You can’t get very far these days without hearing the word cryptocurrency or Bitcoin. And, with good reason. Bitcoin and cryptocurrency outperformed any other asset in the market in 2020. In a year of financial volatility, cryptocurrency stayed strong when long-adopted assets like gold, silver, and crude oil declined.
Despite these strong numbers, bitcoin only has a 2% adoption rate. You could read that as market skepticism, or you could read it as an opportunity to get in on the ground level before it takes off. Deltacore Capital, a Barclays award-winning hedge fund that focuses on digital assets, is leading the way in cryptocurrency investment.
I asked them for their five tips for those considering investing in cryptocurrency. Here’s how to get started the smart way.
Tip1# Do your due diligence.
Don’t go into investing blindly. Make sure you do your research and vet your sources. Cryptocurrency is generating a lot of buzzes online, especially on social media or from self-proclaimed crypto gurus. But talking about it doesn’t make you an expert. You need data-driven information to make an informed decision.
Consult experts who have a history in both investment and an understanding of digital assets. Make sure your information is coming from the right people, and don’t fall prey to the blind enthusiasm of get-rich-quick investment schemes. If you want to make a sound investment, you need to be in it for the long haul.
MORE FOR YOU
Tip2# Make trades based on data.
The market never lies. This may seem like simple advice, but many investors get caught up in what they “think” will work or the types of investments they’re biased towards.
Data is the only way to correct bias. Keep track of how the data develops over time. Make sure that your trades and investments are motivated by quantifiable data, and not by personal opinion. If you can’t back it up with numbers, it’s not a worthwhile investment.
Tip3# Keep emotions out of investing.
Investing is a long-term commitment. If you can confidently say you’ve done your research and have made strong calculations, don’t be thrown by short-term fluctuations. You should never make a financial investment based on excitement and opportunity alone. Keep your emotions about investing separate from the action of investing. Don’t let them govern your decisions.
Tip4# Understand market caps.
One thing is for sure: the potential for growth with any investment can be found in its market cap. A market cap is the total dollar amount a company is valued at based upon the stock market. It’s calculated by multiplying the number of outstanding shares a company has by its current market price (CPM). It’s not about how cheap or expensive an asset is, but about how much potential it has for growth.
Are you sensing a theme? Smart cryptocurrency investments are data-driven. Make sure that you can see the end goal, or the life of your investment, from the start. Market cap informs the level of risk associated with an investment, growth potential, and even how sensitive they are to economic changes.
Tip5# Invest with a strategy.
Cryptocurrency investments aren’t for those looking to get rich and get out. You have to have a strategy for moving forward. Gathering data and information is essential to creating a strategy, but it’s also about knowing what you are willing to invest (both monetarily and in terms of time). Figure out exactly what you want from your investments, and how much you’re willing to spend. Building these parameters will help you make smarter decisions as you learn.
Successful investors are proactive and not reactive. Investing in cryptocurrency requires a strategy, and a willingness to stick with long-term goals. Experts like Deltacore Capital, who are well-versed in balancing the risk and reward of investing, are making it possible to get in on the ground level of cryptocurrency by making calculated, data-informed steps. If you want to be an early adopter, they’re certainly leading the way.