Investors are attempting to determine how to add alternative currency, such as Bitcoin, to their existing portfolio of traditional investments. Even though the cryptocurrency market has declined since the start of the year, some crypto assets have historically had strong returns. For instance, since its launch, Bitcoin has significantly outperformed the general stock market.
However, investors should be aware that Bitcoin and other cryptocurrencies are speculative investments with specific risks. When it comes down to it, you should have a backup plan when considering digital assets, just like you do with stocks and bonds, just like you would with any other investment. Here are some basic investing tactics to keep in mind while you manage your cryptocurrency holdings.
- Prioritise Liquidity
Liquidity when choosing how and what to invest in the cryptocurrency market. The market’s most liquid cryptocurrency is bitcoin. The term “liquidity” describes how quickly an asset may be changed into cash without losing value. Because it can determine whether traders can enter or exit a trade at the desired value, the concept of liquidity is crucial. The cryptocurrency market is dynamic. Thus traders must be able to enter and exit positions rapidly.
This means that there must be both supply and demand for the cryptocurrency in order for buyers to get the best deal and sellers to make a profit. According to Tally Greenberg, head of business development at, a cryptocurrency hosting company, “you don’t want to buy an asset that maybe has amazing potential but is not being traded and it’s just stagnating, so you’re sitting on it and you’re at the mercy of the market.” Trading volume, or how much cryptocurrency has been purchased and sold, as well as investors’ general interest in the asset, might be useful in determining liquidity.
- Harness Volatility
Cryptocurrency is infamous for its drops as well as its rallies. Although its volatility can be advantageous for traders who profit from these price fluctuations, it can be challenging to manage for long-term investors. Since cryptocurrencies are still a new asset, there is still a lot of hype and speculative activity surrounding them, which frequently causes increased volatility.
Large price swings are often regarded as a risk, yet everyday volatility is common in the cryptocurrency market and can present a business opportunity. According to Greenberg, volatility is advantageous for cryptocurrency trading, but it’s best to understand your risk tolerance as an investor before investing. She adds that it’s crucial to closely monitor market activity by keeping up with news, blockchain updates, and historical charts relevant to your trading.
- Always Take your Gains
Experts advise cryptocurrency market participants to routinely take profits. Cryptocurrency investors frequently confront the dilemma that a cryptocurrency’s price could drop or surge when it’s time to take profits, but it’s preferable to have a reliable technique for doing so. According to Greenberg, “a lot of folks just buy and hold for an eternity, and they’re at the mercy of news, memes, and celebrity tweets.” Decide on your entry and exit locations for trades and have a clear justification and objectives for trading cryptocurrency in the first place.
In the world of cryptocurrency, it is not a good idea to put all of your eggs in one basket. Having your crypto portfolio invested in a number of coins and crypto projects is a better method to reduce risk in cryptocurrency investing. According to Greenberg, diversification among various digital assets connected to cryptocurrencies and blockchain, such as the internet of things, non-fungible tokens, and DeFi initiatives, is crucial. She claims that since bitcoin exchanges don’t always carry the same assets, you can even diversify by using other exchanges. Crypto investors can allocate to both comparatively steady and speculative assets thanks to diversification.
To invest in bitcoin right away, follow these steps, which take just five minutes overall.
To choose which cryptocurrency to invest in, you should, however, make sure you conduct a ton of study. Additionally, keep in mind that digital currencies are unstable, so think about the hazards before moving forward.
Because of its market-leading cost structure, support for 60 digital assets, and free US dollar deposits, eToro is ultimately the best location to invest in cryptocurrencies in the US.
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