6 Crypto Investing Rules

Invest in the crypto market is a challenge, to say the least. It seems to defy all the rules that apply to other markets, and investors may simply be overwhelmed by the volatility and the technicality of the market.

That said, it’s not without reason that many popular investors and companies are starting to spread more of their wallet to cryptocurrencies. The crypto market may be unpredictable, but over the long term, it has proven attractive to many people.

So how do you invest in crypto and make sure it doesn’t burn? Volatility can be off-putting, but there are some basic rules you can follow to ensure you get the most out of your capital. This is what we try to explain here. But keep in mind that nothing is guaranteed, so the age-old principle of investing as much as you can afford to lose remains the absolute rule.

1. Never invest more than you can afford to lose

Any successful and reasonable investor will tell you to only invest as much as you can afford to lose. This applies to all markets, and more so to crypto, which can see double-digit declines within hours. Today’s investment world has its fair share of reckless investors, who squander life savings on a handful of actionsbut it is a surefire path to loss.

The crypto market has seen unprecedented growth in value and equally significant declines in value. It is still a nascent market, with no regulatory controls or technical barriers at an early stage. This can lead to unfortunate situations, such as hacks, frauds and a flurry of sales orders it may seem to happen on a whim.

As such, investors should take a small portion of their capital – to reiterate, only as much as they can afford to lose – and budget it towards a few select cryptocurrencies.

2. Use Dollar Cost Average (DCA)

The principle of cost average (DCA) applies very well to the crypto market. DCA is used to beat volatility, and volatility is a major feature of the market. By investing small amounts over time, you can stem losses and use your capital more efficiently.

It should be noted that using this method you will pay a bit more in network fees, but any gain you make should make this negligible. You can do this on a weekly or monthly basis – the details are left to you. If you’re feeling particularly optimistic about the market’s direction, you can set aside some extra capital for when the market appears to be at its lowest.

3. Research in detail, stick to the basics

Research still matters in the crypto market. Although it is not as clear and direct as investing in a publicly traded company, it still plays an important role in the investment process. The process of finding cryptocurrencies for investment could be a topic on its own, but here it is beyond the scope of discussion.

Some of the principles you will guide your research with are whether the project and crypto in question has a valuable and unique use case, the technical elements of the project, the management team, and the potential to disrupt the industry or the particular space in which it operates.

However, in any case, you should always focus on the fundamentals. Does the project have a transparent and honest team? Does the financial data, in terms of spending and allocation to investors, add up? Does the technology seem to have real potential?

4. Stick to the main assets

Of course, for many, the relatively complicated and novel way of researching cryptocurrencies can be daunting. For these people, it may be best to stick with the major strengths that have survived the test of time. Bitcoin and Ethereum are the best examples of these strengths and have endured many bear markets.

There are several others as well, although it becomes much more difficult to tell whether these other major assets with large market caps have the potential to survive into the future. This also applies to Bitcoin and Ethereum, although the consensus is that these two are already worth considering.

5. Use secure storage

Apart from the investment itself, a major requirement when exploring the crypto market is the act of storage. It is not uncommon to hear of investors losing access to their exchange accounts or, in the worst case scenario, losing their funds entirely due to a hack or security incident. Storing your crypto assets securely is of paramount importance, and the responsibility rests with you.

Thus, serious investors should consider what is called a hardware wallet. These are wallets with additional security features to ensure that your funds cannot be stolen. Investors should not hold their cryptocurrencies on exchanges or software walletsat least for any appreciable amount of crypto.

6. Use common sense

Above all, investing in the crypto market requires common sense. It’s easy to get caught up in the hype and excitement surrounding a new project, but more often than not it results in heavy losses. It’s even easier to get involved with a meme token that’s grown significantly from a gathering of individuals online, like Dogecoin– but it’s a double-edged sword, with one side much sharper than the other.

As with the scholarship, you want to diversify. Several projects are working on key issues and use cases, and these have the potential to cause major disruption. It’s not guaranteed, but as with the different sectors of the stock market, you can allocate your capital to these projects.

The essential

Investing in the crypto market can seem daunting. It’s a new space that doesn’t seem to follow a lot of rules. However, there are some fundamental approaches you can take to ensure that you are making good use of your capital.

You don’t have to be enthusiastic to invest, as many enthusiasts would like. Apply the basics of investing and use common sense, and you may find that the crypto market isn’t as overwhelming as you once thought.