Interested In Cryptocurrency Investing? Here Are 10 Tips For Success…
Back in early May, I told my Capital Wealth Letter readers that it was time to venture back into the cryptocurrency waters.
As you may know, we’ve dabbled in and out of this space, dating all the way back to my first crypto prediction in 2021. At that time, I said Ethereum (ETH) was the place to be, and it led to a 400% gain within a year.
As I have explained before, I used to be something of a sceptic about this space. But a few years ago, I decided to dive into this emerging asset class with an open mind. I read everything I could get my hands on – and even put a little bit of my own money to work.
Since then, I’ve been sharing some of my knowledge with readers. But after several setbacks in the crypto world (which I’ve covered many times), I told readers to stay on the sidelines.
That all changed earlier this year, as I think seasoned investors and novices alike are about to get a “second chance” …
If I’m right, then we’re talking about a once-in-a-generation opportunity…
10 Tips For Success With Crypto
I’ll have more commentary on what’s happening in the crypto world soon (you can always check out our weekly Crypto Roundups — read the latest edition here.) But today, I want to talk about how I think you should approach cryptocurrency investing in general.
Specifically, if you’re already interested in this space, I want to share some tips for general safety as well as for increasing your chances of success. So here are 10 general tips for success with cryptocurrency. Let’s take a look…
1) Start small
Open an account at an exchange, like Coinbase, and buy a small amount of bitcoin at first as a test. (We recommend $500 or less.) Whatever you do, remember, don’t bet the whole farm.
2) Create a crypto wallet
Your crypto wallet stores your private keys. Once you create your wallet, write down your backup phrase (and keep it in a safe place). This will ensure you can still access your bitcoin even if you forget your wallet password.
3) Avoid holding excess crypto at exchanges
Crypto exchanges can be vulnerable to attacks by hackers. Instead of holding excess bitcoin on an exchange, transfer it to your bitcoin wallet.
4) Use two-factor authentication (2FA) on your accounts
Single-factor authentication involves only a username and password. 2FA adds an extra step, like entering a temporary PIN sent to your phone.
5) Be prepared for volatility
If you haven’t noticed, the prices of bitcoin and other cryptocurrencies are extremely volatile. This makes them unsuitable for conservative investors or those without a high-risk tolerance.
6) Have a plan
All investors — regardless of what they’re investing in — need to have a plan. For example, your plan might be to allocate 1% of your portfolio to bitcoin as a portfolio diversifier with the potential for outsized gains. And you might formulate a rule that you’ll only add to your position after bitcoin’s price has fallen 30% or more. Stay disciplined and stick to your plan… or else the extreme volatility will have you buying high and selling low.
7) Limit cryptocurrency exposure
Bitcoin and cryptocurrencies can have a place in a diversified portfolio. But cryptocurrency assets should total no more than 10% of your investable assets. When determining your allocation, keep in mind that bitcoin (or any other cryptocurrency) could one day plummet to zero.
8) Keep track of your transactions
This will make Tip No. 9 easier. Consider using an Excel spreadsheet. Really, anything helps.
9) Pay your taxes
This should go without saying, but pay your taxes. The Internal Revenue Service (IRS) considers bitcoin and other cryptocurrencies to be property for U.S. federal tax purposes. You must pay taxes on your realized gains. Fortunately, tax advisers are adapting to this new landscape and are issuing guidance to clients. Don’t be afraid to get their help.
10) Don’t buy on margin. Some trading platforms allow you to buy cryptocurrencies with borrowed funds. This is never a good idea. Margin trading of cryptocurrencies is an easy way to quickly lose a lot of money.
Closing Thoughts
Remember, these tips are not all-encompassing. There is much more to say about cryptocurrencies, what might be in store next, and how investors can profit.
But stepping out of your comfort zone just a little bit can be worth it.
Make no mistake, cryptocurrency may be the most fascinating and controversial development in money and finance in generations… if not centuries. And the underlying blockchain technology has the potential to revolutionize aspects of our economy, upending many established companies — and even entire industries.
The only question is… will you keep an open mind and evolve? Or will you stand rooted in your first assessment of the technology and watch it pass you by?
We’ve only witnessed the beginning. There’s more to come…
The cryptocurrency world is constantly evolving. The next big thing could be right around the corner. And we plan to be there when it happens…
That’s why I just released a brand new report covering the three best crypto investments available right now – and how you can profit. If you’ve been waiting for a second chance to get in on crypto, I believe now’s the time to cash in on crypto’s comeback.