The cryptocurrency market has become huge over the years and attracted many people who saw something interesting in digital coins. From the moment Bitcoin, the first cryptocurrency, was launched, digital currencies have brought plenty of investment opportunities, changing the way we talk about money in general or make transactions.
However, the crypto space is quite challenging to navigate, especially when you might not know the best crypto asset to choose or how to buy crypto currency. So, to help you a little in this process, we have prepared a guide with the fundamentals you need to consider if you want to add cryptocurrencies to your portfolio.
What are the first considerations to keep in mind before investing in crypto?
Cryptocurrencies represent a good investment opportunity, but at the same time, they also come with many risks, which is why it is important to take some steps first so that you will manage to navigate all the challenges of this space. First, you will need to research the market to discover what cryptocurrency truly is. Additionally, thanks to the initial research, you will be able to find all the features of digital assets to decide which is the best for your needs and preferences. If you truly understand how digital currency functions, you can anticipate what will happen with that digital coin and better manage market fluctuations.
It will also be a great idea to look at the whitepaper that was released together with the main projects so that you will understand the initial goals better. This will help you in making more informed decisions before investing. Another great piece of advice you should follow is to invest only the amount of money you can afford to lose. As cryptocurrencies are risky assets, you could either experience big wins or losses. This is why it is better to be more mindful of the amount you invest.
Diversifying your portfolio is also something you shouldn’t forget when you are making the first steps into the crypto landscape. That is why it is a good idea to consider more types of cryptocurrencies. Thus, if one digital coin is not performing the way you thought, this will not impact your entire investment.
What are the main crypto categories you can invest in?
Bitcoin
Bitcoin was the first digital currency ever created, which inspired the entire landscape of altcoins. Bitcoin was launched back in 2009 by Satoshi Nakamoto, whose identity has remained unknown up to this moment. Bitcoin is the largest digital currency by market cap and is also perceived as a decentralized store of value. Moreover, Bitcoin can also represent a hedge against inflation, and it is also so appealing to people worldwide because it is a scarce asset, with a limited supply of 21 million coins.
Altcoins
Altcoin is a term that refers to all the digital coins that represent an alternative to the crypto king, Bitcoin. Over the years, altcoins have tried to develop new solutions and improve Bitcoin’s shortcomings, introducing many technological advancements. Currently, altcoins are mainly used for privacy features, smart contracts, decentralized applications, the creation of NFTs, and the list can continue. If you’re interested in learning how to buy cryptocurrency, some of the most popular altcoins to consider are Ethereum, Litecoin, and Ripple.
Ethereum is the second-largest digital coin by market cap and one of the most important blockchains worldwide, which has started to be used in many industries.
Stablecoins
Stablecoins can be seen as better options because their value is pegged to other stable assets, such as fiat money. This is why they are less volatile than Bitcoin or the other altcoins. Some of the most popular stablecoins are Tether, DAI, and USD Coin.
What are the factors that affect the crypto market?
The crypto market is affected by many factors, and it is good to know them to maximize your chances of experiencing wins and not losses. Demand and supply are two of these factors, which always impact the prices of digital coins. For example, if the demand increases, the prices will boost, while if the supply is bigger, then the prices could lower.
Additionally, crypto prices can be affected by everything that occurs in the media, and each piece of news can drive the prices upward or make them drop. Regulations are another area that can cause fluctuations in the crypto space, especially because cryptocurrency are at a nascent stage, and governments worldwide still change their minds regarding crypto usage and adoption. For example, some countries have welcomed digital coins, while others are more radical and have banned their usage.
What are the most important trading strategies to keep in mind?
Over the years, investors have developed many strategies that can impact the success of cryptocurrency investments. HODL is one of them, where investors buy and hold their digital coin longer without considering market fluctuations. In this case, people might expect that the value of the digital coins will increase over time, so they resist doing something with them on the moment.
Scalping is another very used strategy. In this strategy, traders want to make small profits by taking advantage of what happens in the cryptocurrency landscape for short periods. They take advantage of the price fluctuations that occur, as this will allow them to make large profits over a longer time.
Day trading refers to the strategy in which traders purchase digital coins and sell them on the same day to make quick profits.
The bottom line
When you want to take your first steps into the cryptocurrency space, you must equip yourself with everything you need to have a positive experience. So, do your research, be patient, and don’t try to invest more money than you can afford to lose. We hope the advice from this article will help you in your crypto trading journey.
