Many years ago on my first visit to a casino my friend gave me two bits of good advice. Put the money that you intend to lose in your left front pants pocket. When that money is gone, go home. As Bitcoin has broken above the $50,000 barrier folks are getting all excited about crypto again. Anyone who bought Bitcoin at the end of 2022 and has held on has seen their investment more then triple. Can you expect the same sort of return if you invest now? What are some practical crypto investment rules that you can use to guide your decisions going forward? How much money should you risk. When is it time to stop and go home?
Never Risk More Than You Can Afford to Lose
Opportunity and risk always go hand in hand in any type of investment. The problem is that some investments require that you take on excessive risk in order to have a chance to make a profit. Professionals who trade in risky markets such as stock options commonly limit the size of their trades to one or maybe two percent of their total trading capital. These folks know that nobody is successful in every single trade. These successful individuals never risk more than they can afford to lose on any single investment or trade. The same should apply to anyone who is getting into crypto investments or trades. Never risk more than you can afford to lose and never risk all of your investing or trading capital on a single investment or trade.
Learn to Use Dollar Cost Averaging for Crypto Investments
The rationale for investing in crypto for the long term is that tokens like Bitcoin or Ether will appreciate while currencies like the dollar, euro, or yen will lose value. The trouble with this approach is that a token like Bitcoin can be so volatile. Money invested at the height of the 2021 Bitcoin surge shrunk to less than a third of its value by the end of 2022. Experts in investing over the long term advise against trying to time markets. Rather they suggest that a person invest a set dollar amount every month, quarter, or year no matter how high or low the stock, commodity, or token is currently priced. This is called dollar cost averaging. By doing this with Bitcoin you will not overspend at the top of a market swing and you will buy at bargain prices when the market tanks.
Do Not Blindly Follow Crypto Market Hype
If you follow financial news programs on TV or social media there always seems to be a trendy guy telling the interviewer how Bitcoin will double or triple in price by the end of the year. Nobody asks them if they will pay for the losses of folks who follow their advice and lose. This generally seems to be part of one of the recurring crypto pump and dump schemes. This is not to say that crypto will not grow over time. The risk of blindly following the advice of celebrities who promote crypto is that while they are being paid to promote a token, you are taking the risk.
Bitcoin and Ether Crypto Investments Are More Secure
When investing in crypto you can look to hit a homerun or you can look to make reasonable profits over time. Such slow and steady profits every single year can result in fantastic gains over years of investing. Tokens like Bitcoin and Ether are not only the biggest in crypto by market cap. They are the most stable and likely to produce slow and steady growth over time. Crypto novices may be attracted to the newest and shiniest crypto token because it can have the potential for huge returns when it is first issued. As a rule, these tokens do not continue to grow. They can shrink and disappear as quickly as they came. Over the long term folks investing in crypto will tend to go better with secure tokens like Bitcoin and Ether.
