The crypto market attracts gold diggers who believe in gaining 1000% returns and becoming extremely rich by just investing $300 over a short period. Some crypto bloggers and info businesses reinforce this opinion, promising their followers the ability to make money on cryptocurrencies easily and pressuring them for fear of missing out. So many newbies excitedly enter the market and lose funds because they don't have enough knowledge and strategy but believe in luck and fabulous 100% working tips. The crypto market aims to create fair financial opportunities for everyone worldwide, with low entry barriers, though the game has rules. In this article, we share the basics of how to make money investing crypto that would be useful for newcomers and will help take the first steps in cryptocurrencies mindfully.
How to Make Money Investing Crypto
Determine Your Goals of Investing Crypto
The first step is defining your goals for investing in cryptocurrencies. What do you want to gain, why do you need it and when.
For example, you aim to retire before 40 and live on your investment returns. So you have ten years to accumulate money to afford over 20 years without working. Or, invest in your children's college education, which will take five years, and you have five years to prepare. Or you need extra income shortly and want crypto investments to contribute 50% to your overall profit. The goal determines your time frames and helps you understand what strategy and tactics might be helpful.
Chose a Crypto Investment Strategy
Earning passive income with crypto is a long-term process against trading when you act over short and medium timeframes and make decisions each time the price dramatically changes. The strategy will help you to follow the rules and understand your trajectory.
HODL
HODL appeared as a misspelling to "hold", meaning keeping an asset as long as possible, whatever happens. The strategy addresses the increasing value of crypto assets over long periods, unlike fiat money, losing value every year because of inflation. HODLing needs minimum effort, a safe crypto wallet and the ability to access it 5-10 years after purchasing crypto assets.
Dollar-Cost Averaging
The strategy helps to minimize volatility risks when purchasing crypto assets. It is complicated to predict an entry time and pick the moment with the ideal price. According to the Dollar-Cost Averaging strategy, you can minimize the volatility impact when purchasing assets on schedule and dividing funds into equal portions. Instead of buying Bitcoin for $1000 at once, you buy it weekly or daily for $100 or another amount, so you average the entry price. The strategy is weak while an uptrend, as with every new purchase, you bear more costs.
Buying the Dip
The strategy aims to accumulate the most crypto assets during a bearish market. A bearish market means the prices have dropped, so you can buy assets at a low level if you predict an uptrend. The crypto market moves in the cycle, and the uptrend, as well as the downtrend, can't last forever, and there is always a market correction. However, do research before purchasing since the downtrend may indicate fundamental issues with particular assets and their native projects with no uptrends for them in the future.
Create a Well-balanced Investment Portfolio
What is a balanced portfolio, and why you can't just hold Bitcoin and Ethereum? A portfolio is balanced when you distribute funds across different areas, projects and types of assets. It helps to minimize your losses and risks and resist circumstances you can't influence. For example, you decide to invest in AI-based projects as, for now, they seem appealing and promising. In the future, governments may develop numerous restrictions in the AI field, control data, and obligate projects do not collect specific information, thus making the area less powerful and fast-growing, resulting in you losing your investments instead of gaining returns. In this case, you need to invest in different sectors, so if one appears under complicated political, economic, social or other situations, you won't rely on a specific company, industry or blockchain network. You will have multiple plans B to survive as an investor.
Diversify risks
Invest in cryptocurrencies with different risk profiles meaning large, middle and small market capitalizations. Bitcoin, Ethereum, XRP, USDT and other cryptocurrencies have a large market capitalization of over $10 billion. Crypto assets with large market caps have high liquidity, and their prices can withstand high cash-out volumes.
Mid-cap cryptocurrencies have a market capitalization between $1 billion and $10 billion. Mid-cap cryptocurrencies have the potential to grow and expand, but they are riskier. Mid-cap currencies are Solana, Tron, Polygon, Litecoin, Chainlink, Uniswap, and Filecoin.
Small-cap cryptocurrencies have capitalization under $1 billion and are highly dependent on market sentiment. These are Algorand, The Sandbox, Tezos, Decentraland and others.
Allocate across different protocols
Numerous blockchain networks are performing as a basis for building tokens. Most of the DeFi projects utilize the Ethereum blockchain. However, you need to consider other blockchains, as well, since the native network changes may affect its tokens.
Choose various types of crypto assets
Cryptocurrencies and tokens have multiple utilities within their native projects and the entire crypto market. The utility makes assets more resistant to negative determinants impact.
So, what types of cryptocurrencies should you consider:
- payment currencies — are created as an alternative to fiat money and are used for transactions only. Those are Bitcoin, Ethereum, Cardano, Solana and others;
- stablecoins — these tokens are backed by holdings in fiat money, bondings, stocks, precious metals and others and are equal 1:1 to fiat currency. Most of the stablecoins are based on USD. Stablecoins aim to save value while keeping your funds in crypto assets. Stablecoins are USDT, USDC, BUSD, DAI, TUSD, USDP, and EUROC;
- utility tokens — unlock services, products or features of particular platforms. Those are The Sandbox, Chainlink, Filecoin and others;
- meme coins — are based on popular memes and are used for transactions only. Meme coins are Dogecoin, Shiba Inu, and etc;
- governance tokens — serve as a governing tool for holders who vote on vital decisions and choose the development direction of a platform. Uniswap, Maker, Aave, Synthetix, Dash, and Sushi Swap allow holders to influence their native platforms.
Check Basic Crypto Indicators and Metrics
There are simple indicators and metrics that will help newcomers easily gauge market sentiment, buying and selling opportunities, and current trends:
- Crypto Fear and Greed Index — indicates market sentiment on a scale of 100 points, where 1 means an extremely fearful market state with low prices and buying opportunity, while 100 means an extremely greedy market with prices skyrocketing and a selling opportunity;
- Bitcoin dominance — the market share of the first cryptocurrency combined with price trends helps to indicate possible further trends and movements across the entire crypto market;
- Total Value Locked (TVL) — the decentralized finances (DeFi) metric shows how much money crypto users hold in particular blockchain networks, projects or assets;
- Active addresses — the number of network active users helps to indicate its activity and potential.
How to Buy Your First Cryptocurrencies
You can buy the most established and valuable cryptocurrencies at SpectroCoin. We offer all tokens mentioned in the article so you can create a diverse and balanced portfolio.
How to get started:
- Create a SpectroCoin account;
- Deposit your account with EUR, USD or GBP using Skrill, Neteller, Payeer, Perfect Money, Advcash, SEPA and Faster Payments, Pacific Private Bank or Bankera;
- Go to the Exchange page, choose the currencies you want to pay and receive.
Hold Your Crypto Investments Safely
Mindful crypto investing involves proper buying and selling decisions as well as safe storage. With SpectroCoin crypto wallet, you can store crypto assets as long as your investment strategy requires.
In the wallet, you can track 24-hour price swings and filter your fiat and crypto assets.
We keep our clients' funds in cold storage, meaning such storage has no internet connection ensuring its safety. The wallet is protected by two-factor authentication, which you can switch on at any time in your account. Also, you can manage the devices and protect yourself in case your mobile phone or laptop were stolen.
Crypto assets safety is one of the most vital characteristics you should consider when choosing a crypto wallet. SpectroCoin wallet is the best choice for newcomers and mature crypto users.
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