First Steps to Investing in Cryptocurrencies Safely: An Essential Guide
Welcome to Bitso! Now that you have taken the first step into the crypto investment world, you might be wondering what you should do next, right?
You’re not alone, and that’s why we are here!
Investing in crypto can be very profitable. There are some key concepts you should get acquainted with to help you guide your decisions and feel more comfortable when investing:
Returns
This is how much your investment changes over time, in percentage terms. For example, if you invested $100 and have $105 the next month, you’ll have a monthly return of 5%.
Financial Risk
This refers to how much your asset’s returns fluctuate. If your returns can change significantly in a short period of time, and even become negative, you could say it has a high risk.
Bitcoin, ether, and most crypto are considered high-return investments, but they entail some risk. So, if your returns become negative after a couple of days, it doesn’t mean you made a bad investment. It’s just the nature of the asset you invested in, and you can still make money after some time! To illustrate, here are three charts of how crypto assets normally behave over time. You might see your returns fluctuate significantly each day, but in the long run, you could still build wealth.
So, if you think you don’t have any experience or time to put into your investments, you can define an investment strategy in advance so you don’t need to worry about day-to-day changes in the crypto market and you reduce the risk.
100 minus your age rule
You can follow the “100 minus your age rule” which suggest that, for example, if you are 30 years old, you should put 70% of your savings in investment options with variable returns like crypto, and 30% (your age) in less risky options that always provide the same return, like Bitso Earnings, an investment product offered by Bitso that currently gives you up to 4% annual returns on some of your stablecoin holdings like USDC and USDT. Investing in stablecoins also means investing in a less volatile cryptocurrency, as their value is pegged to a more stable asset such as the USD or gold, and they are often collateralized 1:1 with these assets.
Diversification
Another thing you can do to reduce risk is diversifying your investments. This means distributing your investments among different assets, so that, when the return of one asset goes down, there’s a good chance another will go up. This helps you create a solid portfolio that reduces risk.
In a nutshell
Seeing your returns go down in the short term doesn’t necessarily mean you made bad investment decisions.
You don’t need to outsmart the market. Create your strategy, preferably looking at the long term, and stick to it.
Allocate your savings between fixed returns and variable returns.
Always diversify by investing in different assets.
We hope that now you feel more prepared to invest in crypto with Bitso. Stay tuned for more helpful content, and keep doing your own research to make the right investment decisions.
Now, go and download or open your Bitso app, start exploring everything you can do, and don’t forget these tips.
