With the rapid changes in the world of cryptocurrencies, there has never been a better time to invest in it than now. The industry is facing a future where increased regulation, growing adoption rates, as well as mainstream acceptance will cause an irreversible maturation in the industry. As a trader, one might have one or more reasons to invest in the world, starting from supporting the technology behind a project, a belief in the social vision, or hedging net worth from fiat collapses. However, before deep-diving into the world of wallets, exchanges, and technologies, it is imperative to learn about the market and how it moves and operates because of several forces impacting it. Since few currencies are decentralized, whereas others are not, the industry showcases significant differences from the rules of traditional financial markets that involve stocks, shares, bonds, and derivatives.
Unraveling the Tips and Tricks of the Trade
Well thought out and step-by-step market research helps in creating a robust trading portfolio that will work wonders for a trader. Planned market research helps a trader understand the underlying technology and monetary rules behind whichever token a trader wants to invest or trade-in. It is also useful to know the business use behind each token. For instance, Bitcoins can be used as a payment method between two parties whereas Ethereum is used to create decentralized applications and autonomous smart contracts. Such knowledge can help a trader learn the value of each asset before he starts investing in them and building his portfolio.
Some of the other essential things to keep in mind are the number of developers on a project, how large the community is, the average trading volume (liquidity), and market capitalization. Learning about your risk tolerance level is one of the important guides to help a trader decides on the kind of cryptocurrencies that he should be investing in. Newer currencies available at lower rates showcase big returns but stand an equal chance to fizzle out in the long run. Similar digital assets come with a higher baseline level of risk due to the still unregulated nature of the market. Mainstream currencies move at slower rates and are mostly remain unchanged at their price levels.
Aligned with the Traditional Financial Market
If one must compare the cryptocurrency market with the regular financial market, then Bitcoin will emerge as the large-cap stock. Altcoins are like various small-cap and mid-cap stocks with moderate potential for growth. Thorough industry knowledge will help a trader gauge the market to help him seize the most potential opportunities that are undergirded by genuine research and knowledge rather than just emotion.
Hoxha believes that even after learning the market trends, a trader should never invest more than he is willing to lose. He also highlights the importance of diversifying portfolios so that one poor decision does not result in total ruin.