Do’s and Don’ts of Investing in Cryptocurrencies


It looks like 2021 is set to be another big year for cryptocurrencies of all kinds.

At the time of writing, Bitcoin is nearing an all-time high on the eve on the eve of Coinbase’s IPO. Additionally, a recent court ruling saw the market sentiment for XRP make a turn for the bullish.

Just a few months ago, some analysts predicted that the bull-run for cryptocurrencies would only be temporary. Given the current market outlook, this is highly unlikely.

Amidst all this excitement, amateur investors are likely to be tempted to get aboard the cryptocurrency train. With Wallstreet and other major investors beginning to accept digital assets, this is perfectly warranted.

The cryptocurrency market however is an extremely volatile one. Despite cooling off in recent years, there is still a significant risk involved when investing in cryptocurrencies.

So, if you’re looking to get in on the game, here are some do’s and don’ts that you’d do well to remember.

  1. Do: Diversify your assets

Diversification is an essential part of risk management. As the adage goes, don’t keep all of your eggs in one basket.

Instead of a single type of cryptocurrency, build up a basket of investments that consists of cryptos, stocks, and bonds.

Don’t invest in Bitcoin only, invest also in Ethereum for example. You can find the best Ethereum wallets here:

This allows you to balance out your risk exposure over a series of different assets. Additionally, sudden fluctuations in market conditions won’t result in you wiping out your entire portfolio.

Prior to the introduction of crypto assets, systemic risk was an unavoidable aspect of investing. Given their decentralized nature, cryptocurrencies provide investors with a degree of protection from systemic risk.

  1. Don’t: Invest emotionally

FOMO or the fear of missing out has crippled more than one hopeful investor on occasion. In the risky crypto market, investors may sometimes act in a rash manner.

This could be due to one of two situations.

  1. To avoid losses due to changing prices
  2. To capitalize on a tip

Oftentimes, panic buying/selling only leads to further losses.

Instead of relying on hearsay and gossip, conduct your own research and draw your own conclusions. Panicking will only lead to one losing out on the long-term.

  1. Do: Work with trustworthy sources

The unregulated and decentralized nature of the crypto market means that digital assets can be bought and sold easily.

This however often leads to situations where gullible investors are cheated by scammers and con artists.

Fake cryptocurrency exchanges and fraudulent cryptocurrencies are some of the most popular scams around. In an unregulated marketplace, victims are often left out of pocket with no legal recourse available.

As a rule of thumb, always choose to work with trustworthy, proven sources such as Coinbase, PayPal or eToro when investing. Practice good security hygiene and always keep your personal data protected.

  1. Don’t: Trade without a stop-loss order

Stop-loss orders are an investor’s best friend. It is an instruction given to close a trade should the price of an asset fall below a certain level.

Thus, allowing you to keep your losses below a certain amount.

As cryptocurrencies are traded 24/7, it is highly unlikely that you’ll be able to constantly monitor your investment. By implementing a stop-loss instruction, an investor can protect themselves from falling into a pit.

Always remember that it’s better to quit while you’re head instead of holding on and hoping against hope.

  1. Do: Research your cryptocurrencies

Bitcoin. Ethereum. Litecoin. Bitcoin Cash. XRP.

These are just some of the cryptocurrencies available on the market today. With so many crypto assets to choose from, you’d be hard-pressed to make a right choice.

While Bitcoin may be the most popular crypto available, it is also the most expensive. Thus, making it an unsuitable investment for smaller investors.

Meanwhile, cryptos like Litecoin and XRP are cheaper and less popular. However, they may not be as stable as Bitcoin.

Without proper research and analysis, it’s impossible to decide on any of these investments. This is why it’s essential that you do your homework and understand what you’re getting yourself into.

The world of crypto investments is an unpredictable but lucrative one that is extremely unforgiving. In order to succeed, one would need to be both careful and knowledgeable in equal measures.