5 tips for investing in cryptocurrencies like a pro

Whether you want to save money for the near future or ensure a certain level of financial stability for when you’re older, investing in cryptocurrencies is among the best strategies for anyone to try. It is accessible and can be done in multiple ways to benefit you as an investor.

Luckily, if you’ve never had anything to do with this field, there are many resources on the internet and even cryptocurrency classes to help you gain knowledge and experience. At the same time, some apps are created to simulate crypto investing so you can get insight into how this process works before actually contributing with money.

However, know that crypto investing has risks, and if you’re not paying attention to the market changes, you might be prone to losing your assets. For example, if you decide to buy Bitcoin, the most known and trusted cryptocurrency, you need to know what is the current bitcoin price to prepare your next strategy and protect your investments. You can also check the bitcoin news for the same. But before getting deeper into that, let’s review some essential tips for investing like a pro.

Don’t underestimate studying the subject 

One of the biggest mistakes new investors can make is underestimating learning about cryptocurrencies. It’s not enough to briefly know how they work and benefit your asset portfolio ― you need to read the cryptocurrency’s white paper before investing in it and decide if it’s worth the risk and aligns with your budgeting needs.

You should also be aware of the risks you’re prone to so that you can watch your steps and minimize any inconveniences. For example, when starting to invest, you need to learn how to hold cryptocurrencies safely and closely follow what the media exposes regarding a certain cryptocurrency or market, so you know what to do next. In some cases, when the market drops, you tend to sell everything so that you can protect your coins. But that’s not always the case.

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Don’t make decisions based on fear

It happens quite often that investors make decisions based on FOMO (fear of missing out), not being aware that their actions are even more impacting the market. For example, when the demand for a particular cryptocurrency suddenly increases, its value also surges. Still, it’s challenging to create more coins since they must be fined faster to face the request. On the other hand, when a cryptocurrency flops, its value will decrease significantly, which affects all investors.

Being tense while making a decision has become the new “buy low, sell high” crypto tip, which is now an unsustainable strategy. That’s because predicting when the prices will be low only leads to more uncertainty because people might buy crypto when the prices are high, fearing they’ll get higher, and only a few minutes after, the prices will go down tremendously.

Learn how to use a crypto wallet

Crypto wallets are something you can choose to hold your crypto assets. There are many types of them, such as the following:

  • Mobile wallets that run and store a private key for your cryptocurrencies on your phone. Although it’s a convenient choice, you’re more likely to be exposed to malware and hacks;
  • Web wallets also store that private key on a server, but a cryptocurrency exchange is usually the third-party responsible for maintaining the wallet. One disadvantage of a web wallet is that hackers can gain access to passwords and user IDs;
  • Hardware wallets are physical devices that look similar to a USB key. As some include biometric locks, hardware wallets are the safest devices to hold your crypto. However, you need to be wary of fake hardware wallets that can steal your private key;
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Understand what cryptocurrencies are taxable

The IRS considers cryptocurrency to be subject to income taxes or capital gains taxes due to the gains derived from crypto. However, the crypto tax rules can be a little bit misleading and complex, which is why you need to study and understand how they work so that you’re free of any trouble.

Taxes change depending on how much you invest and what you’re doing with the crypto gains. For example, if you held your crypto coins for one year or more before selling them for profit, you’d qualify for a long-term capital gains rate. Or if you earn crypto from mining, you owe a tax on the value of the crypto made on that day. Cryptocurrencies can also be deducted, which is good if you sell an investment asset for a loss. 

You can hire a professional for help in case you want to invest to earn more significant amounts of money, but you can also try to minimize crypto taxes by:

  • Holding crypto for a longer time;
  • Claiming mining expenses
  • Considering retiring investments;

Diversify your investments

To minimize risks and optimize your assets, it’s best to diversify your investments. That means investing in various industries and choosing different types of cryptocurrencies. For example, it would help to invest in Bitcoin or Ethereum as a base for your wallet since they’re the most known and used cryptocurrencies. At the same time, you also need to consider stablecoins because they’re not as prone to market changes as most cryptocurrencies do.

Although the final goal is to earn money and be financially stable, investing in cryptocurrencies requires patience and a lot of strategizing to get the best outcomes and protect your assets. Therefore, creating a diversified portfolio is the best way to get a passive income in the long run while safely holding cryptocurrencies. Keep in mind that only advanced investors should take risks in getting more cryptocurrencies ―but even in that case, the risks exceed the benefits most of the time, so the best way to invest is to be patient and persevering.

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Crypto investing is one of the most famous investing types and also the most accessible. However, you need to be careful when dealing with the crypto market because it can be pretty unstable, affecting your investments if you’re not composed enough.