How to profit in cryptocurrency

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Date: 21.02.2018

Welcome to Chapter 2 of Cryptocurrency Investment Tips for beginners, this chapter will cover investment strategies, profit tracking, profit taking and how to find the best opportunities.

This chapter is part of a free ongoing and continuous guide on how to invest in, research and profit from cryptocurrencies, this chapter includes affiliate links so if you find my guidance helpful please use the referral links in this article so I can continue to create these free guides.

Before we get started, cryptocurrencies are very volatile and it is not uncommon to see 20% fluctuations in a single day, this is one of the reasons why it is always advised to only invest what you can afford to lose.

On the other hand volatility is also the reason why cryptocurrencies can be a very lucrative investment, for example, compare a 20% rise in one day to the 7% average ANNUAL return in the stock market and I haven’t even mentioned the 1000% and 10,000% returns early investors have made, but we will come to those stories in future chapters.

Basic Advice:
Only invest what you can afford to lose
Invest according to your risk tolerance
Always do your own additional research
The best time to buy bitcoin was almost 10 years ago, the second best time is today
Keep your coins safe (referral link): https://www.ledgerwallet.com/r/4c54?path=/products/

The Safe Strategy

First you might want to start with “Blue Chip” cryptocurrencies, these are the cryptocurrencies with a market cap of over $2 Billion. At the time of me writing this there are currently 7 blue chip cryptocurrencies which are:

Bitcoin - https://coinmarketcap.com/currencies/bitcoin/
Ethereum - https://coinmarketcap.com/currencies/ethereum/
Ripple - https://coinmarketcap.com/currencies/ripple/
Litecoin - https://coinmarketcap.com/currencies/litecoin/
NEM - https://coinmarketcap.com/currencies/nem/
Dash - https://coinmarketcap.com/currencies/dash/
Ethereum Classic - https://coinmarketcap.com/currencies/ethereum-classic/

Some sources claim that cryptocurrencies with a market cap greater than $30m qualify as blue chip cryptocurrencies so if you want a broader perspective you go to Coinmarketcap.com at look at the cryptocurrencies with market caps above $30m. I prefer to stick with the $2 Billion qualifier since that sets the bar higher therefore making the investments safer in my opinion.

To making investing into altcoins easier you can first buy bitcoins and then trade them for your favourite coins.

Buy Bitcoins from Coinbase (Referral link – Global, you get $10 in FREE Bitcoin after buying $100 in total): https://www.coinbase.com/join/592b7d7f64a015a3716ebdad

Buy Bitcoins from Bitpanda (Referral link - Europe only): https://www.bitpanda.com/?ref=3127933809251797450

Buy Bitcoins from Coinmama (Referral link – Global, No verification): https://www.Coinmama.com/?ref=cryptonite

LocalBitcoins (Referral link – Global, Verification needed for some purchases, Peer-to-Peer): https://localbitcoins.com/?ch=d7ch

Buy Bitcoins from Cex.io (Referral link – Global): https://cex.io/r/0/up106280379/0/

Note: You can also buy Ethereum and Litecoin from Coinbase and Bitpanda.

When is the right time to buy?

I like to follow two rules regarding this.

Rule 1: Get your foot in the door now

No one can tell for sure what the price will be in the future so if you feel confident about the coin you have chosen then buy a small amount to set your foundations. As long as you have picked a good coin then it is better to get in now and hold for the long term, if you try to time the market, you risk the chances of buying the coin at a higher price later.

Don't be this guy

Rule 2: “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”

If you want to wait for a better price you should buy a coin when it is being “dumped” (investors are selling which causes the price to go down), if you have picked a good coin do not worry the price will soon recover and could even go beyond the current All Time High (ATH).

You can setup buy orders on an exchange if you anticipate further price drops, you can also add the coin to a price tracking app like Blockfolio and setup some price alerts (this will be described in detail further down).

Buy Low, Sell High

Ideally you want to get in early on a coin when it is nice and cheap and sell it after the price has gone up substantially, for example if you bought 300,000 Stratis at $0.01 on August 12th 2016 you would now be a millionaire, having have gained over $1.5m from an initial $3,000 investment at the current price of $5.06 per coin.

If you are not an early adopter and missed out on the bottom prices you can still buy the occasional dips. Let’s go back to Rule 2: “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”. This refers to waiting when everyone else is buying and buying when everyone else is selling.

When everyone else is greedy and buying, this causes the price of the coin to keep rising and you risk overpaying for the coin, especially if there is a later price correction (a temporary price reduction). If you are seeing a pump without any solid reasoning behind it (no new developments, no partnerships, no important news or updates) then you could be better off waiting for the price to dip again before buying.

HODLING


Yes, you read that right, hodling. This is the practice of holding on to a long term investment without giving in to the urge to sell, it is misspelled deliberately for dramatic effect to mimic an investor frantically trying to type the word “HOLD!” If you plan to join the legion of cryptocurrency hodlers then here are some useful terms you should know:

  • Sats – Short for Satoshis, a division of Bitcoin, 1 Satoshi = 0.00000001 Bitcoin. I have added a link for a convertor at the end of this chapter.
    • Fiat – Fiat currency, your standard currencies such as USD, GBP, EURO, CNY etc.
    • ATH – All Time High, the peak of a coins price.
    • Bull Market - a market in which coin prices are rising, encouraging buying
    • Bear Market - a market in which coin prices are falling, encouraging selling.
    • Feeling Bullish – Feeling positive that an investment will grow in value
    • Feeling Bearish – Feeling that an investment will lose its value
    • Weak Hands – People who buy a coin then sell as soon as the price dips
    • Strong Hands – Investors who hold on to coins not matter how low the price dips.
    • Bloodbath – When a large number of coins lose a lot of their value.
    • Moon – A swift and very high price increase.
    • Shakeout – When a coin price dips so low and many worried investors sell at a loss, this can also be caused by a “whale” artificially reducing the price.
    • Whale – A very large coin holder, they can influence the price of a coin through buy walls, sell walls and selling off coins.
    • Buy walls – When whales try to encourage the growth of a coins price through massive buy orders.
    • Sell walls – When a whale tried to suppress the price of a currency (usually so they can accumulate more for themselves). Example imagine a coin costs $4 and has 5m total supply and there is a sell order for 1m coins at $4.2 each, the price will not likely go above that price.
    • FUD – Fear, Uncertainty, Doubt. People who spread bad news about a coin to cause investors to doubt their investments and sell or to prevent other investors from buying into a coin. Can be used by greedy investors seeking to accumulate more coins.
    • Pump & Dump – A scheme where groups buy into a coin cheap and spread hype causing unsuspecting investors to buy in, which then causes the price to “pump” up, then the new investors are “dumped” on by the early investors as they take their profits. After a dump the price goes down and the duped investors are known as “bag holders”.
    • Bag Holder – An investor who is holding onto a possible bad investment also known as being “left holding the bag”, they could be the victim of a pump & dump scheme or they simply bought into a poor coin at its ATH then is left to hold the coin as its price drops.
    • New Blood/Fresh Meat – Another word for noobs or new investors.
    • DYOR – Do Your Own Research
    • Premine - A premine is where a developer allocates a certain amount of coins to a particular address before releasing the source code to the open community. Usually when this happens the developers have reserved a certain amount of coins for themselves for a particular reason.

Many cryptocurrency investors claim that they have made more money from holding onto an investment long term instead of trading and I would also advise everyone to hold and only trade if you have previous experience, trading is not for noobs.

Taking Profits

Just because you are a hodler that does not mean you cannot take profit from your investments.

https://steemit.com/crypto/@cj900/how-to-profit-in-cryptocurrency

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