A FEW MORE "NEVER DOs" FOR CRYPTO BEGINNERS AND EXPERTS
In my previous newsletter, I promised to share a few more tips that will keep you safe in your crypto journey. Feast on them!
It’s a new week; the majority of us are still grounded due to the pandemic, and there’s never been a better time to learn about crypto. If you’re new to my newsletter, there’s a free gift for you once you use the subscribe button at the bottom of this release.
If you missed my previous article on “things to avoid”, check it out here.
Let’s see a few more important tips.
Never borrow to invest in cryptocurrencies
If you follow the first rule of investing “invest only what you can afford to lose”, you’ll understand that this option is not negotiable. I’m pretty sure you know that borrowed money isn’t money you can afford to lose.
Although cryptocurrencies are promising long-term, there are no guarantees of short-term rewards, considering that you have to pay back the debt after a stipulated period. Volatile assets like cryptocurrencies are high yield assets that come with high risk, and there is absolutely no investing instrument that produces high yield with low risk. As an investor or trader, you have to personally determine your risk level, which influences your investment decisions and returns.
A lot of people have made the mistake of borrowing to invest in cryptocurrency only to watch the market drop heavily.
Don’t over diversify
There’s this mantra about diversifying your portfolio. Remember the famous “do not put all your eggs in one basket”. While diversification is good, all I’m saying is “try not to be too diversified”; the less, the better.
Limiting your portfolio allows you to create a decent watch list that you can comfortably track. It’s easier when you have to track a few projects, know what they’re doing and take action accordingly, contrary to dealing with a handful of projects. Another thing you must consider when diversifying is your capital. If your capital is thin, you don’t need to overly spread it across waters. What you need to do is look out for solid projects that are consistent with development, partnering with Fortune500 companies and have solid individual and corporate backing.
My decent watchlist count would be 5.
Don’t buy the news! Buy the rumour!
If you buy when the news (of partnerships, product launch or new milestone) is already making headlines, you’re already late to the party and on for slaughter in most cases. This is because those who took the risk to buy the rumour at lower prices will be offloading their assets to you at the top. Fear and greed are 2 major psychological factors that control humans in the financial markets. If you do not make use of these factors the right way, you’ll constantly be on the losing side of the market.
Remember that these rumours create hype that eventually builds up prices until the actual news is released.
Don’t give away too much personal info
If you belong to a few crypto groups on telegram, you might have come across some people jokingly giving away personal info like their crypto holdings. By all means, avoid sharing too much info on things like asset holdings, wallets (including hardware), your most-used exchanges and so on. This makes you a potential target for hackers.
When it comes to trading or investing, the best strategy is defensive. That is why I share these very useful tips that can keep you from making a lot of mistakes whether as a beginner or an experienced investor.
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Miracle Nwokwu
Founder, Bitville