The market correction that began at the end of 2021 eventually turned into a full-fledged crypto winter. All market participants had a hard time, almost all coins lost 40-60% in price, some assets completely ceased to exist. And yet, fundamentally, behind each project there are quite specific people, corporations, funds with huge turnovers.
There are many projects that continued to develop even during a deep correction according to their roadmap. They have well-thought-out functionality necessary for the crypto world and further improvement of technologies in general.
People have not lost faith in Bitcoin, but it is quite difficult to objectively expect a rapid growth of 200-300% from it. Today, Bitcoin is not a coin for short distances, it is a long-term game. But the SHIB to USDT exchange rate has already doubled since the beginning of this year. If you are interested in short-term investments and quick results, it is better to focus on new projects that have not yet proven themselves.
Typical Risks of Investing in Cryptocurrency
Before buying any asset for investment purposes, it is important to study the risks. The cryptocurrency market is currently largely unregulated, meaning you are essentially defenseless in the event of a scam or hack.
Another difficulty inherent in all markets is to find the optimal entry and exit points for the market at the best prices. It is not uncommon for novice investors and traders to buy assets at price peaks and then suffer losses during a correction.
At the same time, the project can be very promising, with a great idea and implementation, with a great team, but the market treats all participants equally impartially. If you buy a coin at a high price, a loss in the short term is almost inevitable. Actually, this is why it is better to invest in fundamental projects than in a temporary hype.
Long-term investors earn more than short-term investors, but investing early is always associated with greater risks. Therefore, do not neglect diversification when forming a crypto portfolio.
Basic rules for long-term investment
There is no universal risk-free investment strategy in nature. There are ways to reduce the risk, but not eliminate it entirely. To this end, investors always analyze the market and pay attention to a number of important factors. The most obvious and basic of them:
- Benefit of the project. The number of cryptocurrencies is constantly growing. For long-term investment, it is recommended to choose a potentially useful asset that already affects a particular area. If you are interested in a project aimed at DApps, you should pay attention to the technical parameters of the platform: speed, bandwidth, blockchain fees. For gaming assets or DeFi, in addition to technical indicators, the development of the team and the community will be important.
- Reputation. No matter how tempting the project may look, the scandal is alarming and repels long-term investors. Hacker attacks, malfunctions, customer deception – any of these events gives reason to bypass a dubious coin as far away as possible.
- Project age. All successful projects were once very young, but not every young project will necessarily be among them. If the creators of the project from the first days of its existence promise dizzying profits, something is definitely wrong here. This might be a good short-term deal, but nothing more.
- News background. You don’t have to scroll through the news feed all day. First, you should filter the topics and take into account really important news: listings on stock exchanges, technical changes in the project itself, partnerships with large funds, attracting new investments.
- Liquidity. Often, bad projects do not have a liquidity pool – you can buy an asset, but it is impossible to sell it.
- Community development and behavior. An active community of fans and followers can work wonders. Proven by the history of DOGI. However, without the community, Bitcoin would not have become what it is now.
- Willingness to take risks and tolerance for risk.
Coming to the cryptocurrency market, it is important to understand not only the amount of investment, but also what part is initially included in the risks. You should not invest everything exclusively in young projects. Even in very aggressive investment strategies, it is recommended to allocate at least 1/3 of the investment volume for the purchase of BTC, ETH and, possibly, other coins from the TOP-10 by capitalization.
It is better to keep part of the funds in stablecoins in case of force majeure and the opportunity to buy an asset at a lower price. When taking profits, it is not necessary to change your asset, for example, NEAR to USDT. Stablecoins also have their own characteristics and vulnerabilities, so a combination of at least USDT, BUSD and USDC in a portfolio would be a perfectly reasonable solution.