The economic crisis caused by the COVID-19 pandemic has prompted the search for new investment opportunities and diversification of the financial portfolio. In the new circumstances, even those who previously had nothing to do with trading drew attention to the cryptocurrency.
According to data for July 2020, the traffic of search results of crypto-sites on average grew by 13%.
Besides, in August, the most popular cryptocurrency Bitcoin showed a new annual high (for the current period), exceeding the value of $ 12,000 per coin.
1. INTUITIVE INVESTMENT
Investing in cryptocurrency is always accompanied by high risks. Often, novice traders treat investments as a game, recklessly buy low-liquid coins, etc. In the cryptocurrency niche, a balanced approach, basic knowledge of technical analysis, and understanding of market trends are important.
Intuitive investments can lead to financial losses, so before investing in this or that asset, study the niche in detail. Having mastered the fundamental base, you can protect yourself from possible risks.
2. NON-OBJECTIVE ASSESSMENT OF OWN POWER / KNOWLEDGE
In the early stages of investing, a novice trader can be seized by the excitement and FOMO syndrome (Fear of missing out or loss of profit syndrome). As a consequence, overestimating one’s knowledge can also lead to a loss of investment.
A simple example: a user buys a low-liquidity asset at a low cost, investing all the funds in it. After some time, the asset loses even more in value and the total volume of the portfolio comes to naught.
3. SINGLE CRYPTOCURRENCY PORTFOLIO
The financial portfolio diversification rule works for any market, including cryptocurrency. Often, traders forget about this, investing in one asset, thereby increasing the risk of losing everything at once.
In a global sense, a diversification strategy is the combination of several financial instruments in an investment portfolio. In our case, we are talking about cryptocurrencies, the correlation of which is directly related to bitcoin. How can you protect yourself?
Experienced traders recommend “putting eggs in different baskets”: invest in 4-5 of the top ten cryptocurrencies on coinmarketcap.com. As a rule, these are assets with a history and high capitalization (in demand by the market).
Of course, the top ten can change at any time, since the cryptocurrency market is unpredictable, but using this technique you can successfully counteract market fluctuations while minimizing risks.
4. LONG-TERM INVESTMENT
In the classical sense, for the implementation of long-term investments, one year or more is pledged. In this case, it is necessary to conduct a thorough market analysis and choose the right moment to sell the asset to make a profit.
A common mistake of novice traders is buying a large volume of cheap assets with the expectation of further growth.
But as soon as the rate of such coins begins to move upward, the majority forgets about the long term and immediately sells the coins. If you have made a conscious decision to go into long-term investments, weigh everything well before selling the asset at the first growth.
5. SECURITY OF ACCOUNT AND STORAGE OF CRYPTOCURRENCY
In our time, information security is a basic issue that it would seem that everyone should remember. But, unfortunately, this turns out to be far from the case. Attackers are increasingly taking advantage of the carelessness of traders.
So, the most common causes of theft of funds are associated with the transfer of personal data by the user through phishing sites, the included two-factor authentication both on the exchange and on the email linked to the exchange account. Also, fraudsters often use fake exchangers, which are a script and several pages that give the impression of a working crypto-exchanger.
If you use a mobile application for trading, be sure to set a PIN on it and create a backup copy of the private keys. And if the device allows, set up a fingerprint login.
