How to Invest In Crypto? Follow These 5 Steps Before Buying Your First Crypto

This article features top 5 steps before buying your first crypto.

No human can predict the ups and downs of the cryptocurrency market. Even the largest cryptocurrency on the market – Bitcoin – has a volatility of 64% over the course of a year. This is compared to 17% volatility of the S&P 500. But there's still profit potential in the $1.7 trillion crypto market and so unpredictability means you stand a chance against even experienced investors.

It's possible to avoid the horrible feeling of an unexpected 25% price drop, or worse. By following some good practise you can learn how to keep even a modest investment through periods of volatility. Here are 5 ways to invest in crypto that will help make 2022 a bullish one.

Hold on to your investments

Everybody wants to make $1 million overnight. But crypto investments do not always turn out like that. Despite high volatility and uncertainty, it's actually best practice to keep holding onto your investments, often to at least two years before thinking of cashing in.

According to an instructional video from financial advice expert Sam Kelly – also Chairman of EverGrow  – most traditional investors are in it for the long run. It's normal for markets to go through cycles of falling and growing, and what counts is the gradual growth over months rather than daily spikes. 

"When I used to sit down with investment clients, we'd discuss that one investment might be a three-to-five-year plan," EverGrow Chairman Sam Kelly said. "Unless something fundamentally changes about that project, if the market is falling that's perfectly normal. Most investors would just see that as an opportunity to top up." 

After all, you placed your bets wisely, so put some more trust in your decisions and see how it plays out long term. Even if you can't buy that Bentley the first time, you'll have learned some of your most valuable crypto investment lessons.

Dollar cost average

Fear of missing out (FOMO) is common to even experience investors. No one wants to slip up on the year's hottest investment. Even if that explosive crypto gainer is little more than a cryptocurrency based on a dog meme, like Shiba Inu or Dogecoin. One strategy to overcome this is called the dollar-cost average (DCA). 

The DCA method is where you buy the same dollar amount every week or month, regardless of what's happening in the market. For example, you buy $100 every Monday afternoon for a year. This removes the pressure and stress caused by constantly needing to decide whether to add to a position. It's also a way of building investment even when you don't have the capital right away.

Don't analyse too many indicators 

There are countless ways to analyse crypto. There are technical indicators like the moving average, Fibonacci retracement levels, the directional movement index, Bollinger Bands, the Ichimoku Cloud, the parabolic SAR, the relative strength index, and more. Each of these indicators also has different ways of measuring over time or volume. It gets complex.

Experienced traders know that reading the right indicator is more important than covering all indicators possible. Some might look at correlations to traditional markets, while others bury themselves in cryptoanalysis and charts. It's not bad to look at everything, it will just make the actual decision harder for you. 

Learn which indicators are the most trustworthy and dependable, even if it takes some trial and error at first.

Learn when to let go

At some point, you're going to get it wrong. There's no need to compensate by increasing your position if it's not going anywhere. Pressure and hasty movements are what you should be avoiding.

Whenever you make a bad bet, learn to let go. When your wallet is hurting, you're hurting. It's not the mindset to make a new clear-headed investment in. Maybe you need to get your key indicators clearer or turn to experienced investors for advice. In any case, stop until you've got your confidence back. Successful traders are the ones who stick it out the longest.

Keep betting on winners

This might be the most difficult lesson of all, because of the seduction to cash in on high gainers. The crypto market is very volatile, so cashing in as soon as you see a 30% spike might not cover your past (or future) losses.

Instead of selling up, crypto investors should be buying more high-performing tokens. If your expectations are bullish, consider adding to your position until the overall market trends start to see a decline.

By holding on to a position you might eventually catch a 300% or 500% gain, but that takes bravery and patience. After all, these are the returns you expected when entering cryptocurrency – they just might come a little later than you expected. As Sam Kelly of EverGrow said above, traditional investors go in with a 3-5 year investment horizon. 

Rules are meant to be broken

If these few rules here guaranteed success, everyone would be a crypto millionaire. The trouble is that no analysis or rule of thumb can definitively tell you you're 100% going to make some profit. Learn the rules and play with the analysis, by all means, just know in your learning process you might need to break rules to get the biggest learning.

Do not follow advice from influencers or experienced investors blindly. Everyone has their own personality for risk and capital to buy up positions after a setback. 

Every investment and trading move involves risk, so the more you can learn the better. Always conduct your own research when making a decision as at the end of the day it's only you who will make the better bet in the future.