8 Simple Ways to Maximize Your Cryptocurrency Investments

July 1, 2022August 5, 2022 Cesar Skaff

How do you maximize your cryptocurrency investments? How can you ensure that you get the most out of your cryptocurrency investment, regardless of the outcome? Let’s talk about how you might potentially maximize the profit on your cryptocurrency investment.

No one should make their first cryptocurrency investment or increase the size of their position without first developing a clear strategy for maximizing the return on their capital while minimizing the danger of losing it.

If you base your purchasing selections on your risk tolerance, conduct white paper research, use dollar-cost averaging, and so on, you can reduce the effect of prospective losses while raising your potential earnings.

Despite the fact that bitcoin is still entirely speculative and highly hazardous, using these tactics will allow you to get the most out of your investment while limiting the likelihood of losses.

1. Evaluate your risk tolerance

Inexperienced investors sometimes spend too much on cryptocurrencies at once. This is a common mistake. They invest thousands or tens of thousands on their initial trade to “catch” the next bull market. But anyone who bought Bitcoin in the fourth quarter of 2021 learned this the hard way. Instead of focusing on bitcoin, reevaluate your risk tolerance.

Your risk tolerance determines how much of your portfolio you can devote to “extremely high-risk/speculative” investments like Bitcoin. This averages 5%, ranging from 1% to 10%.

2. How do you decide which cryptocurrencies to buy?

Because cryptocurrencies are merely speculative investment instruments, they do not supply the traditional steak that investor junkies need. They don’t have price-to-earnings ratios, earnings reports, pending FDA approvals, or executive controversies. There is no standard measurement for float. However, they do have white papers.

Even if you don’t have a background in computer science, reading a cryptocurrency development team’s white paper may provide important, market-relevant information such as:

The problem is being addressed.
Design fundamentals
Experience in leadership positions
The competitive environment’s characteristics
Before widespread adoption, obstacles must be overcome.

As a result, the tone of certain white papers is more comparable to a sales presentation than a blueprint.

Let’s take the year 2008 as an example. Global markets are crumbling right now, and Satoshi Nakamoto has just issued a white paper on something called “Bitcoin.” Bitcoin appears to be capable of fixing a considerable number of problems even at its protozoan stage.

In a similar spirit, the Ethereum white paper may be lengthy and difficult, but if you come away thinking, “Bitcoin with improved storage,” it may be enough to persuade you to contribute $100 to the initial coin offering (ICO).

When your ether and bitcoin holdings are combined, they are suddenly worth hundreds of millions of dollars.

As a result, bitcoin forums just as regularly encourage members to DYOR, which stands for “do your own research,” as they do to HODL. Cryptocurrency research may be conducted, and reading white papers is the single most effective method for making the most of cryptocurrency investment.

Is the white paper you’re reading difficult to grasp, riddled with errors, or, even worse, couldn’t find one at all? All three of these things should cause investors great anxiety.

If you are not convinced, other competent investors are unlikely to be either.

Furthermore, a poorly written white paper (or one that does not exist at all) can be an indication that the cryptocurrency in issue is a scam. Despite appearing to be bogus, the SQUID cryptocurrency, which is famous for ending in a $3.36 million rug pull, did have a website and a white paper.

Anyone who read the white paper, however, would have discovered misspellings, grammatical errors, and a technical design for a rug pull that said that “the entire prize fund is quickly transferred to the winner of the game.”

While it is not a good idea to enter a bitcoin transaction blindly, you should not be scared to follow your intuition while abandoning the trade. When it comes to cryptocurrencies, an uneasy gut feeling is usually justified.

3. Make investments with the intent of keeping them

In the short term, cryptocurrency prices might be volatile, but in the long run, they tend to rise. The same is true for Ethereum. To maximize your cryptocurrency investments, buy with a long-term mentality.

Unlike the majority of memes on r/wallstreetbets, the majority of memes on r/cryptocurrencymemes are about HODLing bitcoin rather than buying or selling it (aka holding on for dear life).

Even though the memes that make fun of oneself are amusing, the community rallies around the HODL banner because it is the only way to scrape out some consistent profit and stability from a volatile asset class.

As a result, if you intend to buy cryptocurrencies, you should do so with the idea of keeping it for a long time (HODLing). When the downturn arrives, look for solace in internet memes.

4. Nonetheless, don’t be scared to sell high.

You don’t have to sell your cryptocurrency investment before the bubble bursts to get the most out of it. Aside from that, the value of your cryptocurrency assets should not exceed 5% of the total value of your investment portfolio. This means that you should not base your retirement plans on your cryptocurrency profits. It’s only speculation, but it’s entertaining at times.

As a result, there is no harm in exiting the game when your time is up, cashing in your chips, and moving on to another casino.

5. Use the Dollar-Cost Averaging Method to Reduce Your Risk Exposure (DCA)

After determining how much cryptocurrency to buy, the next question is when is the best moment to do so. And on what basis? With so much volatility in the bitcoin business, how can you possibly time the market well?

Dollar-cost averaging, or DCA, is a strategy of trading and risk management used by more experienced crypto investors. Direct capital accumulation (DCA) is the practice of constantly investing the same amount of money in an asset, regardless of the asset’s current market value.

Consider the following scenario: you want to buy $6,000 worth of ETH. That’s a lot of money, and if you don’t time it well, you could wind up losing the majority of it.

Instead, you might take the lump sum, divide it by 12, and buy ETH in $500 increments on the first of each month. If you proceed in this fashion, you will be able to purchase at various prices throughout the year. In the end, the average price you pay for Ethereum will equal its market value for the whole year.

It’s worth noting that dollar-cost averaging not only reduces the danger of investing in cryptocurrencies; it also makes the process significantly less stressful overall.

6. Consider the potential of staking for a trickle of interest.

Binance and Coinbase allow customers to stake cryptocurrencies, like a short-term crypto CD. Depending on the coin, holding cryptocurrencies for a month can earn you 2-9% interest.

If that makes sense. It’s more of an “if you already have some, might as well stake it” kind of thing. Now, I don’t think you should acquire a cryptocurrency just because it supports staking; rather, “if you already have some, might as well stake it.”

7. Expand your horizons

Diversification can help you mitigate your risk and maximize your investment even in the uncharted realm of cryptocurrency investing. Before you automatically allocate 40-70 percent of your portfolio to Bitcoin, as many novice HODLers do, keep in mind that BTC is not the cryptocurrency counterpart of the S&P 500. It is neither reliable nor conservative; it does not always rebound.

8. Make Certain Your Investment Is Safe

Only in 2021 were hackers, scammers, and phishers responsible for stealing a record $14 billion in cryptocurrencies. This represents a 516 percent increase above values recorded in 2020.

There are, thankfully, great do-it-yourself security measures available in the world of cryptocurrencies, one of which literally requires a safe. Many long-term HODLers choose to keep their private keys offline in the form of a “cold wallet,”. That refers to a hard drive, a USB stick, or a purpose-built product like a Ledger.