Investing in cryptocurrencies is not an easy task, although many want to make us believe that. While it is an asset that has similarities with others, such as stocks, precious metals and obligations, there are some differences that make it completely different when correctly choosing the best option.
In turn, a very important factor that we have to take into consideration in the world of cryptocurrencies is volatility, which causes the price of these to rise and fall vertiginously in a matter of minutes.
Cryptocurrency expert Alexei Antonov, a global investor in blockchain startups and co-founder of the SONM project, shares five tips, or tips, that will help us become better investors and make the right decisions.
The most used strategy, but not the only one, is to buy important cryptocurrencies like Ethereum and Bitcoin and keep them until they rise. This strategy tries to anticipate a potential rise, so patience is very important when the price of coins falls after entering.
The strategies proposed by Antonovo are alternatives to this investment method that, according to him, are more lucrative. Although I have a particular opinion of what the investment is or where it should go.
Investing in cryptocurrencies is not buying and selling currencies for the simple fact of speculating about their possible growth. Even less when the only promise on which this is based is marketing or subsequent developments that have not yet materialized. Many people trust their instincts or the advice of another, but if you do not do your own work you will most likely end up making the wrong decision.
When a person invests in a company, such as a chain of fast foods, what they do is invest in the possibility that tomorrow; these places offer us great profitability, because they serve food to millions of people all days.
In the case of blockchain projects, we can find that the situation is similar, with a small difference. Many of these projects are similar, and usually deal with equal problems, so determining which one will prevail in the future is a very difficult task and carries a huge risk.
To this it is necessary to add that the blockchain markets are much more global than the financial ones, everything that exists in this industry is linked with everything, causing certain barriers to entry to be eliminated.
A company that creates a project in London can quote in a Tokyo exchange and do it for 24 hours 365 days a year. It is a market that offers no breaks, there is no time to waste, there is no time to stop and think.
There are more intelligent people in all areas, but surely in blockchain there are more. With an industry completely in its infancy and with a growth that is frightening, it is difficult to live up to the circumstances. So try to keep up with the professionals is not a simple task to perform.
With new projects that are born every day, and without any history that allows us to think that they have the potential to grow, the decisions that are made in this sector tend to have many errors. We can multiply our capital several times, but we can also lose everything.
Even for these professionals, there is also the paralysis of fear, where we do not act because we are overanalyzing things and we have the fear that we still have knowledge to acquire before making the decision. And it is impossible to know everything; therefore this situation is not desirable either.
5 Strategies to invest better in cryptocurrencies
Let’s see now the strategies that this expert in the profession has to offer us.
# 1 Buy and Hold (Buy & Hold)
What we are looking for here, as I have already mentioned, is to buy those cryptocurrencies that have the prospect of growing over time. Of course this sounds logical, even somewhat obvious, but the key point that underlies here is to buy a major currency, Bitcoin, Ethereum, and keep it for months or years, even forgetting about them.
The idea is not to pay attention to the swings that exist in the market and that are very harmful to our health. We cannot be all day seeing the price go up and down, it is not healthy and it will lead us to make wrong decisions.
But our investment portfolio should not only consist of two or three top 10 cryptocoins without more. It is an interesting moment to buy coins that are working in some sector that interests us and that we know very well, such as artificial intelligence, logistics or agriculture. If we can choose cryptocurrencies from sectors that we already know, we have a large part of the work done, and we do not need to be buying and selling at all times because we are not sure.
One part of this strategy is to have half of our portfolio with Bitcoin, because this cryptocurrency is the most important and is the one that sets the market temperature a bit at all times. A tactic that Antonov says cannot fail.
If you are a newbie in this world, it is best to refrain from investing in ICO. It is a very risky place to start investing at first.
In general, these projects are surrounded by a large marketing machine, which creates an important enthusiasm and leads to prices of real madness, all for the promise of great profits. Here the recommendation is that the investor only acts if he has a team of technical analysts who can help him analyze each project and its risks. As this is not so common, individual investors should be as far away as possible.
You have to know all the important aspects of the ICO projects and as far as possible know even the members of it. Investing after having seen an advertisement in a social network is an almost assured way to lose our money.
It is better to take the 100 cryptocoins with greater market capitalization and analyze them to find the best prospects. These currencies that are already quoted are the best option to form a long-term portfolio.
An investor who conforms something like that can sleep a lot more safely, letting his investment work for him without being worried about all the rumors and unimportant news that appear every day.
# 2 Bitcoin derivatives and top 20
If it is not enough for you to buy cryptocurrencies and wait for them to revalue, then this strategy may interest you.
For that there are instruments that in other markets are used for hedges, since we can not expect the cryptocurrencies to rise continuously until the end of time. There are numerous futures contracts for several currencies, which allow short trading; something that is much simpler than trying to sell each time we think the market can turn around.
Traditional markets have offered us a large amount of aid, such as swap contracts and margin trading, which have been quickly adopted by the cryptocurrency market. It is necessary to study these tools to be able to use them in the right way, since they are perfect for a strategy where you want to reduce the risk.
Especially in times of extreme volatility where investment can be greatly reduced as it happened in January and February 2018.
# 3 Timely investments
The great fortunes in this market have been made by being at the right time. While I believe that market timing is not something that can be achieved from any point of view, the author of these strategies considers it.
When we read the whitepaper of a project, we follow all the comments made on their social networks and even talk to the team; we have a better understanding of how everything works, as well as when and why. This is very similar to having privileged information, which allows us to have opportunities to operate at a very opportune time for our capital.
The author, like me, believes that we should not pay any attention to technical analysis, but for different reasons. Consider that this market is subject to manipulations, from the best financed project to the smallest currency with some millions of capitalization, so it does not work correctly.
All these are sensitive to the tweets of an important figure in the project, counting also those campaigns that remain in the shade and that are not evident until the time comes when they yield their fruits.
Here it is important to have a team of experts who can advise us, who understand technology in general and can foresee important advances in a company. Understanding where a project is standing can make a big difference, since we can find one that is starting to work in one area while another is already completing its product. This is very important when making intelligent decisions.
# 4 Arbitration
From the arbitrage of cryptocurrencies I have talked a lot in this blog, even in which I collected different ways to earn money with Bitcoin. And this is a wonderful opportunity to get some profit in this market.
According to the author’s experience, robots are the most optimal way to generate income with this strategy. Obtaining between 5% and 20% per month with minimal risk. They are given in the exchange part or events of force majeure, such as regulations.
The idea behind this strategy is quite simple, finding a token that in one exchange is trading at a different price in another. So we can buy in the place that is cheaper and sell it in the other at the same time practically.
For the use of these bots it is first necessary to have certain skills, or to count on someone else’s, in terms of programming. Although there are also solutions available in the market. We may not get great benefits, but it can be an interesting opportunity for novice investors.
# 5 not only tokens
There are other investments that are not properly tokens or cryptocurrencies, but rather they are companies that work in blockchain projects and where we can acquire their shares. These projects aim to use technology to improve real life, providing services that are much more efficient than current developments.
They can be a blockchain that improves the tracking of shipments, cryptocurrency exchanges, payment systems such as Square, or any business that is related to this new technology.
These investments usually represent better opportunities than risky tokens, because you can have a better knowledge of these companies. On the other hand, we also benefit from the rapid growth of these companies, unlike other traditional sectors.
We can make money with companies that work this technology, but in fiat currency, as long as we have a great knowledge about the industry in which they work. Perhaps obtaining dollars is not our intention, but there are positive aspects in the stable growth that a traditional company can offer along with blockchain. Coinbase in is a great example of this.
At the end of the day, the investment in cryptocurrencies and blockchain companies is both fascinating and dangerous. It’s like the life of a seventeenth-century pirate, it seems seductive, but it carries great risks. We can find cryptocurrencies that generate 1,000% in a year and have made many people rich, but on the other hand we find investors who have lost everything in ICO and very risky projects seeking to obtain those returns.