Choosing your crypto investment can seem like a complicated and challenging task, but after you’ve read through this article, picking the right asset should be much simpler and clearer than before. We’ll provide precise steps to follow, and tell you our checklist before investing.
Before jumping into investing, everyone should give a thought to the goals they’d like to reach, as well as why they set that goal in the first place. For instance, your goal could be to double your account size in one year, or to reach a certain percentage gain in a given time frame. After you’ve defined this, however, ask yourself why you wanted the extra funds in the first place. Whether it is a holiday, new car, or house that you’re saving for, reminding yourself of your reasons go a long way in terms of lasting motivation.
Also, consider your risk appetite when setting your crypto investing goals. This quite simply means coming up with an amount from your disposable capital that you’re willing to lose in order to reach your goal.
In any case, ensure that your crypto investing goal is specific, measurable, achievable, realistic, and time-bound, as such targets will bring the most value for your venture.
Once your goals are established, you’re ready to start looking at the crypto market. Because there are countless options, the best technique to analyze the offering is to start from the top market cap items and work your way down the list. This means start with looking into Bitcoin (BTC), then move on to Ethereum (ETH), and so on.
At each asset, observe and note three key points (explained in Step 3):
1. Year-to-date returns (in %)
2. Unique Selling Proposition (USP), lifetime in years, and founding team
3. Market cap and upside potential
Using this technique will make your search way more efficient than random picking would, and you’ll likely find the assets that fit your portfolio shortly after you begin.
After you’ve noted the above-mentioned three characteristics of the first ten crypto assets you’ve looked at, it’s time to establish the list of your investments. This is easier than it sounds.
First, place your notes next to your goals, and see which assets’ year-to-date returns match your targeted percentage gains—keep those that do match or come close, and eliminate those that don’t.
Second, look at the USP of the remaining tokens and see if you believe in their longevity, problem-solving capabilities, past development, and founding team.
After you’ve crossed out cryptocurrencies that you don’t resonate with, there’s only one thing left to do, and that is considering the market cap and upside potential of your remaining assets. For instance, if you find that two tokens are similar in all aspects, but one has a market cap of $20B, and the other $200B, it could be that the smaller cap token has more upside growth potential than its bigger counterpart.
The final step is to pick your few favorite crypto assets and begin your investment journey. There is no fixed number you have to choose, but it tends to be best practice to begin with investing in 4-8 different cryptocurrencies. Remember, the most vital point in your investing is to get started; likely, you will thank yourself for jumping into this exciting world a year from now.
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