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Cryptocurrency Investing 101
Discovering good projects in the cryptocurrency and blockchain space is not the hard part, the difficult part is timing the market. By following this guide, you can improve your chances for determining when the best time to buy and when the best time to sell is. Remember, always do your own research!
Sentiment is a key factor in determining the price of a particular cryptocurrency project. Sentiment in this case indicates the general viewpoint of people on cryptocurrency as a whole at a given point in time. For this, we have the Fear and Greed Index Chart, which will indicate whether or not the market sentiment is either "fearful" or "greedy":
When the market is "fearful" the price will usually reflect that and likely be oversold. When the market is "greedy" the market tends to be overbought. Knowing this information, when you see the market is starting to get fearful you can sell (while it is still greedy). Then once fear is at an all time high, purchase the coins and projects at a discount.
Buy the Dip
You can use our homepage listing as a guide to find some of the best cryptocurrency projects on the market. Find the projects you think are best and invest in them when they can be bought at a discount.
Chart it out
Make sure you check out the charts on the actual cryptocurrency projects you are interested in. Use the chart tools provided, like in the following example:
In the above illustration, we drew a couple red resistance lines, and the slope of our upward trend. Drawing it out, it appears that our trend is following the upward slope (green line) and that we may soon start to form support around the 11K level. For more advanced techniques, study Elliott Wave theory and various formations like the double top/double bottom, bull flags, golden cross, and reversal patterns.
Market conditions can affect the outcome of this, however, things are looking good for Bitcoin at this point in time. When you factor in the halving event which occurs next year, there isn't a better time to get in.
History repeats itself
If you follow economics enough, you will know that there are cycles in the market. You can find patterns, especially in cryptocurrencies like Bitcoin which have halving events, which correspond to the price changes you see over the course of many years.
Litecoin for example, already had its halving event and the price was already down significantly from its price just a month earlier. This is because people are already anticipating the events that will unfold and are acting pre-emptively to ensure maximal gains. This means you should too!
Don't buy the hype
You may learn about a new cryptocurrency through a YouTube video or an article. But by the time you watch it, likely thousands of people have already seen it and will have capitalized on it. Make sure the project is sound AND the price is lower than its usual average to ensure you have better odds at making a return on your investment.
Beware of ICOs
Investing in an ICO when it first comes out is like buying a top of the line GPU when it first comes out. Shiny and overpriced for what it is. Unless there is some amazing early-bird bonus, avoid the hype and buy at least 3 months out. Better yet, wait at least a full year to see how the project progresses and then decide.
Set goals, take profits
Before you invest in a cryptocurrency project, determine whether or not you plan on holding it for 6 months, 1, 2, 5, or 10 years. You may need to adjust your investment strategy accordingly depending on how long you plan to hold it and how confident you are about the project. Once you've determined these things, take profits when the time comes because you never know when another downtrend in the market will occur.
Pay applicable taxes
Don't forget to pay for taxes if you live in an country that requires it! You can use Bear.tax to help you calculate and file taxes on your cryptocurrency gains. It supports many different exchanges to collect all the information you need to report your gains or losses.
If you use the above guidelines and take some time to do some research and watch some videos on some of these projects, you will have a good chance at making a return on your investment and be rewarded handsomely! Check out some of our other Guides and Safe List sections if you need help purchasing cryptocurrency or finding the best exchanges for blockchain projects.