle of a bear market, when prices will be much lower than last year.
Beware of Bitcoin Halving
This happens every 4 years and has played a significant role in the rise of the cryptocurrency market. Historically, the Bitcoin halving has been a sign of a bear market. The next halving is expected to take place in early 2024, when much of the cryptocurrency community is waiting for the start of the new bull market, after this long period of silent accumulation.
Limiting Your Risk
There will often be situations where a project fails or is hit hard, for reasons that were not entirely obvious. As such, no crypto asset is immune from default, but top-tier cryptocurrencies such as BTC and ETH provide a hedge against the high-risk/high-reward nature of the broader crypto market.
Understanding Market Value
The higher the market value of an asset, the more dominant that asset will be in the market. Market capitalization has long been considered an important indicator of success in the cryptocurrency market, but that doesn’t mean large-cap assets aren’t prone to failure. Finally, the market value can be calculated by multiplying the price and the current offer.
At the core of these pillars is the best practice of all for those involved in cryptocurrencies: Do your own research.
By Audy Castaneda
