After last year's Bitcoin (BTC) and Altcoins rise, more and more people are interested at crypto investing. This market drop is very useful for many things, as I have wrote in my previous articles. One of useful things from this drop is that new people who are coming into crypto market are not here because price is rising, they are here because they see potential of the technology.
Many people last year invest in crypto with expectation that BTC will go to the moon and they will be millionaires very quick. Having hopes is nice, I am also invested in crypto with expectation that my investment will pay of, but problem is that many of those people don't even know what is Bitcoin and why it is used for. Same thing is with Altcoins. If you ask them what is difference between Ethereum, Ripple, Monero, Iota or Dogecoin, they don't know.
Because of that, I think that is very important that you do some research about Crypto and then you should decide is it worth to put some money into it. I will try to simplify things for newcomers at Crypto world.
For me there is only TWO large GROUPS of Cryptos.
- FIRST group is crypto money.
Crypto money is group of Cryptos that wanna serve as money. Some of them are private, some of them not, but their basic intention is to serve as money. Money can be used for payments or as a store of value and these cryptos have same intention.
There is many Cryptos with this intention and I will not list all of them, some of them are:
- Bitcoin
- Litecoin
- Monero
- Dash
- Iota
- Nano
- Zcash
- SmartCash
- Bitcoin cash
- Verge
There is many more coins with same intention.
SECOND group are crypto platforms.
Crypto platforms is a group of cryptos that have intention to serve as a platform for development of many different things. Most platforms are used for development of many different DApps (Decentralized applications) with different purpose and some of them are used as platforms for connecting banks, payment systems, businesses, data and people. Only few of these platforms are fully functional, most of them are in development stage. Some of them still don't have functional main net.
There is many platforms out there and some of them are:
- Ethereum
- EOS
- NEO
- Ripple
- Cardano
- Stellar
- NEM
- Ethereum Classic
- Qtum
- Ontology
It is not easy to choose where to invest and to correctly guess which project will be successful.
I am following few rules when I am investing in crypto.
First rule is DIVERSIFICATION
Old postulate says: "Don't put all eggs in one basket". If you put all eggs at one basket and drop that basket, you will crash all eggs. So don't invest all money at one crypto. I can't say that I am highly diversified. Usually I have between ten and fifteen different cryptos.
Why that number?
Because of the second rule.
Second rule is GET INFORMED
Getting informed for more than that number of Cryptos is very difficult for me because investing in Cryptos is just one part of my life and I don't have time for more than that. I think that following all news about Cryptos that you have is one of crucial things. First of all you have to analyze does some project have current or future important use case. Many projects have many promises and you have to analyze how realistic these promises are. There are many scams in crypto world, same like in real world so you need to be careful. Last year Bitconnect scammed many people, and if you had analyzed how realistic was their promise of around 1% daily return, you would never invest there because even at crypto it is not possible.
Third rule is NEVER INVEST IN PROJECT THAT YOU DON'T LIKE
Many people listen opinions of many advisers and invest in projects because of their opinions or according to TA. My opinion is that you should do your own research and invest only in projects that you like. I have invested in SmartCash dough it is not even at top 100 on Coinmarketcap with low volume and only on few exchanges. I like project and when you like project it is much easier to HODL when bad days are there. My friend @fullcoverbetting is HODLing his KCS dough I don't see any sense for that :-) but I respect that.
Forth rule is NEVER INVEST SAME AMOUNT OF MONEY in all holdings that you have
Doug I like SmartCash I didn't invest same amount of money in SmartCash and Bitcoin, EOS or NEO. I had article about SWAN Cryptocurrencies:
https://steemit.com/cryptocurrency/@cicbar/swan-cryptocurrencies
You need to analyze how risky your project is and you can't invest same amount of money in risky projects and safer ones.
How to decide which is safe and which is risky?
First of all analyze project, how real it is and does it have or will have important use case.
Second, analyze team behind project. Some crypto Superstars like Dan Larimer or Charles Hoskinson, already made some successful project and made lot of money out of it so they wouldn't risk their reputation to scam people with fake promises.
Then analyze time frame for roadmap. Time runs much faster at crypto world and many things can change in one year. If your project doesn't develop fast enough, it will fail.
After that, you need to see market cap and daily volume because Cryptos with lower volume are much more volatile. High market cap without high daily volume doesn't mean lot because if I make Crypto with 1 Trillion coins and sell 1 coin to someone for 1 dollar then this Crypto will have 1 trillion market cap.
Fifth rule is NEVER INVEST MONEY THAT YOU CAN'T AFFORD TO LOSE
This is crucial rule for me for all investments that I have made in my life, not just in crypto.
If you have invested borrowed money or too much money than you gonna be nervous and you will act according to emotions. With emotions, you can't make smart decisions and you will make mistakes. Sometimes people are GREEDY and because of that, they invest huge amount of money. GREED is bad thing in any aspect of life.
I am following these rules in all investments in my life and dough I had some more and some less successful investments, I can't say that I had some huge fails.
If you have your rules I would like to know about them. I am learning all my life and you should never be closed for new ideas.