The prominence of cryptocurrency is often measured in market capitalization. Bitcoin is the unquestioned king at the moment, but Ethereum is carving out a larger share of the market all the time.
Investing in Ethereum can involve knowing the conversion of 0.1 ETH to USD, among other things, but there are a few things to know ahead of time. With a few simple tips, even newcomers to the world of crypto investing can feel as confident as established users.
Don’t Invest More Than You Can Lose
We have heard the stories of those who invested in cryptocurrency heavily and were rewarded exponentially. The reality of that story is that the vast majority of people who invest all they have wind up losing in the end. It is a devastating thing to have to go through and it could be avoided.
For the most part, cryptocurrency is a long-term play. Patience and management of the budget will go a long way. Investing more than you can truly afford to lose, it can create a feeling of catastrophe should that investment go awry. Investing is like gambling and the safest way to do so is to leave yourself some wiggle room.
Don’t Get Emotional
Perhaps the single most common mistake that Ethereum investors make is letting emotions get the best of them. Because we have money tied up in these investments, it is all too easy to panic when the price moves one way or the other.
Every purchase or sale of Ethereum should be treated without emotion involved. Take into consideration all of the facts and figures to make the best decision possible. Flying by the seat of your pants and allowing emotions to dictate might seem like some maverick thing to do but it will probably result in seriously troubling losses before anything else.Diversifying is Your Friend
Similar to the last two tips, there is another that will help keep you from a catastrophic loss. Rather than invest everything you have into one entity, spread your money around. Diversify your portfolio. It is an insulation against total loss and provides the chance to live and fight another day.
While it might seem easy to throw all of your money into Ethereum or Bitcoin, it is too hard to know when the next great market crash will come. By investing in other types of cryptocurrency, investors can have some layer of protection from rapid declines (like Bitcoin at its height).
Clarify Risk Tolerance
At the end of the day, each investor has different goals. The best way to determine what path to take is to evaluate your risk tolerance. This method provides valuable information to the investors so that they know how aggressive or conservative they wish to be when investing in Ethereum or any other form of cryptocurrency.
Because this is a long-term play, it helps to have a strategy in place. Talking with a broker to better understand your risk tolerance is a fantastic start. Doing a little bit of research will also give you a better idea of where your level of risk may be.
Ethereum is Not Bitcoin
There can be some misconceptions about cryptocurrency, in general. Though Ethereum has the second-largest market cap, it is quite different from Bitcoin. Ethereum is fully decentralized, which provides additional security that cannot be found in more traditional methods of investing. It is also a better long-term investment though there are some concerns over its price volatility. There is far more to know about Ethereum but this is as good a place to start as any.
Think Long-Term
There are far too many investors who get into cryptocurrency thinking they are going to hit the wave at the right time and sell out at a huge profit. While that certainly can and does happen, it is not nearly as common as it might seem. That’s because cryptocurrencies are a long-term play.
Look at the price of Bitcoin. In just over 10 years, it has had meteoric rises and precipitous falls. For all of the investors that cashed out at the peak, there are even more who failed to recognize the proper time to get out. By keeping a long-term strategy in mind, it is easier to deal with those ups and downs while avoiding the emotional transactions that wind up becoming extremely costly at the end of the day.
Have a plan in place for when to re-evaluate the market. It might be a year from now. It might be five years from now. Whatever the case, don’t go looking to move your cryptocurrency at the first sign of a profit because you could be leaving a lot more on the table. It can be scary to see prices fall but it will not have been the first time (nor the last). Ride out that wave and most established cryptocurrencies tend to come around sometime.
Risk Only What You Can Afford to Lose
When we get involved in investing, many of us don’t stop to think about losing. After all, visions of the next big score dance through our minds without the negative coming into play. The simple reality is that many investments turn out to be losers.
For that reason, invest only what you can afford to lose. While it may not be fun to lose that money, it could also be a lot worse if precautions aren’t taken. We have heard stories about those who risked it all and were rewarded by a crypto boom.
Unfortunately, we don’t hear the other 95% of the stories that end in failure. It is okay to pick the wrong investment. But if you risk everything you have on that single investment, it is the kind of failure that can be life-changing in all the wrong ways. Having a high-risk tolerance is fine but this is crossing the line into being dangerous. Don’t overextend yourself and wind up losing everything in the process.
