After the past year, you saw a lot of change happen in the cryptocurrency world. Several big companies entered this space.
Yahoo Finance pointed out several companies that added cryptocurrencies to its portfolio. Some of them were MicroStrategy, Tesla, and Square. It is possible more companies will add cryptocurrencies to their portfolio this year.
Bank savings rates are ridiculously low. The current inflation of 6% makes the savings rates even worse. The Federal Reserve Chair, Jerome Powell, tries his best to calm the public when he talks about inflation.
Whether you have invested in cryptocurrencies for years or you are just getting started, there are some unwritten rules you should consider.
Anyone can buy Bitcoin on an exchange. There is nothing preventing you from doing that.
These other tips will help you make better decisions as you add more cryptocurrencies to your portfolio.
Seven unwritten rules you should know about
1. Follow your Cryptocurrency investing goal
When you start investing, you should have your own goal. What Michael Saylor of MicroStrategy says about Bitcoin is his goal. It’s not your goal.
Your goal may be to add exposure to Bitcoin to diversify your portfolio. Or your portfolio is all cryptocurrencies. Everyone has their own goal when it comes to investing.
Make sure you have identified your goal and that you stick to it.
2. Dollar Cost Average
The price of cryptocurrencies can change dramatically from day to day. With this method, you don’t need to be an expert in investing in this market.
The best way for anyone to invest is to dollar cost average into a cryptocurrency position.
Basically, you make a routine to buy cryptocurrencies on a schedule. This may be every week, every other week, every month, once a quarter, or whatever schedule works best for you.
You’re not too concerned with the price but want to increase your holdings on a position or two.
As long as you do this and don’t worry too much about the price, over the long term your investment will grow.
3. Sell losers to come out as a winner
With a loss on your cryptocurrency, you can write off some of your losses against your gains. Under IRS law, you can take a loss on a cryptocurrency if it happened to fall lower than the price you made the initial purchase.
Over time, the price of a cryptocurrency moves the longer you hold the investment.
One day the price of the cryptocurrency you bought could be up. Then the next day you could see the price drop over 20 percent.
When your investment is down, the IRS tax law allows you to deduct your loss if you sell a losing cryptocurrency.
If you made gains on your cryptocurrency, it may be wise to lower what you pay in taxes if you sell a loser or two.
You need to keep track of the price you bought your cryptocurrency.
This can be done easily if your cryptocurrency exchange allows you to review the price you purchased crypto. Another way is if you track your purchases on a spreadsheet or a cryptocurrency app.
Knowing your numbers is key.
4. Control your emotions and Ignore the noise
It is easy to let your emotions get the best of you especially when you hear about the latest update in this market.
The cryptocurrency market moves based on the news.
An event that happens in China could trigger the cryptocurrency market to move almost instantly.
You can ignore the bad news, or you can use the bad news to make better investment decisions.
When the bad news comes, the price of Bitcoin and other cryptocurrencies could be a signal that the price will drop.
In this case, you can either HODL or you can use this as an opportunity to buy more of your investment.
5. Diversify your investment options
Last year, Glauber Contessoto made news when Dodgecoin made him a millionaire. Almost as soon as he became a millionaire, he lost this status as the price of Dogecoin dropped.
This is why diversifying your crypto portfolio is necessary.
You never know when a cryptocurrency will go up or down. The market can move in any direction.
When you are overexposed to one single cryptocurrency, it is easy to become rich. Then it is just as easy to become poor.
Diversifying your cryptocurrency holdings helps you grow your portfolio and also avoid big losses that could literally wipe you out.
6. Continue to invest in yourself
The best thing you can do when you invest in cryptocurrencies is to continue to educate yourself in this space. This is still a young market with a lot of room to grow.
You could compare cryptocurrencies to computers in the mid-1990s.
During that timeframe, several computers were dominant at the time but soon became obsolete in a few years. You don’t see many Compaq computers in people’s homes today.
You can learn about cryptocurrencies by reading about the latest news on the internet, watching a YouTube video, or buying a book on cryptocurrencies.
Or you could subscribe and read my articles.
I spend at least two to five hours a day staying up to date on this market.
7. Trust your gut instincts
Don’t be afraid to follow your own instincts. When you start investing in cryptocurrencies, it is easy to follow the advice of someone on a YouTube video or a post you saw on Facebook.
Always do your own research after you hear about a new cryptocurrency. You want to make sure this investment works for you.
For the other person, they could have a lot of money, and investing in a cryptocurrency could be a small fraction of their entire portfolio.
With you, you want to make sure you don’t invest in a cryptocurrency scam. These scams are out there.
Always make sure you do your due diligence and research before you make an investment.
Sometimes when you trust your gut instinct, you could actually save yourself some money.
What cryptocurrency tip did you like best?
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.