How to survive in the cryptocurrency market?
A new unregulated market, where everyone strives to be the first to find himself in a new niche and get rich, is full of various risks, and, unfortunately, many are so busy making profits that they do not pay enough attention to the technologies they deal with.
The last drop in cryptocurrencies cost many investors losses, but more important, they no longer believe in this market. However, it should be noted that it is useful for many to experience such a shock as early as possible.
Here are a few tips based on market observation in recent months that should help you navigate your new industry.
Keep track of emotions
There is such a concept, a syndrome of missed opportunities, when a person always thinks that the best, interesting or profitable happens somewhere else. In our case, this is a situation where you see a huge green candle on the chart, and you do not have this token, so you sell what you have in order to catch the jump on the outgoing train. Such emotional trading can be very dangerous, as in the end you invest in a token that has already grown significantly, or maybe even reached the maximum, and will not grow anymore.
Lesson: put emotions aside and do not try to run after prices - the time will come and your token will go up. In a bull market, each asset has its finest hour.
Beware of hype
Twitter is very convenient for reading news and exploring public sentiment, but sometimes it turns into a minefield. Self-proclaimed cryptocurrency experts continuously share their ideas and investment tips, while many are not obvious about their commitment. Alas, many of the distributors of information pursue their own benefit - sometimes they own certain assets, and sometimes they can be directly sponsored by certain companies. Some even deliberately spread panic.
Lesson: transparency in the cryptocurrency market is a scarce commodity. Be on the lookout for everything you hear critically, and think about the possible reasons for the newsmaker before spreading the news.
Those who scream the loudest are best heard - as a rule, they get the most likes on their tweets or votes on Reddit, as their words reflect the mood of the crowd. For example, if you look at the r / cryptocurrency forum on Reddit, you can always see messages advertising certain tokens on behalf of the author, who obviously has a large supply of these tokens. But you can’t ignore them either - read and make your own opinion. The main thing is not to run after the crowd blindly.
Lesson: study the topic yourself, taking into account other people's opinions. Take the news critically. People name different reasons for the recent decline in the cryptocurrency market - these are Bitcoin futures, the Chinese New Year, the loss of interest in Bitcoin, and the downside game by large players ... However, it is possible that the whole thing is false news.
Remember the story of the regulation of cryptocurrency exchanges in South Korea. This news was broadcast from all over, and it seemed to everyone that a complete ban on exchanges awaited this country. A few days passed, and it turned out that the government was only going to introduce regulation of exchanges and prohibit anonymous transactions, which is good, since this makes the operation of exchanges more secure. And the exchanges have earned again.
In addition, a number of South Korean government officials later were caught into insider trading - they sold their cryptocurrency assets right before the announcement of regulatory measures.
Lesson: do not believe the news, study the topic yourself.
Investments diversification and risk management
Diversification is one of the oldest and most important concepts for an investor. Here's how to do it.
1. Low risk, high market capitalization: 40% of your portfolio. These are the safest and most stable investments, 10 leading tokens. Popular options: Bitcoin, Ethereum, Neo and so on. These tokens most likely have a great future, and in the event of market volatility, they will be least affected.
2. Average risk, average market capitalization: 30% of the portfolio. These are promising and developing projects with great growth potential from the top 50. Popular options: VeChain (VEN), ICON (ICX), Omisego (OMG) and so on.
3. High risk, low market capitalization: 30% of the portfolio. Here we are talking about active trading and highly profitable instruments, and constant attention is required. This category may include, for example, Red Pulse (RPX) and Internet Node Token (INT).
P.S. Over time, it may turn out that you have too many different tokens in your portfolio. In this case, try to consolidate investments - this will reduce the size of commissions and simplify asset management, which means you will have more free time.
Lesson: never put all your eggs in one basket.
Do not store tokens on exchanges
As we have all seen repeatedly, exchanges are regularly hacked. Blockchain allows us not to use the services of banks or other organizations to store our assets, but not everyone uses these opportunities - very many people keep their hard-earned money on centralized exchanges. Transferring tokens from the exchanger to your own wallet is expensive and time-consuming, but absolutely necessary.
Lesson: while tokens are stored on the exchange, do not consider them as yours.
And beware of the financial pyramids - remember Bitconnect.