Where cryptocurrency trading and investing are concerned, some things don’t get discussed as often as they should. These forgotten factors may help grow your portfolio, or they could lead to frustration and financial ruin. Because there’s so much content posted every day, it can be difficult to focus on the most crucial developments. In this guide, we’ll cover five bitcoin trading secrets that most people won’t share.
Diversification: It’s Not All It’s Cracked Up to Be
At first look, this might seem like bad advice. Almost everywhere you go, you’ll hear advice such as “invest in more than one coin” and “try secured lending”. While the core message is a sound one —don’t over-commit —it’s not really applicable to cryptocurrency. The only real reasons to branch out are to buy more coins or to increase volume for greater gains in the future. Dividing your portfolio among various coins may slightly reduce the risk of a total loss, which is why it’s important to only invest what you can afford to lose.
Price Isn’t as Important as the Market Cap
Another mistake beginning traders make is to believe that short-term gains constitute a proven strategy. Most stories of astronomic success are typically the result of luck and a bullish altcoin market, and most moves are made when coins are at a low price. It’s vital to note that coin prices only become relevant after consideration of the total supply. When buying a coin, compare the purchase amount to the market cap, as it will determine the coin’s supply, scarcity, and long-term value.
Don’t Focus on the Absolute Price
In cryptocurrency trading, it’s critical to remember two things: that past performance does not indicate future performance, and to look for positive future values. These two factors have an overarching theme; to avoid taking the profits made from your portfolio unless the market has radically changed. A good rule to follow is to only invest 10-20% of your total disposable income, to avoid over-leveraging yourself.
Being Right Isn’t the Most Important Goal
This fact is commonly overlooked by many cryptocurrency investors. Some traders get overly egotistic about the decision-making process and they lose their focus on profitability in favor of ‘being right’. Although being proven right may provide short-term comfort, looking for loopholes will bring longer-term profits.
The Worth of Any Crypto Should be Compared to BTC and USD
Though Bitcoin is far from the only crypto available, you should care about how other currencies compare to it. In the long term, it’s good to make trades that positively affect your Bitcoin value. This doesn’t mean you should focus exclusively on BTC; rather, it means that it’s time to improve the portfolio’s value as measured in Bitcoin. If the BTC value of your portfolio doesn’t increase, it may indicate that holding onto those Bitcoins is a good idea.
Many people are reluctant to get into the cryptocurrency trading game because they’re not willing to put their faith into a currency they can’t see or touch, but the truth is, crypto may be the direction in which the world is headed. With a sound investment strategy and these little-known crypto trading secrets, you’ll find it easier to stay ahead of the game.