Investing in cryptocurrency can be part of a balanced investment strategy. Whether you’re familiar with cryptocurrency investment or are just getting started, you must have heard of Bitcoin at some point, Bitcoin stands out as a distinct asset class due to its network effects, immutability, censorship-resistance, capped supply, and decentralisation. If you believe cryptocurrency use will become more prevalent in the future, you should consider investing in some as part of a diversified portfolio on a regulated digital asset platform like Luno.
However, as with any investment, it is important to look beyond the short-term risks and market volatility. Instead, you should focus on how your money can grow over the long term. Therefore, you must equip yourself with the necessary knowledge to benefit from long-term cryptocurrency investment. With the world becoming more technologically-savvy and use cases of digital assets continuing to grow, here are some tips to take note if you are considering to invest in cryptocurrency:
Tip #1: Research Before You Invest
Before you start your cryptocurrency investment journey, you should do a thorough research on a chosen cryptocurrency. The best way to do this is to go to the source: the project’s website, read their whitepaper and talk to their community on forums and social media. Look closely at the project’s team, product, and use cases. Additionally, there are many credible online resources like the Luno Discover blog to learn how to maximise your long-term cryptocurrency investment.
The more information you have, the better decision you can make. As a result, you should be able to find the cryptocurrencies that fit your investment needs. Keep in mind that the cryptocurrency market is relatively new, thus, volatile. However, as widespread adoption continues and the market matures, it will eventually create a less volatile market, which is a positive sign for investors looking to invest for the long-term.
Tip #2: Focus On The Future Impact Of Cryptocurrency Technology
In your research, you might have learned about the future impact of cryptocurrency. It is essential to point out that cryptocurrency technology is still relatively new, with Bitcoin being launched in 2009. Compared to other technologies, cryptocurrency still has a long way to go before it can realise its potential.
Remember what happened with smartphone technology? What’s happening with cryptocurrency today looks similar. Several foundational smart contract technology layers like Cardano (ADA) and Solana (SOL) compete for dominance in the same way Nokia and Apple competed to be the smartphone choice for the world.
Meanwhile, the number and type of decentralised applications have grown, some of which changed how we live every day and some never really worked or mattered. A growing number of investors believe that the potential impact of crypto technology today is similar to what we saw with mobile technology. That means this could be the beginning of a new phase of value creation, but only time will tell. Nevertheless, this will help you make an informed cryptocurrency investment decision.
Tip #3: Invest According To Your Risk Tolerance And Investment Horizon
In the investing world, there’s a common saying that time spent in the market is better than trying to time the market. Unfortunately, many beginners get caught up in reading the charts and prices of cryptocurrencies when they should be focusing on a long-term investment plan instead. For example, if your goal is to consistently generate wealth so you can retire comfortably, then you should look at an investment timeline of at least 10 or more years.
However, long-term investing can feel like a bumpy ride because the cryptocurrency market reacts to external factors like inflation and geopolitical events. These reactions lead to short-term volatility that we know is inevitable. Yet, these short-term swings can still distract you from your long-term cryptocurrency investment plan.
Historically, the cryptocurrency market has averaged upward in the long-term, so you should stick to your investment plan. You might be tempted to sell your cryptocurrencies during a bear market. Still, you must stay invested at a risk level that you are comfortable with. Therefore, having a solid understanding of your risk tolerance and personal investment horizon is essential to weather any market downturn.
Tip #4: Use The Dollar-Cost Averaging Strategy
How can you stay invested consistently for the long term? Dollar-cost averaging (DCA) is one strategy you can use for cryptocurrency investment. DCA is an investment technique that involves the regular purchase of a particular asset, like stocks, bonds, or cryptocurrencies, with a fixed amount of money. The timeline of each purchase can be done weekly, monthly, quarterly or yearly, depending on your capability.
Regularly investing in an asset reduces the “buy high, sell low” risk. With DCA, you buy more when assets are low and fewer when they are high. This helps you reduce your average cost per unit. Dollar-cost averaging does not guarantee a profit or protect against loss in a declining market. Instead, it averages out your purchase price over time.
Tip #5: Diversification Is Your Best Friend
Diversification is a risk-management strategy that involves balancing your portfolio with various assets. When it comes to cryptocurrency investment, diversification means holding a variety of coins in an attempt to reduce portfolio risk. For example, if one investment loses value, it will not affect your portfolio too severely.
There is diversification at the top level between the different asset classes: currency, commodities such as stocks, property, and cryptocurrencies. Then there is diversification at the lower level within each asset class. For example, in stock investments, it is common to put your money into several different companies operating in various sectors rather than placing all your savings into one stock. The same strategy goes for cryptocurrencies.
Start Your Cryptocurrency Investment Journey With Luno Malaysia: The Leading And Regulated Platform To Invest In Cryptocurrencies Safely
Whichever cryptocurrency you invest in, make sure you are on a regulated and highly secured digital asset exchange platform like Luno. The Securities Commission-approved platform features other approved cryptocurrencies readily available for you to trade: Bitcoin, Ethereum, Ripple, Litecoin, Bitcoin Cash, Chainlink, Uniswap, Cardano, and Solana.
Sign up with Luno and refer to your friends for Bitcoin rewards:
- Share your unique invite code with your friend from the Rewards Page
- Your friend signs up, deposits and buys RM250 in crypto from Luno’s Instant Buy or Sell
- You both get RM25 in free Bitcoin
*Read more on the Terms & Conditions for Luno’s referral programme here: www.luno.com/en/legal/rewards-and-promotions.
This article is for educational purposes only and you should not construe any such information as investment or financial advice. Investing in cryptocurrency is high risk and may result in the loss of capital as the value can fluctuate. We recommend individuals to consult with a licensed financial planner for detailed financial advice on whether cryptocurrency is a good investment option.