Making money with cryptocurrencies is not easy at all. They are very volatile assets, so dealing with emotions is essential. Drawing up a plan, as well as sealing the investments are some of the advice offered by industry experts consulted by the newspaper ALnavío. Advice that will be useless if the user does not understand the concept of cryptocurrency cold storage.
Bitcoin, ethereum, litecoin, ripple … cryptocurrencies are an excellent investment opportunity. That is so clear that even Forbes magazine produced a list of “cryptorics.” But being a no-brainer does not mean that investing in them is easy.
They are high risk assets and complicated to understand. For this last one you have to start. Either the concept of cryptocurrency is understood or the investment is lost from the beginning. Therefore, all experts recommend, at least, a weekend of study.
If on that weekend the user understood what digital currencies are and what their functionality is, then it is time to apply these five rules that indicated to the newspaper ALnavío Daniel García , analyst of the brokerage XTB , and Ignacio García Medina , founder and director of Walamax , consultancy specialized in cryptocurrencies.
1. Draw a plan
Investing is not an adventure. You have to plan every detail. Have a strategy and stick to it. To this the analyst of XTB calls it “defining the time horizon”. In this sense, he warns: “What is not worth is to buy bitcoin in a week’s time. Then, as I see that he is losing, instead of a week I hold him for a year. You cannot do that. “
The reason, explained Garcia, is that, if the time horizon is short term, so must remain so. “It’s not worth changing it as an immunization measure. You have to stick to the plan and enter the market with very clear objectives. “
As with any investment, diversifying is a way to minimize risks. In the market there are 2,000 different cryptocurrencies. From the bitcoin, which is the pioneer – its price at the moment is $ 10,500 – to digital currencies that are directly a joke. See the cases of pesetacoin and weedcoin.
That’s why you have to be careful, and when investing, look at aspects that go beyond the price and the trend. “In coinmarketcap.com you can see the information of each currency. The team of people behind, the projects they develop, forums in which they talk about it, their social networks … All this is important, but the key factor is the human team, “says the head of Walamax.
In this regard, Medina cites a recent case. The litecoin. “They recently announced that on February 26 they will release litepay, a system by which businesses can easily accept litcoin and exchange them to their local currency if they want. Users can spend directly on litecoin or use the litepay visa card in euros, which is rechargeable from litecoin, and you can use it as a debit card at any trade that accepts a visa. “
3. Beware of emotions
Investors are people, and as such, it is important to deal with emotions, with euphoria and pessimism. It’s about not losing your mind or money. “Digital currencies reward patients. The convinced investor takes advantage of the decreases to acquire more coins and only sells when he goes up a lot. If it sells, of course, “says Medina.
In view of the different investors, a kind of jargon has been created in the universe of cryptocurrencies. Hodl (badly written intentionally) is a term proper to the world. It refers to the English verb endure (Hold ). “The hodler is the person who keeps his investment in crypto, and even increases it, against wind and tide,” says the director of Walamax.
Then there are the whales, that is, the big investors, the most experienced and those who take advantage of the fear of the novices to buy cryptocurrencies at a low price. These descents also have their terminology dip.
4. Protect the investment
Decentralized cryptocurrencies, such as bitcoin, allow a unique and exclusive use. Grant freedom, both for good and for bad. Imagine then that you have a bitcoin. He bought it for $ 6,000 and now it’s at 10,000. Then he loses the password – also called seed – of his digital wallet. What happens? That he loses everything.
As explained by Medina, the cryptocurrency password is usually a combination of between 12 and 24 random words in a specific order, “impossible to decipher”, which are “the only certificate of ownership”.
“The advisable thing is to keep it oneself in a paper. Even in a safe. Important not to take a photo, or scan or save on your computer or, of course, tell anyone. If you lose it, you cannot recover it, and with it your bitcoins are lost. “
For this reason, it is important to use an application that generates the key or seed. Coinbase is the most famous because it emulates a traditional bank, but in reality those who own the private keys are they, the user only has the password of their database, which is exposed to cybercrime. The same goes for the exchange houses.
Therefore, Medina recommends different applications to Coinbase. For Android phones, Coinomi and Mycelium; and for iPhone phones: Bread Wallet, exclusive for bitcoin and Loaf Wallet for litecoin. Also, he adds that for large sums of money it is advisable to have a USB with encrypted chips.
5. Not allocate all savings to cryptocurrencies
The big returns of bitcoin have a price: the risks, the volatility, the fear that all this is a bubble. Overnight, the investment may disappear. For that reason, be careful with investing all the money you have saved.
“I’m not going to invest all my savings in assets that have a very high risk. It is quite incongruous. I give an example, if I have 100,000 euros to invest, I would allocate 60% of that money to investment funds, to shares 30%. And 10% would leave it for cryptocurrencies, “says Garcia.
And one last warning from this broker: “It is true that cryptocurrencies have the highest profitability, but I can not expose myself to something that gives so many scares, especially if the goal is to achieve a consistent and regular investment.”