Rules to Invest Successfully

As a newbie, the crypto world can be daunting and the thought of committing your hard-earned money by investing in cryptocurrencies might be downright terrifying.

If you don’t know what these “crypto” things are and you don’t know how they work, cryptocurrencies might seem better left alone. Maybe your pal Bill believes they’re the next big thing, but when prominent people like Jamie Dimon warn that you’ll lose all your money if you invest in them, cryptos might just not seem worth the trouble or the risk.

It’s easy to be confused.

But there’s nothing to worry about. Most people felt uncertain before they entered the crypto world. It didn’t stop them from making profits and it shouldn’t deter you, either.

The market is volatile and it’s easy to make wrong decisions. Nevertheless, you can overcome. To help you win, here are some important tips for investing in cryptocurrencies.

  • Consider the market cap, not the price.

    When looking for a coin to invest, in pay more attention to its market cap than its price. The price of a coin doesn’t determine its profitability, the forces of demand and supply do. And scarce coins with limited supply (like Bitcoin) hold a lot of value.

    The market cap of a cryptocurrency gives an idea of the total worth the cryptocurrency and reflects the real value of a project. To calculate the market cap of a coin, multiply the current price of the coin by the amount of coins in circulation. For example, if Bitcoin is worth $10,000 at a moment in time and there are 15 million Bitcoins in circulation, its market cap is $10,000 x 15,000,000, or $150 billion.

    Investing in coins with substantial market caps might mitigate your risk. Don’t be deceived by how cheap a coin is or how fast it is appreciating. If there isn’t much money invested in a given cryptocurrency, that means the market as a whole doesn’t respect it. Unless you have extremely good reason to believe in a coin with a very low market cap, it’s definitely safer to avoid it.

    Two other important aspects to consider are trade volume and liquidity. If the coin you’re investing in isn’t easily traded for fiat, it might still generate a great deal of stress for you even after appreciating in value. Be sure that you can liquidate your holdings when you need them.

    CoinMarketCap provides valuable information about thousands of cryptocurrencies, including price, market cap, circulating supply, and more. CryptoManiaks helps you understand what these cryptocurrencies are all about. Getting acquainted with both CryptoManiaks and CoinMarketCap will help you make informed investment decisions.

  • You do not need to be right every time.

    Remember, investing in cryptocurrencies isn’t a sure thing. With the possibilities of rewards come risks. Anybody who tells you they’ve only made winning bets is a liar.

    Manage your risk the right way. Know that you can’t win 100% of the time - you don’t need to, anyway.

    A great investing analogy can be made to the game of poker. In addition to the millions who play a game of poker once in a while for fun, there are individuals who make their entire income from poker every year - professional poker players.

    Professional poker players know that you can’t win every hand. Winning even 51% of the time could be enough to make a profit, however. Instead, they know that if they continue to make that correct decision over and over and over, they’ll win the majority of the time and they’ll be able to pay their rent.

    Winning one hand doesn’t make you a great poker player and losing one hand doesn’t make you a poor poker player. In the same sense, your investment results won’t always reflect the quality of your decisions. A good investor makes the best decisions they can over time. Your results over a long period of time are more significant and indicative of your ability than any short-term gains or losses.

  • Luck is everywhere.

    Again, just like with poker, investing involves a very large variable we call “Luck.” In poker, sometimes you can have the best cards at the beginning of a hand and make all the right decisions, but still end up losing the hand. The wise players don’t let one loss like this affect them; they don’t get down on themselves if they make the right decision and still lose because of an unlucky run of cards.

    Similarly, if you do all your research and make a sound investment decision that doesn’t pay off like you expected it to, remember that luck is an important factor. Sometimes, investors make irrational decisions that lead to profits and are (incorrectly) seen as “geniuses.” Other times, investors make great decisions that don’t pay off. Remember, as well, to be skeptical of taking advice from others solely because of their past success. Anyone can get lucky. And as the old saying goes, “Everyone looks like a genius in a bull market.”

    Know that luck exists, but try not to let it get in the way. Like we said above, try to “zoom out” and assess your decisions over a longer period of time. The importance of luck tends to diminish over longer periods of time. Anyone can profit from a lucky decision once. It’s much harder to stay lucky after many decisions over the course of a year. Of course, keep learning to stay ahead of the curve and ensure your decisions are as good as they can be.

  • Buy low, sell high.

    This is a common sense maxim that holds true for all sorts of investing. Cryptocurrencies are kind to those that lead and cruel to those who follow. Always buy low and sell high.

    When it comes to altcoins (and cryptocurrencies in general), the ideal thing is to enter the market when the price is cheap and sell for a profit later on. This can be looked at from two different perspectives.

    If you’re considering investing in more mature crypto markets like Bitcoin and Ethereum, the best thing to do is to “buy the dip.” These coins experience periods of appreciation and depreciation. Make sure you enter the market when the price is relatively low.

    This way you can sell for a handsome profit a few months later. Or, if you’re like many others who believe cryptocurrencies truly are the future (and destined to skyrocket in price or even replace fiat altogether) and can’t be bothered with trading, you can just decide to “hodl” your cryptos for the foreseeable future.  

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    On the other hand, if you’re looking to invest in altcoins with less significant market caps when compared with Bitcoin, the wise thing is to get in early when the coin is cheap. You can sell as soon as it skyrockets and make a good gain. Holding on to an altcoin for a longer period of time is often a bad idea, unless you have diligently done your research and you’re sure about its future.

  • Don’t follow the crowd.

    Watch out for FUD and FOMO. Don’t invest based on FOMO and manage your FUD in tough times.

    FOMO in the crypto community means “Fear of Missing Out.” It is used to describe the feeling most investors have when they see a coin posting massive gains. Naturally, when you see others making gigantic profits, you’ll want to jump on the bandwagon, by investing huge amounts of fiat so that you don’t miss out on the action.

    The danger of FOMO is that it usually pushes people to buy coins that have already experienced their most significant rise in price. Too often, victims of FOMO buy only after the coins shoot up in price and right before they crash down abruptly. If you buy out of pure FOMO and your coin’s price crashes, you will be left “holding the bag” of depreciated coins and your money will be “gone with the wind.”

    FUD, on the other hand, stands for “Fear, Uncertainty and Doubt.” Because the crypto market is still small in relation to other markets such as gold, it is often affected by negative pronouncements and proclamations.

    Sometimes, a big shot will come out and claim that cryptocurrencies have no real future, spreading FUD in the process. At other times, a harsh headline in the news will cause people to worry about cryptos. When this happens, the market reacts and the price dips, prompting some people to sell their coins prematurely. They then see the coin bounce back up in a short time and recover. To re-enter the market, they have to buy at a higher price than the price they sold at. If these investors had held onto their coins in the first place, resisting the FUD, they could have avoided this expensive situation.

  • Manage your emotions.

    Don’t let them overcome your logical mind. Sometimes, even profits can cause you to lose your perspective. Winning too big too often can make you lose your head. You may feel overconfident and make some very bad investment decisions.

    The crypto space is fairly volatile. Stay calm. Make rational decisions and remember: a few wins does not make you a winner and momentary loses doesn’t make you a loser, either. Try to imagine the future and invest in coins that will remain relevant.

    A good tool for keeping your stress low and keeping your emotions in check is meditation. Consider meditation a valuable investment of time that will pay dividends. Studies show that 20 minutes of meditation per day can lower stress, lower blood pressure, and keep your body and mind much healthier. A healthy mind is particularly useful in the crypto space, where it’s not unusual to see 1000% or -75% returns on your investment in a matter of days.

  • Manage your capital.

    Take some time to think about how much you can afford to invest in cryptos. Then consider how much you are willing to invest in projects, taking into consideration your crypto investment capital. This process can change your life.

    And always remember to diversify your portfolio. Don’t put all your eggs in one basket.

    As a new investor, it’s better to play it safe. All investors, however, should know to only invest what you can afford to lose. Choose how much you want to invest in each coin and decide at what price you will pull out, all based on your trading capital.

  • Invest in yourself.

    Investments in yourself are some of the wisest investments you can make as a budding crypto investor. Buying and reading investment books is a smart. Consulting experts for advice can cut your learning curve. And investing in courses is a great idea, too.

    Cryptomaniaks.com is an excellent example of a great investment you can make in yourself. 

    Try to gain more knowledge about crypto investments. Learn investment tricks. Spend time (and money) that will allow you to make quality, well-informed decisions.

  • Be dedicated.

    Practice makes perfect.

    Like all skills and hobbies, to reach an advanced level you have to be consistent. Becoming a shrewd investor requires dedication. Be diligent when gathering data about a potential coin and be dedicated to your methods.  

    Before investing in a cryptocurrency, ensure that you know enough about it and what it aims to achieve. Does the idea make sense? Does it have a future? Is it worthless? Cryptomaniaks’ Coins section is a great resource for learning more about specific cryptocurrencies.

    Don’t change too many things too quickly. Know what you’re doing and only do what you know.

  • Consider the words of the experts.

    It’s always helpful to take advice from the wise individuals that came before us. To finish up this guide, here are a few maxims from some of the smartest people to ever grace the investment world for you think over as you prepare to enter the crypto market:

    Be fearful when others are greedy and greedy when others are fearful.

    - Warren Buffett

    The way to make money is to buy when blood is running in the streets.

    - John D Rockefeller, the world’s richest man in the late 1800s

    Know what you own, and know why you own it.

    - Peter Lynch, successful Fidelity fund manager.

    Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.

    - Paul Samuelson, Nobel Prize-winning economist.

    An investment in knowledge pays the best interest.

    - Benjamin Franklin

    In the short run, the market is a voting machine, but in the long run it is a weighing machine.

    - Benjamin Graham, pioneering value investor.

    In investing, what is comfortable is rarely profitable.

    - Robert Arnott

    The (stock) market is filled with individuals who know the price of everything, but the value of nothing.

    - Phillip Fisher

Posted by Joel S.

I believe in cryptocurrency for its privacy aspects and for the autonomy it gives individuals from centralized banks. Cryptocurrency is also fun and exciting: there is always something new to learn.

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