How to Smartly Invest in Cryptocurrency?

When it comes to investing your money, there are plenty of options to choose from, with one of them being a cryptocurrency or digital currency. Although it has only been around for a short time, its popularity for investors has steadily risen, especially in recent years.

However, while this means there are more digital currencies to choose from, this has made it difficult to discern how to smartly invest in cryptocurrency, especially considering how volatile the fluctuations are in the market. Although these wild fluctuations can mean high risk for investors, it can also give them bigger gains if they go about it correctly.

With that said, we have created this article that aims to provide you with a comprehensive guide on how to invest in crypto so you can minimize your risks even when participating in a high-risk market.


What is Cryptocurrency?


In simple terms, cryptocurrency is a virtual currency that uses cryptographic encryption and is usually based on blockchain technology. Because of the encryption, it makes it difficult to forge cryptocurrency. The basic premise of cryptocurrency is decentralization, meaning they are less likely to be interfered with or manipulated by any governing body.

However, cryptocurrencies are considered much riskier and more volatile than regular currency due to the lack of government backing as well as precious metals such as gold – factors that are often present with regular currency. Thus, cryptocurrencies are only valuable when people perceive them to be such.

Some of the most popular and recognizable cryptocurrencies are Bitcoin and Ethereum. Even though there are over a thousand other cryptocurrencies and new ones continue to emerge, those two are the to-go coins for the investors.


Benefits of Cryptocurrency as an Investment

If the cryptocurrency market is so volatile, why should you invest in the first place? After all, wouldn’t be smarter to invest in a more stable, less fluctuating market? Well, yes and no, and here are some of the reasons why it can be a good idea to invest in cryptocurrency.

It offers you a higher level of financial independence.

Cryptocurrencies offer you a higher level of financial independence as your money is yours alone and cannot be controlled by external institutions like banks or the government. This means that you don’t have to worry about losing access to your money as it’s fully within your control.

It presents high risks but also great returns.

Due to the volatility of the market, it can be a bit daunting to invest in digital currency as their fluctuations can be difficult to predict. Nonetheless, as long as you are smart about how you invest your money, they can offer you great returns.

It has higher liquidity than traditional currency.

One of the defining traits of cryptocurrency is that they are very easy to sell and purchase at any given time, giving them higher liquidity than traditional currencies. Because of this, you can easily get in and out of the market when you wish.


A Guide to Smartly Investing in Cryptocurrency


Considering how volatile the market is for cryptocurrency, learning strategies on how to invest in cryptocurrency is a must if you want to reduce the risks you undertake. Nevertheless, digital currency isn’t all that different from traditional currency.

Therefore, the strategies used for investing in digital currency are often similar to the ones used for traditional investment.

So, if you’re wondering how do you invest in cryptocurrency, then here’s a helpful guide that can teach you some tips and tricks on smartly investing in this type of currency.

Make sure to do thorough research before participating.

Like with anything that involves taking risks, doing adequate research is necessary if you want to maximize your investment and go about it correctly. This is particularly true for high-risk markets such as cryptocurrency.

Hence, if you want to make a profit rather than experience a loss, you need to be knowledgeable about the currencies you’re investing in, whether it’s a cryptocurrency or traditional currency.

Doing so will allow you to take calculated risks and lessen the chances of experiencing a loss and/or running a large debt. Doing your due diligence and researching more about the industry before entering may be time-consuming but it can have incredible payoffs later on when you’re already investing.

Moreover, most, if not all, of the digital currencies have made their whitepapers available online so there’s really no reason to go in unprepared. Whitepapers are reports on a particular issue that can help readers understand it more and therefore, make a more informed decision.

So, if you want to maximize the potential of digital currencies as an investment, then doing your research and using that as a basis for your investments is a must.


Ignore the hype and noise.

Just like you would with traditional investment, you need to filter out the noise and ignore the hype surrounding cryptocurrencies and treat it like you would regular money. This is where your thorough research of coins will come in.

When it comes to investment, you shouldn’t base your decisions on what others are saying about a particular currency. Instead, use the knowledge you gained from your research to make calculated risks as well as ask guidance from those who have expertise and knowledge of the topic.

Learn to discern who is actually knowledgeable about trading and investment strategies and who isn’t. Doing so will allow you to filter the information from other sources, allowing you to take in only those who can be helpful for forming your own strategies.

Know your strengths and be prepared to take calculated risks.

Investing money always involves some degree of risk-taking but it’s never been more apparent than when investing in cryptocurrency. As a market with volatile fluctuations, there are so many things that could happen and sometimes without notice.

Hence, you need to learn where your strengths lie and what your weaknesses are, particularly concerning risk-taking. If you’re the type to get nervous when taking risks, then cryptocurrency might not be the market for you.

However, if you identify yourself as a risk-taker, then you need to go about this the right way so you don’t end up with insurmountable debt.

Risk-taking can be exciting but it can result in more losses than gains if you don’t think carefully about what risks you will take. Therefore, if you want more profit than losses, calculated risks are the way to go.


Don’t forget to check your emotions at the door and expect the unexpected.

As mentioned already, the market for cryptocurrency investments can be extremely volatile which is why it’s important to check your emotions before entering the market. This means that some mental preparation is needed before participating in investments.

By doing so and expecting the unexpected, you won’t be swayed by your emotions in times of turbulence, allowing you to act more rationally whenever large swings in prices occur. After all, cryptocurrency investments are not for the faint of heart.


Only invest money you can afford and take losing.

A seasoned investor will tell you to only invest an amount that you can afford and you can stomach losing. Investments, whether traditional or digital, are meant to add more value to your current wealth, not lose it entirely.

Therefore, make sure that you only invest money that you can afford and stomach losing. That way, in case you do suffer losses, they won’t be as big or damaging, unlike if you invested all your money in one go.


Don’t invest in only one currency.

Another strategy to maximize profit and minimize losses is by making sure you don’t put all your eggs in one basket, as the saying goes. Diversify your investments by investing in more than one coin.

This is a strategy that even financial advisors in traditional investment advise as this can enable you to realize which coins are more profitable than others. This can also help you create a more diverse cryptocurrency portfolio.

You might be tempted to go with just the most popular currencies like Bitcoin but although its dominance of the cryptocurrency market may currently stand at 79%, it’s not always a sure thing. This is considering how this figure fell to around 50% back in 2018.

Therefore, to minimize your risk of losses, it’s best if you spread out your investments amongst the cryptocurrencies available rather than investing in just one coin.


Consider using a different email for your investments.

Investing money involves sensitive information which is why it’s best to use an alternative email for your investments. This is because using a regular email for your investments can potentially open you to security risks and data breaches.

To reduce the chances of this happening, consider an alternative email account that’s dedicated to your trading activities. Make sure to turn on the 2-factor authentication feature to provide enhanced security for your investment activities.

Moreover, it’s best if you use a unique username and password that won’t just be difficult to guess but also don’t have any personal information that potential hackers can use to trace back to you.



Learn what hot and cold wallets are.

When it comes to the storage of digital currencies, there are two options to choose from – hot and cold wallets.

“Hot” wallets are online wallets that offer easier accessibility, making them the more desirable choice for beginners. However, because this entails storing your investments online, they are also more prone to data breaches by hackers.

On the other hand, “cold” wallets are the offline counterparts of hot wallets. Due to their offline nature, they are less susceptible to hacking and therefore, is a great option for cryptocurrencies you plan on storing for long periods of time. Meanwhile, hot wallets are better for small amounts of a coin that you plan on using daily.

Another thing to note about wallets is that they are different from exchanges. Exchanges may be more convenient as storage but this can be troublesome as this means you don’t own the “keys” to your digital investments.


Stay vigilant around mobile digital wallets.

The convenience offered by mobile phones, particularly smartphones, has expanded to include mobile digital wallets that allow you to store your money on your mobile phone.

However, while this may be more convenient, avoid storing big sums of your cryptocurrencies on your phone as they can easily be compromised.

Moreover, avoid trading via mobile phones as well for the same reasons. Convenient as it may be to do everything via your smartphone, it’s simply too great a risk, especially if dealing with large amounts. Security risks are something you should always consider when investing, whether it be traditional or cryptocurrency investment.


The cryptocurrency is a market that never sleeps.

The cryptocurrency market is a 24/7 market, meaning it never sleeps. However, this doesn’t mean that you shouldn’t as well. If you’re a long-term trader, then checking it out every few days or so should be enough.

However, for short-term trades, the market tends to be more fluctuating, therefore, it might be necessary to check it around 3 to 4 times per day.


Final Thoughts

Investing in cryptocurrencies has become more lucrative in recent years, despite its high-risk nature. However, like with any investment or financial transactions, being smart about where you put your money is key.

This includes doing enough research about the digital currency you want to invest in, creating smart strategies on how and where to invest your money, as well as considering the possible security risks with digital investment.

While the market of cryptocurrencies can be highly volatile and risky due to its ever-fluctuating nature, the profit you might gain if you invest in cryptocurrency can be huge, provided you know what you’re doing.

Hopefully, this guide was able to provide you with enough tips on how to smartly invest in cryptocurrency and answered your question of “how do I invest in cryptocurrency.” Investing in cryptocurrency can be great if you know how to be smart about it.