Some people think that they will get rich quick simply by investing in cryptocurrencies. That`s the typical moon-boy attitude that does not often meet the reality of investors. Well, when you look at the recent altcoin pumps, you have to come to the conclusion that it is indeed possible. The current altcoin season has already made some investors crazy rich. So, on the one hand, it really can be easy but, on the other hand, it is also very risky. It is also possible to lose a lot of money, if not all of it. There are some seductive temptations out there that can simply ruin your portfolio. Nevertheless, there are some really important things that you always have to keep in mind when you are investing in crypto.
Hoping to make quick money, while not understanding cryptocurrencies at all is a bad idea! Please, before you invest in cryptocurrencies, learn as much as possible about them. Please make sure to learn everything you need to know about cryptocurrencies.
In the end, you alone are responsible for your own investment decisions and no one else. That`s why it is so important that you always do your own research ("DYOR"). Let me explain it like this: When you read just one article or when you watch one single video on Youtube, then you haven`t done your own research. In this case, the person who has written that post or the person who has made that Youtube video has done the research for you. This means that you are simply adopting the DYOR from others.
So doing your own research actually means reading as much as possible. You need to have as much information as possible from different resources. If you have done this you have finished your own research.
Diversify Your Portfolio
Another really important thing that you always have to keep in mind when you are investing in crypto is that you should diversify your portfolio. When you diversify your portfolio, you will drastically lower the risk of losing everything. The reality is, that there not only massive gains but also brutal drops, especially when a coin is over-hyped or a project misses some technical deadlines, massive drops are happening.
I personally try to keep at least half of my portfolio in Bitcoin and Ethereum. These are the cornerstones of my portfolio to lower the risks. Nevertheless, I see the potential of coins with a low market capitalization. I am definitely not ignoring that potential for massive gains. However, it`s mostly easy money for some but also a horrible dump for others. You can also lose like 90% of your investment in just a few minutes, for example, because it was an exit scam or there was a lack in the smart contract.
That`s why I only use a small part of my portfolio to invest in potential low market cap gems. That`s money that I am also willing to lose. I may lose some of my investment but I am willing to take this well-calculated risk. Why? Let`s say that I have $500 to invest. I don`t invest in just one crypto, I invest $100 in five different altcoins. If just one of them is the 100x low market cap gem then I haven`t lost anything if the other four are worth nothing in the end.
When I invest a part of my portfolio, let`s say 5%, in a potential low market cap gem, then I have only lost that 5% in the worst case. I know that it is risky, so I am only investing money in potential low market cap gems that I am also willing to lose.
There are some nice low market cap gems out there but unfortunately, they are hidden under thousands of shitcoins. So you have to invest some time in DYOR to spot these well-hidden gems.
Furthermore, I don`t chase every pump out there in order to protect my capital. I only focus on a few selected assets and not one thousand. There are many new exciting cryptocurrencies coming to the market every day but chasing all of them can be extremely dangerous to your portfolio.
be cool when investing in crypto and don`t FOMO!
FOMO is an important term in crypto space and means “Fear Of Missing Out.” This feeling is especially prevalent when a cryptocurrency rises in its value significantly over a relatively short time. It can be described as a feeling of anxiety that other people are getting rich while you are missing out
The problem with FOMO is that your investment decisions are based upon emotion instead of logic and reasoning. It can often lead to a situation where trades are made for an asset that is overpriced, incurring much greater risks of financial losses.
So don`t FOMO, be cool. 😎 When a cryptocurrency rises in its value significantly over a relatively short time then you are already too late. FOMOing in is dangerous.
Don`t Get Greedy
Another very important thing is that you never should get greedy. When you can get greedy, you will get scammed more easily. It is important to understand that greed is the first ingredient for a successful scam. As I mentioned before it is important to stay cool when it comes to investing in crypto and not to FOMO. When you get greedy, you also lose your coolness. When you lose your coolness, you are guided by your emotions and not by a rational mind anymore.
This means that whenever you get greedy you are going to put yourself in danger to get scammed. This happens faster then you may think. The cryptocurrency industry is still relatively new and therefore, also the number of scams is increasing. Meanwhile, we have seen thousands of different scams over the past years, from very complex operations to extremely simple ones.
Let me give you just one example. One of the oldest scams in the crypto space is the "Send me 1 Bitcoin and I will send back 2 Bitcoin" scam.
These kinds of scams are promoted nearly every day on social platforms like Twitter or Youtube. Fake accounts with thousands of followers are created so that they look real or even worse, real official accounts get hacked like recently on Twitter.
A lot of people, especially newcomers, still fall for this most common scam. Now ask yourself why people are still victims of this type of common scam? There can be only one reason, those people sending their hard-earned Bitcoins to scammer were simply greedy and therefore not thinking rationally. One thing is for sure: if you just put your feelings aside and look and it in a rational way, you would have noticed the danger.
Whenever a self-proclaimed "giveaway" requires users to first send a small amount of crypto to their wallet, then it is a scam. There is absolutely no need at all to send crypto to a foreign address in order to receive more crypto back. Greedy people are blind to these obvious signs of a scam.
Greed is also the reason why people still fall for ponzi and pyramid schemes while everyone should know that this never works well.
If you lose all your crypto because you got scammed, then it is really hard to recover from such a serious loss.
The Benefits Of Bitcoin
Besides all the recent pumps in the altcoin market, you should never underestimate the benefits of having Bitcoin in your portfolio. It is probably the easiest way to make some gains in crypto right now.
Bitcoin is probably not the fastest way to big gains but I believe that it is at least one of the most certain investments you can do in crypto. With all the uprising DeFi, Bitcoin doesn`t look really shiny at the moment but Bitcoin has proven itself over the last decade. Bitcoin has the highest market capitalization by far. It has proven itself to be the most secure blockchain network. It remains the steady survivor through all the crazy ups and downs. It is highly unlikely that Bitcoin will just disappear from the market.
So buying and simply holding Bitcoin is probably the easiest and best way to gain some exposure to the crypto market. That`s why Bitcoin still is, besides Ethereum, the biggest part of my portfolio.
The Power Of HODLing
HODLing is an easy game. Simply buy and do nothing, just hold it. Don`t mess up investing and trading. Investing is not trading. When you buy and hold, you have an investment. When you buy to sell, you have a trade.
With most cryptocurrencies like Bitcoin, it is more important to have time in the market than trying to time the market. This is basically what HODLers are doing. The most stress-free gains in cryptocurrencies are actually coming from HODLing. Simply wait long enough until it is time to sell.
Collecting The Gains
At some point, it is time to sell some coins out of your HODL bag and to collect the gains. In other words: Take the profits!
When you decide to sell and take profits, you have to face reality. Yes, it is possible that you sell too early and the crypto keeps mooning after you have sold. Well, it happens. It happens to nearly everyone because no one is able to time the top of the market. Always keep that in mind.
So after 10x gains which is amazing, think at least about taking your initial investment out of that crypto. This makes this specific back at least free of worries because if it crashes to zero, you still have lost nothing.
Also here, the important thing is not to get greedy. When you made 10x gains, that`s actually insane, so don`t get greedy and take some of the profits. Taking the profits and balancing out your portfolio will lower the risks and it will also lower your stress. In this way, you can ensure that your portfolio is growing consistently.
My Final Conclusion
It is possible to get rich quickly by investing in cryptocurrencies but it is also very risky and many people are falling into the same traps over and over again.
Well, at least it is possible to minimize the risks to a minimum by understanding them in the first place. This is actually not some kind of difficult rocket science. If you once understand these risks and learn how to control them, you are going to benefit a lot from the cryptocurrency market in the long-term.
The cryptocurrency market has made millionaires and you can be one of them. Just master your mind and have that discipline when you invest in crypto.
Finally, I hope I could provide you with some useful information about the most common misconceptions when it comes to investing in crypto.
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