How Do You Maximize Your Cryptocurrency Investment Returns in Today’s Market?
Cryptocurrencies are an increasingly popular investment method, and this fast emerging investment class has great potential for investment returns. The original cryptocurrency Bitcoin is a prime example of the opportunities available to savvy investors. Over the past decade its increased in value by over 31,000%, but the question remains with such a volatile asset is it a worthwhile investment in the future? To consider that question, with the crypto market in a relative downturn from last year’s highs, involves a look at how to maximize the benefits of cryptocurrency investment which is a key issue for investors to consider.
At its most basic as cryptocurrencies, even more than traditional stocks, can be volatile, you first need to be fully aware of all the possible risks involved before investing in cryptocurrencies. Therefore, if you’re considering adding cryptocurrencies to your investment portfolio, BigONE recommends you be proactive in order to maximize your chances of investment success.
Research your investment options carefully
Some cryptocurrencies have obviously more significant long-term investment potential such as Bitcoin and Ethereum which is why a lot of investors are loath to look at so-called altcoins, despite examples of impressive returns such as the newly DAO generated token ApeCoin (APE) which reached an all-time high of $39.40 before plummeting to its current price of around $13.
Although many altcoins may lack a long-term path to profitability, they still have the potential to increase their price due to celebrity endorsement and social media hype. The most successful of which is Dogecoin (DOGE), which Elon Musk has gone to great lengths to promote which is one of the primary drivers for price increases in the last year. However, bear in mind, a measure of the success of Dogecoin is also down to a strong community following and support, another key variable certainly worth considering when evaluating which altcoin is worth investing in. It’s also true that Dogecoin, with its $18bn market cap, has benefited from strong developer support too. In late December, the Dogecoin Foundation released a development plan that is consistent with its current community policies and consensus-based approach.
If you’re wondering if the cryptocurrency you’re planning to invest in is a good investment and want to find growth figures for any cryptocurrency you’re planning to buy, it’s worth putting in the study and careful research. The advantage of this is that you’ll fully understand the cryptocurrency project you’re investing in and have the opportunity to generate a good ROI over the investment cycle. When done properly this means you don’t need to worry about bear and bull markets as you make decisions based on what you can handle ahead of time. Another obvious point to guide investing is to understand thoroughly the token or protocol you are investing in and are aware of their planned roadmap for rollout in the future, so you stick to the fundamentals and are not led by your emotions.
Avoid investing in any cryptocurrency you don’t understand
It’s never a good idea to invest in a cryptocurrency that you are unfamiliar with unless it’s just a small amount for fun, or for community purposes such as buying your favorite football team’s NFT. If you feel unsure about the blockchain technology, its use cases and projected applications, the founding team, or long-term development goals of the cryptocurrency you intend to invest in then either double down on your research or take a step back. The last thing to do is be guided by emotion first and reason second, as clearly such an approach will fail sooner or later. Particularly when getting into crypto for the first time you want to be looking at the fundamentals, looking out for projects with in-depth developer support, and be careful with exotic kinds of projects that might have been a clone from another project, as a straightforward money grab or rug pull.
Your chances of making money will improve if you are willing to invest the time to research the crypto assets you will be investing in, understand how the cryptocurrency market works, and understand the factors that influence cryptocurrency prices and market conditions. The key thing in any crypto project, and in any sort of investment is do your own research (hence why the acronym DYOR is so popular in crypto community circles). Because even for thought leaders in the crypto and blockchain industry, there’s an overload of information on LinkedIn, and all these platforms, to sift through to find the signal from the noise. Simply put you just need to have a very aware and see what’s going on. And decide in advance what are you willing to invest? What are you willing to lose?
Keep investing for the long term
Warren Buffett, one of the world’s best and most successful investors, has stated that he looks at investments from a distinctly long term perspective, an approach passed down from Benjamin Graham’s school of value which teaches the investing strategy of purchasing stocks below their intrinsic value and holding the stocks until their price reflects the real value of the business. As such his famous maxim is that it’s better to “pay a fair price for a great company than a low price for a mediocre company.”
Buffett’s advice is fundamentally sound because you cannot guess how market volatility will impact your investments. So, if you buy a cryptocurrency because you intend to hold it for the long term and believe its value will rise over time, you minimize the risk of losing money due to either your poor market timing or due to the impact of unexpected economic events. Of course, this comes back to knowing your budget and having a thorough plan. Investment opportunities whether stocks or crypto, may arise due to changes in the market such as the result of the war in Ukraine, or due to individual crypto projects that become bargains. As these are not predictable events it’s important to have cash available to pursue this value investing approach.
Build a diversified portfolio
Putting all of your money into one cryptocurrency increases the risk of losses in your investments. You are relying on one cryptocurrency for all of your earnings expectations and expecting it to perform well ahead of time, which is nearly impossible in the volatile cryptocurrency market because no single cryptocurrency will continue to grow exponentially. As a result, as an investor, you should consider diversifying your funds to increase your chances of making a profit on the majority of your investments. You should also consider investing the majority of your money in more traditional investments, such as stocks, funds, or bonds, so that you are well-prepared for any risks that may arise and that your losses from any underperforming investments are minimized.
