Crypto has established itself as a major investment market, and as was indicated in our piece on bitcoin’s survival prospects, it will probably be around for a while –– even if it adapts and changes along the way. This is leading more people to look into adding crypto to investment portfolios. But how should they go about doing so?
Here, we’ll give you a few tips on how to responsibly and strategically add cryptocurrency to your portfolio.
Do your research
The crypto space changes from one day to the next, whether because of influencer opinions, decisions by major exchanges, or talk of regulatory changes. Take the time to keep up with the news, follow discussions on Twitter or Discord, and pay attention to what leaders in the space are saying. As you’re likely are, traditional investments can gain or lose value based on news and current events –– but the crypto market is even more volatile in this respect. Both day-to-day value and long-term outlooks are in constant flux, and only with adequate research can you determine whether you want to get involved –– and if so, when and how.
Use a naturally diversified crypto trading platform
Assuming you do decide to add crypto to your portfolio, you’ll want to give careful thought to the platform you start conducting transactions on. While there are a lot of different apps and services that facilitate trading today, it is wisest to find a cryptocurrency trading platform that is inherently diversified. That is to say, you want a platform that supports multiple mainstream coins, is still adding new assets, and –– ideally –– allows for stock and/or commodity trading as well. Having a range of options like this at your disposal gives you more options as you set about building your crypto portfolio, and ultimately allows for more strategic investment.
Consider setting up stop losses
This is a personal strategic decision, but it’s one that can sometimes save you from losing everything you’ve already invested when a coin suddenly loses its value. If you’re not familiar, a stop loss is essentially an orders for the platform to sell a specific coin when it drops to a value that you choose in advance. It’s a safeguard, in the case of cryptocurrency, against the extreme volatility of the market. That said, some investors disagree with stop losses in crypto, arguing instead for the more long-term strategy of “HODLing,” or “holding on for dear life.” In crypto, they see this as not only the best way to protect yourself, but also the best way to keep the market’s overall momentum moving forward (resulting, in theory, in gains for all).
Really, this matter comes down to forming a strategy based on your investment goals. If you want to diversify your portfolio with crypto holdings and seek slow, steady gains, stop losses can protect you. On the other hand if you’re looking at crypto as an aspect of your portfolio that can result in significant profits, the HODL approach may be worth considering.
While there are slow-moving options on most platforms that allow you to invest with a low risk, low reward system requiring little supervision, the idea of crypto is to keep an eye on your current investments on a daily basis. Indeed, there are plenty of day traders who make a living on this strategy. It’s also important to note that the crypto market never closes, and news from the other side of the world can affect the gains or losses you see when you wake up in the morning. Now, we’re not saying you need to spend 20 hours a day glued to your screen, watching the green and red candles –– just be aware that change happens quickly on the crypto markets, and it’s best to keep an eye on your holdings.
All things considered, the cryptocurrency market offers a great way for investors to diversify their investment portfolios, especially if more of their current investments are long term, meant for retirement funds or other passive investments. It is gaining more popularity than ever like, you can purchase Instagram followers using Bitcoin. Do your research, pick a suitable platform, start small, and define your approach, and you have every chance to make this a solid aspect of your personal financial strategy.