Cryptocurrency Investment Strategy For Long-Term Success (Newbie Friendly)

12 June 2018

cryptocurrency investment strategy

The crypto market is being constantly flooded with people who just gamble their money without any solid cryptocurrency investment strategy. The reason for that are success stories that usually go viral. You hear about a person who turned a small investment into a life-changing sum and now you want to have skin in the game. What you don’t hear, however, are countless of stories of folks who wasted their precious capital because of making typical rookie mistakes.

In this guide, we show you how to avoid making trading decisions based on emotions or biases. By following the principles outlined below, you have a better chance of survival during any crypto storm and achieving the gains you want.

Why To Invest And Why Not To Do It

Crypto is so popular because it made so many people incredibly rich in a short period of time. Oftentimes, this is the reason why beginners get into it – to get rich fast. However, this is very unlikely to happen if you’re new and inexperienced. You’re way more likely to actually lose your money as a newbie than to make a profit.

Getting into crypto to double your savings isn’t a good idea either.

You should invest into cryptocurrencies if you’d like to participate in one of the fastest growing industries out there. Are you eager to learn more about technology and investing? Great. Are you willing to spend your time learning how the markets works and how to spot undervalued cryptocurrencies? Even better.

But if you just want to get rich fast because other people got rich fast then you might end up massively disappointed.

FOMO: Fear Of Missing Out

The fear of missing out is one of the most common reasons people lose their money in crypto. There are many examples of projects that experienced incredible growth making people believe that buying a pumped cryptocurrency is a good idea because it could still do another 2x or 5x.

Whereas it’s absolutely possible that the price could keep increasing and you could make a profit, usually though it’s just a bad habit to develop. Imagine people who bought Bitcoin at $19,000. It doesn’t mean that they won’t make a profit in the future, but they could have easily avoided the painful bagholding.

Whenever you’re about to make a cryptocurrency purchase, ask yourself whether you’re making a rational decision or simply rushing because someone sold you the dream of the next 100x gain.

The good thing about this industry is that there is always a new opportunity to invest in undervalued cryptocurrencies before they go mainstream.

Do not fomo in purely based on the hype.

DYOR: Do Your Own Research.

Sometimes, fomoing in on a project is not the worst idea if you’ve done in-depth research and you realise the potential is real. A lot of people who fomoed in on Raiblocks (now NANO) probably ended up in profits because of an insane rally it had.

When it comes to researching cryptocurrency projects, there are few websites which go as in-depth as we do so here are a few tips on what to look for.

Read the whitepaper. It’s crazy to see how many people invest their money into a project without studying the whitepaper or projects that don’t even have a whitepaper. Even if they seem too technical at first glance, make sure to at least read them once. Sometimes, it can be enough to spot potential bullshit.

Do background check on the team. If you’re a regular reader, you’d know that we pay a lot of attention to the team behind a project we recommend. You can have the best idea in the world and it’s still worthless if there’s no one to turn it into a reality. When checking the teams, focus on their previous experience, expertise, connections etc.

A great example for this is Nexus (NXS).

Nexus claims that they will launch mini satellites to create a network out of them. Now, this sounds great but you might want to know how would they be able to do so.

After doing some background check on the founder of Nexus – Colin Cantrell, you will learn that his father, Jim Cantrell runs Vector Space Systems which is a space tech company. Furthermore, they’ve not only partnered with Nexus but will also add NXS as one of their payment methods for satellite launches.

Once you find information like this, you know you’ve done the background checks the right way.

Analyse the problem & solution. There is plenty of projects out there who create fictional problems only to justify the existence of their ICO. You don’t want to bet your money on cryptocurrencies that have no real-life use cases.

Analyse the industry. Is your cryptocurrency trying to revolutionise a dying industry? If you make a long-term investment, you need to pay close attention to the trends so you don’t end up being a guy investing in a VHS rental store while you could have been an early Netflix investor, as an example.

Balance Your Portfolio

Sometimes you feel so good about a certain project that you just want to go all in. Again, if you’re after a long-term investment strategy, then the last thing you want to do is put all your eggs in one basket. As cliché as it sounds, keeping your portfolio balanced is a priority.

When overinvesting or going all in, people only see the positive outcome while being blind to what will happen to their money if something misfortunate was to take place. If one of your investments were to get hit by a 50% drop and that would ruin your portfolio and mental health, you’re simply overinvested in that very idea.

The truth is, some of the great ideas with solid teams behind them might still fail. There is so many factors that need to align properly for a project to succeed. But that is completely fine as long as you plant multiple seeds.  

Average Down

Let’s say you were to invest $1000 in a certain cryptocurrency. You could just spend the entire amount at one go or you could do what’s called averaging down.

This means that you’d only put a fraction of your total investment at the current price and then set multiple buy orders for lower prices in case of a dip. If you invest $500 at $0.40 and then watch it drop to $0.20, you still have the remaining $500 to invest. This way, you average buy price will be $0.30.

When it comes to cryptocurrencies, you want to reduce your risk as much as possible and averaging down is a great method to avoid overextending yourself.

Avoid Overhyped Projects

As we mentioned earlier, the fear of missing out can be strong, especially when everyone is talking about a certain project. What you need to realise though is when everyone is promoting something, they most likely already invested at a lot lower price.

The later you invest, the more people there are who bought in before and are ready to take profit. By doing so, you increase the risk of being a bag holder when the price drops because someone unloaded their coins at people who arrived late.

This is why we research undervalued projects. If you’d like to hear about an idea before it reaches its full potential, be sure to subscribe to our newsletter on the homepage or at the bottom of this post.

Take Profit

Whereas holding onto a good project for a long period of time can pay off massively, you want to reduce your risk. Due to the volatile nature of the crypto market, it’s never a bad idea to take some profit. If you coin went 2x or 3x, it makes sense to take out the initial investment or at least a big chunk of it and let the rest ride for free.

This way, you can still enjoy great returns if it keeps growing but also secure your initial investment in case it drops.

By taking profits regularly, you reduce your risk in a smart way while still being able have skin in the game.

Keep Some FIAT Aside

The crypto market is extremely volatile and can be unpredictable even for the most experienced traders and investors. Sometimes, we can experience a dip based on some bad news that nobody expected.

For this reason, it’s smart to keep some FIAT ready so that you can invest it when an opportunity arrives.

It’s tempting to just invest all your allocated FIAT but you’ll be glad you left some aside when we go through a big correction.

Store Your Cryptocurrency Safely

There is nothing worse than losing your cryptocurrencies due to negligence. What you want to do is minimise the risk of losing your coins and there is many ways to do it. One of the most common solutions is getting a hardware wallet like Nano Ledger S.

The last thing you want to do is keep all your crypto on an exchange. There is countless stories of people losing their money because an exchange got hacked or turned out to be shady.

The safe thing to do is to only use exchanges for making purchases and using your own wallets to storage.

Summing Up

The above mentioned principles should give you a basic foundation for making your crypto journey enjoyable and profitable. For more advanced ideas and in-depth research, be sure to subscribe to our newsletter.

If you feel like you’d rather trade then be sure to check out our post on cryptocurrency trading strategies.