Remember when you first heard that Bitcoin was at $10,000 in December 2017, and you rushed to buy? Well, you probably should have known that wasn’t the time to buy.
Perhaps, after making a loss you have sworn off cryptocurrencies. But that doesn’t stop stories of people making money from cryptocurrencies from sipping in. You’ve probably heard stories about your friends going on vacation with money they made from trading in cryptocurrency. Or maybe you even have a cousin who makes his livelihood from cryptocurrency.
Every time you hear these stories, you long to have your own positive story. But the fear from your last experience still serves as a cautionary tale. Based on questions we have received, here are a couple of tips that could help you navigate cryptocurrency investment.
Start with little
As much as you want to rush in and 2x your money it’s better to start with an amount that correlates with your risk tolerance level. With 200 naira you can buy bitcoin or any other cryptocurrency listed on Quidax. So there goes your concern about having to buy a whole Bitcoin.
You could consider buying a small amount when the prices are low, you can use CoinMarketCap to see the historical price of any cryptocurrency. On a monthly basis, you can continue buying small amounts. The idea behind this is that if the price increases you can sell. As opposed to buying when the prices have hit a high and hoping it goes higher.
When the price surges, you want to make money from the difference by selling. It is best to set an amount which when it reaches you can sell. Let’s say you bought ether when 1 ETH was 50,000 naira you could decide that once it hits 50,500 naira you want to sell.
Once it reaches your sell price, that’s the time you should sell. Here’s the tricky part hoping that the price would go higher. Don’t you hate stories of people that lost out in 2017 because they sold too soon? If this happens, remember that the pain of losing money is often worse than the joy of gaining money.
Alternatively, to avoid losing out you could sell in bits. When it reaches, 53,500 you could sell 50% of your holdings if it reaches 53,800, sell 25%, then if the bull run maintains you could hold offload the remaining 25% at once or break it further. You need to decide what works for you.
One might ask what if I hold just 3,000 naira in cryptocurrency, the gain doesn’t seem significant? Consider that you are doing this for the long haul and it’s in line with your risk appetite. So your formula could be Buy low, Sell high, Repeat.
As you increase your holdings of one cryptocurrency, you might want to gradually increase your holding from one cryptocurrency to a couple. Holding several cryptocurrencies helps mitigate against prices drop on one and prices gains on another.
When deciding other cryptocurrencies to buy finding answers to questions like; what problem does the cryptocurrency aim to solve, who is the team behind it, how has it performed over time, what caused previous price surges/drop?
Asking these questions will help you make the right choice on which cryptocurrency you want to add to your portfolio or even the first cryptocurrency one you want to buy.
A couple of the tips above sound like a lot of work, especially if you have a demanding job. Your phone’s calendar notification can do you a lot of good here. You can set notifications to do your research when you have free time. When you are commuting to or from work or during lunch might work for you.
You can also use apps like blockfolio that allows track cryptocurrency prices and set price alerts for when the cryptocurrencies you hold or are interested in, hit your buy/sell limit price.
This content is for educational purposes only. It should not be considered as financial advice. You should consult your financial advisor before deciding to store, buy or sell digital currencies.
This article is in partnership with Quidax. Quidax is a European based cryptocurrency exchange with a focus on Africa. We provide a seamless platform for users to send, receive, buy and sell cryptocurrencies using their local currencies.