In recent years, cryptocurrencies have become a popular investment, with the cryptocurrency market expanding rapidly. But given the market’s notoriety for being volatile, it helps to analyze the market trends and insights to gain confidence in investing. In this article, we will give an overview of the current situation of the crypto market. You will also learn risk management and investment strategies for safer and more rewarding trading.
Latest Cryptocurrency Market News and Analysis
Despite the volatile nature of the crypto market, there has been generally an upward trend in the global cryptocurrency market capitalization. As of May 12, 2023, the overall market cap is $1.1 trillion, up from $1.6 billion on April 30, 2013. This significant expansion is a result of various reasons.
One of the primary factors promoting the crypto industry’s growth is big companies increasingly embracing cryptocurrencies. Examples of large companies that are accepting Bitcoin and other crypto as payment for their products or services include:
- Home Depot
With big corporations jumping on the crypto bandwagon, investor confidence in the industry shoots up. As a result, there has also been a rise in decentralized finance (DeFi) platforms. DeFi eliminates third parties and centralized institutions from financial transactions allowing for peer-to-peer cryptocurrency exchanges. Compared to traditional finance, DeFi is highly secure and transparent.
The world’s first, ergo most popular and valuable, cryptocurrency is Bitcoin (BTC). Bitcoin’s value has tremendously increased since being launched in 2009. As of May 12, 2023, the price of Bitcoin is around $26,300. However, this is more than 60% below its all-time high price of $68,789.63. Additionally, the price has fallen by around 4% and 9% in the last 24 hours and the past seven days, respectively.
Prices of other leading cryptocurrencies are also declining. The prices of Ethereum and Binance Coin have dropped more than 7% and close to 6% in the past seven days. The latter is the second-largest cryptocurrency by market cap after Bitcoin.
How To Invest in Cryptocurrency
Investing in crypto assets is highly risky, but at the same time, it can result in very high returns. Here are several strategies to grow your portfolio and wealth while managing your risks.
Invest What You Can Afford To Lose
Just as the crypto market has seen unprecedented growth in recent years, there have also been astronomical dips. So if you’re not in a financial position to withstand potential massive loss on a crypto investment, you cannot afford to invest in that asset.
According to Yubo Ruan, founder and CEO of Parallel, a DeFi platform, “A person new to crypto should consider around 5% of their income to the crypto market…”
Use Dollar-Cost Averaging
Dollar-cost averaging is an investment strategy used to curb volatility. It involves investing small amounts into crypto regularly regardless of the state of the market. This way, you can capitalize on price swings in the market.
Investing a fixed dollar amount during bear and bull markets mitigates risk by stemming your losses and preventing emotional investing. Additionally, it presents the chance to accumulate crypto at a cheaper value, which you can later sell at a higher value when prices go up again.
Diversify Your Portfolio
Not putting all your eggs in one basket is a good rule of thumb for investing in cryptocurrency or any other asset at that. Instead, spread your money into different asset classes to lower your financial risk in the event of market downturns. That’s because the more diversified your portfolio, the more predictable and less volatile your returns.
The goal of portfolio diversification is to capitalize on the heterogeneous makeup of the crypto market. This requires finding uncorrelated digital assets, i.e., those whose prices don’t move together. Otherwise, the strategy will not be as effective.
So say you have $5,000 to invest in crypto, but instead of putting it all in Bitcoin, you invest $3,000 in Bitcoin and $1,000 in Ethereum and Litecoin each. These three coins fall into different crypto categories and hence are not correlated. Besides crypto classification, you can also diversify by geography and industry.
If you want to invest in multiple cryptocurrencies but don’t have the capital, there are other ways to diversify your portfolio. In exchange for sharing your internet bandwidth, Honeygain gives you JumpTokens. And you don’t have to wait until you reach the minimum payout threshold of $20 (or 20,000 Credits). You can send new earnings to your cryptocurrency wallet in seconds by enabling JumpTask Mode. It’s also possible to earn JumpTokens easily by doing micro tasks on their platform, too, so then you don’t have to invest in crypto separately.
The cryptocurrency market is a fast-expanding and dynamic industry with numerous investment opportunities. But due to its excessive volatility, investors should apply effective investment strategies to maximize profits and minimize risks. Such practices include diversification and using dollar-cost averaging.