What are the tips and tricks for someone wanting to invest in Cryptocurrencies in 2021?

January 25, 2021

Reading Time: 4 minutes

Cryptocurrencies are booming once again, heading into 2020. The long-awaited crypto spring is finally here; Bitcoin is reaching new heights after hitting a record high of $27,000 in value. No one knows where it will stop when it is going to correct; however, one thing is for sure, and it is that Cryptocurrencies are blooming with fruitful colors.

With the adoption and introduction of sophisticated Defi projects and successful Cryptocurrencies, the Crypto ecosystem garners significant attention from investors and users. Cryptocurrencies are at the forefront of most modern portfolios. The notoriously volatile and decentralized nature of Cryptocurrencies is attracting investors around the world.

With how well cryptocurrencies are heading into 2021, newer investors are interested in placing their money. The Crypto ecosystem is enormous, and before investing in cryptocurrencies, you need to establish an understanding of the ecosystem. The market is relatively new and isn’t mature compared to traditional markets that have persevered for centuries. It is very easy to lose money without the right knowledge or guidance.

If you’re interested in investing in cryptocurrencies, you’re at the right place; in this article, we’ll be sharing some tips and tricks for someone wanting to join in.

Investing what you can handle

Investing in what you can handle is one of the most critical steps when transitioning into the crypto trading space. You must invest money that you can take losing. Do not make the mistake of carelessly putting all of your eggs in one basket. Invest money that you don’t need in your daily life, an amount that wouldn’t affect your monetary status.

Cryptocurrency trading is a test of patience. It requires fortitude, resolves, and patience. Bitcoin dropped from its usual price of $7,000 in early January to $3,000 in March amid the covid outbreak and scheduled halvening. Since then, Bitcoin has soared to $27,000 and is still growing.

Many investors lost their patience and withdrew their investments in early March; however, those who stayed patient were rewarded with a 230% ROI. The market is extremely volatile, and no one can tell where it is going to head. Attaining a solid return on investment may take a long time; therefore, you must invest what you can handle to lose.

Establish an understanding of how things work

The Crypto ecosystem is very vast, with over 6000 different cryptocurrencies listed across popular exchanges. Each unique to its liquidity, volume, functionality, operations, popularity, and price. You must do proper research to make yourself familiar with the ins and outs of the ecosystem before investing in an asset.

You must understand the various aspects of an asset and have a basic understanding of evaluating an asset. There’s no rush of becoming an expert overnight. You shouldn’t buy a house without visiting it; similarly, you shouldn’t buy an asset without fully understanding it.

Diversify your collection

When investing in cryptocurrencies, you must diversify your investments instead of tunneling on one asset. With over 6000 different cryptocurrencies listed across several popular exchanges, diversifying your investment is an ideal choice.

Performing your due diligence

Doing your research is integral if you want to invest in cryptocurrencies and different projects within the crypto ecosystem. Refrain from investing in what people ask you to invest in. Time and time again, we heavily emphasize the importance of performing your research and forming your own decision.

Analyze different projects, form an understanding of what interests you in the ecosystem. Here are some tips

  • Read the white paper of a project.
  • Use Twitter
  • Part-take in various discussions on different forums
  • Find online reviews on different channels such as Reddit, Google, and more.

Forming a personal opinion will serve well in the long run instead of relying on people’s views.

Save yourself from scams.

The whole cryptocurrency industry is still in its developing stages, the market is relatively new, and the world has yet to adopt digital assets. Either way, the cryptocurrency market is doing exceptionally well, and like most markets, it has its fair share of malice and malicious users.

Investors are looking to invest in various assets to capitalize on the opportunity quickly; however, many projects are ready to prowl on the incompetency of uneducated and inexperienced traders.

The market is filled with manipulative and vindictive scammers, waiting to cash in on the incompetence that they are presented with. Projects may use fluff statements, plagiarized content, and provide fake endorsements. This is why it is essential to understand and form a personal opinion if you’re looking to invest.

The role of market capitalization

Amateur investors like to highlight market capitalization in their decision making. The higher the market capitalization, the better the asset. However, that may be true for traditional markets; it is not valid for Cryptocurrencies. Market capitalization is in no way an absolute indicator of success in the cryptocurrency market.

You must factor in the total market cap and the increase in market cap since an ICO. A high market cap with less growth potential is worse than a low market cap with high growth potential.

Additionally, many projects organize ICOs when starting. ICOs may increase the market cap by a large margin. However, that’s not indicative of the success of the project in the future.

Utilizing Bearish and Bullish Market.

It is trading wisdom to sell resistance in a bearish market and buying support in a bullish market regardless of what you prefer. You must learn how to spot the various bullish markets and bearish markets and strategize adequately.

Performing Technical Analysis

Technical analysis is one of the essential tools in a trader’s arsenal. Technical analysis analyzes and evaluates different aspects of an asset to predict the future. Traders use various charts, statistical models, histories, tools, and algorithms to calculate an asset’s trends. It is highly encouraging to learn how to perform Technical analysis if you’re looking to invest in cryptocurrencies.

Conclusion

Cryptocurrencies are heading strong into the new year, and investors jump on the bandwagon as soon as possible. Many will persevere, some will succeed, and most will fail. It is a fragile line that can be widened with a deeper understanding of the ecosystem and our guidance. Hopefully, with the tips and tricks discussed in this article, you’ll be able to come out on top. Happy trading.

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