If you have considered investing in cryptocurrencies, or have already purchased some and are looking for tips on how to best manage your investment, there are a few tips that can steer you in the right direction. While a lucky few managed to get into the crypto game early on and purchase some well sought after coins during their first few years, some of us are just now playing catch up to get on the crypto train.
Like all investments, it is imperative that you keep track of your financial exposures and to keep reviewing your trading plan in order to make sure you are best utilizing your money. Whether you’re just getting started or you’ve been in the game for a while now, here is how to best manage your crypto investments. Besides, If you want to learn more about Bitcoin and how to work with it, you can join a course created by Dchained.
Have a Trading Plan
Walking into the cryptocurrency investment world with a clear plan that honestly reflects your appetite for risk is imperative. A recent study by Yale economist Aleh Tsyvinski showed that around 6% of every portfolio ought to be made up of cryptocurrencies — this is in order for the investor to achieve optimal returns all the while minding the risk. Setting a clear trading strategy for prices you’d like to buy at and prices at which you’d like to sell can keep you from making knee-jerk decisions that are driven by emotion, and that may certainly end up costing you money! Have a plan for how to deal with gains as well as losses, and a target allocation that should go towards Bitcoin or other cryptocurrencies.
Use a Crypto Tracking Tool
Apps and websites like Altpocket, Blockfolio, and CoinTracker are investment tracking tools specifically designed for cryptocurrencies. They help you consolidate your entire financial portfolio in one place so you can break it down by type and value. They can even help you perform basic functions by offering tax return documents. Some of these apps even allow you to turn on push notifications so you can keep track of a particular coin crossing a certain threshold.
Keep your Coins in Wallets, not Exchanges
Since exchanges are online platforms, they can be hacked and are more vulnerable than wallets. It is always better for you to withdraw your Bitcoin from the trading exchanges and store it in a safe and secure wallet. The best wallets are cold ones (offline hardware wallets) that are extremely difficult to hack due to them being offline until you connect them to the internet. This is bound to keep your investment more secure, allowing you to not have to worry about the continuity of your investment.
Diversify your Investments
Much like most investment advice, the crypto market also calls for a good deal of diversification. While Bitcoin may be the most popular and well known cryptocurrency, there are others out there that also promise great returns and have a lower entry price, too. Coins like Ether, Ripple (XRP) and Litecoin are great for beginners who are looking for coins that have many functions and that will likely perform well in the market.
Expect and Understand the Volatility of the Market
Unlike other markets, the cryptocurrency market is one that is volatile and quite unpredictable. Understanding how the price can suddenly fluctuate and being sure to hold out for more stability is the best way to manage your Bitcoin investments. It is the very volatility of the cryptocurrency market that makes it one that offers huge profit margins on short term investments. Therefore, it is important that you not only understand volatility, but also learn how to navigate it by sticking to your trading plan.
All in all, these are just a few ways you can arm yourself in order to most adequately manage your bitcoin (and other crypto!) investments. Make sure you start trading with a clear plan that is well thought out, and one that takes your financial exposures into consideration. Use the necessary tools to keep track of your money, and understand that volatility is not necessarily a bad thing.