Many novice crypto investors report having difficulty choosing their first investment. That makes sense too; There are thousands of options and different tokens come into the spotlight every day.
In addition, many are eagerly waiting for the next new cryptocurrency, which will rise by a hundred thousand percent. But is that realistic? In this article we explain how you can take your first steps in this dynamic industry.
1. Don’t be fooled by “hypecoins”.
Cryptocurrencies rising thousands of percent in a week; Many believe the crypto market is their gateway to becoming a millionaire. You have this expectation for a reason.
These so-called hypecoins or memecoins actually exist. However, it is not recommended to search for these coins.
The chance of you choosing exactly the right one is minimal. Many of these hypecoins are poorly made and copies of each other with the aim of making the founders rich. For example, creators pay influencers to “spice up” the coin. The price then rises sharply. Then everything was put up for sale, which led to a serious crash.
All other investors who thought they would make money quickly are then left with nothing. Therefore, it is important to carefully consider whether a crypto is safe.
Cryptocurrencies with a large market capitalization (the total value of a crypto) are generally less volatile than the memecoins described above. Think of Bitcoin (BTC), Ethereum or Cardano (ADA). These are usually cryptocurrencies with a long history, which shows that they are not one-hit wonders.
2. Set your own pace
It is also important to set a realistic goal. The chance of winning thousands of percent is, as already mentioned, very small. Big wins in a short period of time are definitely not realistic, although it does happen occasionally. However, this is more about luck than wisdom.
When investing in cryptocurrencies, it is advisable to do so at your own pace. Determine the term over which you want to invest; Will you hold (HODL) your cryptocurrencies for years and invest a little every month? Then look no further than dollar-cost averaging (DCA), a simple investment strategy. Bitvavo offers a handy tool to do this for you automatically.
You can also trade crypto more actively. However, there are many risks involved and there is a greater risk of your investments evaporating.
3. Only invest money that you can afford to lose
You’ve most likely heard this tip before. But that doesn’t make it any less true. Since there are many risks associated with cryptocurrencies, it is wise not to invest the money you need to pay your fixed costs. Only invest money that you can really afford to lose.
It doesn’t have to be a huge amount: many investors invest small amounts. You don’t have to buy a whole Bitcoin, you can also buy just a fraction. In addition, cryptocurrencies are often only a small part of a broader investment portfolio, which also includes traditional stocks, for example.
Investing with small amounts is, as already mentioned, called DCAing. By making small, regular investments over a longer period of time, a portfolio can eventually grow larger.
A popular crypto exchange is the Dutch Bitvavo. This fair is registered with the Dutch Central Bank (DNB) and therefore complies with all laws and regulations.
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