These days, cryptocurrencies have become a very hot topic and everyone is wondering how to use them for making money. They are the newest instrument in the market and stories about how investors profited from Bitcoin have also incited some interest and excitement. However, the fact of the matter is that investing in these cryptocurrencies is a lot harder than it sounds. Sure, you can find an exchange or trading platform, sign up and get started, but there is no guarantee that you will be successful. Even those people who were able to make their fortunes off Bitcoin actually accomplished this during a period of uncertainty. It simply wasn’t possible to predict the incredible increase in value of the pioneer cryptocurrency.
Even though Bitcoin was introduced in 2009 and a horde of other cryptocurrencies have cropped up in the market since then and have also risen to prominence, they still remain relatively new. Therefore, it is not surprising to know that most people are still unaware of how to make these cryptocurrencies work for them. Guy Galboiz says that you can also be in the same position, which means that you have capital to invest, but you don’t know where to invest and how to invest it. First, let’s take a look at some of the top cryptocurrencies in which you can put your money:
- Bitcoin: If you have heard the term cryptocurrency, it is a given that you have heard of Bitcoin. Being the oldest and biggest cryptocurrency, it possesses almost 40% of share in the market and if it does increase like it did in 2017, it can reverse your fortunes. You should note that its price continues to change and you should be careful about when you invest in order to avoid losses.
- Ethereum: Last year, this particular cryptocurrency grew by nearly 3000% thereby earning the title of the second largest cryptocurrency and it is different from Bitcoin because it is not just a digital currency. It is a rather advanced blockchain project because its platform can also be used for building cryptocurrencies.
- Ripple: This was undoubtedly one of the best performing cryptocurrencies last year as it experienced a growth of 36,000%. Its price may be lower than Bitcoin, but it remains the third largest cryptocurrency as per market capitalization. Its popularity stems from the fact that in addition to being a digital currency, it is also a payment system. Blockchain technology is used for making international payments faster and more secure.
- Litecoin: This cryptocurrency also experienced growth of about 8,000% last year, but its price dropped down in the beginning of this year, just like others. Litecoin has a close connection with Bitcoin and follows similar trends, which encourages interest from traders and has made it the 5th largest cryptocurrency in terms of market capitalization. It was launched in 2011 for improving Bitcoin’s technology and it can complete transactions 4 times faster. Also, it was the first cryptocurrency that performed a Lightning Network transaction last year.
These are some of the top cryptocurrencies in the market and you can choose to invest your money in them. There are a variety of cryptocurrency exchanges that can be used for this purpose and it is best to read reviews and weigh the pros and cons of each exchange before you choose one for your trading needs. These exchanges will require you to make an account, deposit funds and then invest in the cryptocurrency of your choice. But, how do you trade? Here are some great tips that can help in this regard:
- Diversifying is not always a good thing
You will hear this from a lot of people that it is a good idea to diversify your cryptocurrency portfolio and this is somewhat true. After all, it is terribly unsafe for you to put all your money into a single coin and your potential is also considerably limited in this way. However, as per Guy Galboiz, when you decide to diversify, it is not simply because you don’t want to put all your eggs in one basket. You need to do it right when you have made up your mind.
Making more money is the only and also the best reason for diversifying. If you are investing your money in a different cryptocurrency, don’t do it because you are uncomfortable with the idea of investing more into your current cryptocurrency. Instead, you should choose to do it because you can see the potential of the other cryptocurrency and you want to use it for maximizing your own profits.
- You are only going to profit when you are selling
There is nothing better than watching the value of the cryptocurrency of your choice skyrocket. However, you should remember that just because its value has increased doesn’t mean that you have also made money. You are not going to make a profit until you actually sell your coins in the market. Why? This is mostly due to the inherent volatile nature that cryptocurrencies tend to have. If things are going well and you are interested in making a profit, you shouldn’t just sit back and watch. You will not make any profit until you transform the increase in value into a more stable form like a fiat currency.
- Don’t sell your cryptocurrencies until you are prompted
For a large number of traders, emotion remains the dominating factor during cryptocurrency trading. These people choose to go with their gut instead of watching market movements in order to make smart decisions. As a result, these traders end up making more losses that they should have or they rake in less profit than they could have. It is essential for traders to learn how to resist the urge of day trading when they are in the position of making a profit.
It is never a good idea to sell your coins just because you will be able to get some extra cash. Only when the circumstances indicate that it is a wise decision, you should think about selling your coins. There are a number of factors that can affect these circumstances such as any news relating to your cryptocurrency or your profit goals. As long as you stick to the facts, you will be able to make the right decisions.
- Look for the most efficient way to buy and store coins for yourself
As compared to other ways of moving money, cryptocurrencies still remain rather new. There are no best practices yet, which means it is not easy to find a helpful guide to aid you in this process. Therefore, it is up to you to decide the most efficient method of acquiring the cryptocurrency of your choice and how the coins should be stored after you have bought them. It is important to note that how you buy your coins also depend on the cryptocurrency you wish to invest in. Not all exchanges will provide you access to the cryptocurrencies of your preference so you need to search for one that can offer you what you are after. This means that some research will have to be done. Not all exchanges are reliable and some are actually scams that may hold your coins hostage in order to make their own profits.
According to Guy Galboiz, no matter what coin you decide to invest in, you need to bear in mind that you need to get a wallet for storing your cryptocurrency. It is a safe alternative and it will also enable you store brand new cryptocurrencies that may not be available on many exchanges. You should give some thought to a hardware cryptocurrency wallet if you are not interested in day trading and only wish to buy and sell occasionally. This is a physical wallet that can prevent your cryptocurrency from being stolen in the case the exchange you chose may be compromised and it also keeps you from making impulsive decisions.
- Stay focused on profits
One of the biggest mental hurdles that most cryptocurrency traders face at some point or another is the idea of being right and the idea of profit. Even though the difference is not substantial, but it will have a major impact on your decisions. Obviously, you don’t just want to be right in determining which cryptocurrency will rise in value, but also wish to make a profit from these movements.
It is possible that you are right in predicting which cryptocurrency will rise in value, but you will not make a profit if you haven’t invested in the right one. Alternatively, when you are thinking about making as much profit as possible, you don’t just think about the coins that will gain value, but consider which coins will gain the most value. Again, this may seem like a small difference, but it is a one that distinguishes small profits from a significant fortune.
- Consider fiat currencies your benchmark
If you see cryptocurrencies only relative to each other, it will not just lead to confusion, but can actually lead to disaster. Consider Bitcoin and Stellar. If there is an increase in value of Bitcoin and none in Stellar, it is a given that you will be able to buy more Stellar Lumens. However, it should be noted that this doesn’t mean that Stellar suffered from a loss in value in terms of fiat currencies; the only difference is the change in exchange rate between the two cryptocurrencies. Thus, when you are trying to determine the value of cryptocurrencies, you should compare it to fiat currencies such as the US dollar. This will give you a clear indication of whether there has been an increase or decrease in value.
- Make your purchases immediately
A large number of traders out there hesitate in purchasing cryptocurrencies for one single reason; market manipulation. As the cryptocurrency market is unregulated, companies and groups carry out pump-and-dump scams again and again until they are able to enjoy the profits they are after. This can make it difficult to buy cryptocurrencies because you will always end up missing out on getting them at a reduced price at some point. While this problem is quite natural, but it is something that you cannot ignore.
It is practically impossible for any trader to predict any dips related to news or market manipulations. Something that may seem to drive the price of a cryptocurrency up or down may not always have the influence you thought of, if it does. If you are buying a cryptocurrency that’s at a good position i.e. lower than its standard market value, then you shouldn’t hesitate. Buying in and missing out on a little movement is better than not purchasing at all and losing the profits that you would have reaped when the currency corrects itself.
- Learning to manage your emotions
When you are trading and investing in cryptocurrencies, the most dangerous thing is not the unregulated landscape of the market or the scams that tend to rampant in it. The real threat is your emotions because when you are actually making trades in the market, you will experience the feelings and emotions that you do when riding a roller coaster. Every time you look at the value of your cryptocurrency, you will notice a change. It is a given that the ups and downs will make you nervous. If the value increases, you will be tempted to invest more and if there is a loss in value, you will consider pulling out of the market.
This kind of emotional response is completely natural. If you take a look at the history of cryptocurrencies, you will notice that they are full of huge crashes and spikes. Hence, it is not surprising that every fluctuation causes traders to flinch. But, a crucial thing to know is that if you wish to be successful and want to make a profit from trading in the long run, you need to control your emotions and keep them in check. It is better to focus on the numbers and don’t let fear make your decisions.