Perhaps you, like a lot of people, have been experiencing crypto Fear of missing out (FOMO). You’ve seen all of the Twitter posts and Instagram stories of your friends flaunting their crypto gains and started thinking “Why not me?” So, you pick your wallet and set up an account on an exchange. What’s next?
Before you start investing in crypto, there are a few things that you need to know. First, crypto markets are volatile; they are in a constant state of flux and are always changing. Experts will tell you that crypto is “significantly more volatile” than the stock market.
While there is a lot of debate about how long it will take to see stability in the crypto market, there are those who expect that the volatility will never go away. Noelle Acheson, who is Director of Research at CoinDesk, explains it this way: “For crypto investors who have been in the market a while, volatility is not a bug — it’s a feature.”
It remains to be seen whether the regulations that seem imminent for crypto will help to reduce its volatility. So, for now, the roller coaster ride is something that every investor should understand and accept before they board. Once you’re ready to get started, there’s some steps you can take to better your odds of success, courtesy of Dan Mulligan, the Director of Marketing at AscendEX.
Define your goals before investing in crypto
“Know your long-term goals,” Mulligan says. “Are you looking to invest long-term or trade towards a short-term goal?” FOMO might be driving you to invest in crypto, but it is not a good long term strategy.
Will you be planning on holding on to your coins for a year or two? Or, are you hoping to invest in something for the short term and cash out quickly? Defining what your goals are can be valuable in determining what coins you buy, and what you do with them once you have bought them.
Once your crypto is purchased, your goals will continue to be important. Seeing a quick dive or climb could inspire you to scrap your strategy and react with your emotions. This is rarely a good plan for any investment vehicle. If you have goals and stick to them, you can avoid masking rash investment decisions based on emotional reactions.
Do not spread yourself too thin when investing in crypto
Diversification is one strategy for dealing with volatility. In the case of crypto, you might be tempted to buy a lot of different coins to keep yourself from a big loss if one crashes. While there is some wisdom to that, it can be too much of a good thing.
“Select a few projects of interest and do your own research,” Mulligan says. Find out who the team is behind the coin. Read its whitepaper. Learn what the project and its founders hope to achieve. Spend some time interacting with crypto communities on Discord or similar platforms with other investors. This is the kind of (fun) homework that you should be doing to ensure that each coin you invest in is a risk worth taking. But keep in mind, if you invest too much of your time to research a wide variety of coins, there won’t be much time left over to actually invest.
Scott Byron, Head of Venture at AscendEX, also notes that investing in crypto requires investors to closely monitor each of their token investments. The thinner you are spread as an investor, a higher the likelihood of missing critical information about the market and your positions.
Dive in and start your journey
Once you know what you want your investments to achieve, and you have identified some priority coins that you think can get you there, it’s time to dive in. Don’t forget that crypto is still in its infancy. At this point, everyone is a student. The only thing that is predictable is that the market is unpredictable. If your choices do well, build on your wins. If they don’t, learn from your losses and return to the market a wiser investor.
– Dan Mulligan is the Director of Marketing at AscendEX, a platform for investors of all skill levels who want to Invest, Earn, and Trade 100’s of crypto assets in one place.