16 Ways To Invest In Bitcoin And Crypto

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Since Bitcoin’s launch back in 2009 (which seems like DECADES ago!) the cryptosphere has exploded.

There are now more than 16,000 cryptos on the market at the time of writing, with more springing up every week.

The vast majority of these won’t survive more than a few months.

So how do you navigate this rapidly shifting and confusing crypto marketplace while coping with bouts of extreme price volatility?

The following tips will show you the smart way to invest in Bitcoin and other cryptos while avoiding costly mistakes.

1. Don’t buy crypto on the back of hype

It’s easy to get sucked into ‘cryptok’ (TikTok channels devoted to cryptocurrency) or social media platforms devoted to trading digital tokens, but you need to tread carefully.

These spaces are packed with people shouting about every crypto under the sun and professing to know exactly which coins are going ‘to the moon’.

But more often than not these posts are part of a shilling operation designed to artificially pump the value of a crypto for personal gain.

Even worse, sometimes the tokens in question have no utility at all and will be dumped by the original holders for a tasty profit leaving latecomers out of pocket.

Either way, trading off the back of hype is a dangerous strategy. Fear of Missing Out, or FOMO, has cost many people their life savings!

Some people do make money by tracking social media trends and using them to form their trading plan.

But it’s not a strategy many people can follow successfully.

For this reason you should thoroughly research a crypto project before investing in it.

Find out more about the development team, the tokens use case and why it’s perhaps a good coin to add to your portfolio.

Remember, that while there are some genuinely knowledgeable people in the crypto space who are giving sound investing advice, there’s a lot of useless noise as well.

Those who’re shouting about crypto on social media might sound like they know what they’re talking about, but very often they don’t.

2. Don’t sell at the first time of trouble

The phrases ‘diamond hands’ and ‘paper hands’ are often used in the world of crypto to describe two different sets of investors.

Those with diamond hands stay strong when the market’s plummeting, confident in their belief that what goes down must go up again.

Investors with paper hands tend to be less experienced traders who buy hoping that things can only ever go up.

They will sell their crypto at the first sign of trouble, often making a loss.

Whether you’re investing in crypto or traditional stocks and shares, the received wisdom is to always avoid panic selling.

Trying to time the market will only lead to poor investment performance in the long run, unless you’re extremely lucky.

Most financial advisers tell clients to hold firm when traditional markets are taking a dive, knowing that, if history is anything to go by, this trend will reverse over time.

Crypto doesn’t have decades of past performance to be drawn on when things turn bearish, which tends to spook people, especially inexperienced investors.

But, selling at the first sign of trouble could prove to be a costly mistake to make.

3. Don’t invest more than you can afford to lose

Everyone has a different appetite to risk and establishing your own is one of the core tenets of any sound financial plan.

While taking some degree of risk can reap greater rewards in the long term, you need to consider how much you’re willing to lose if things go wrong.

Some people have a strong appetite for risk and are well aware that a crypto they’ve piled into could go to zero overnight.

Others get nervous at the thought of losing even a percentage or two of their investment.

Whether you’re investing in crypto or anything else you should always consider how comfortable you are with any losses you may experience.

Ask yourself the question – if I lost all the money I invested, how would it affect my life?

If your loss would materially impact your standard of living, or those around you, you should pull back and reconsider.

It’s down to you how much risk you want to take but always keep in mind the potential for loss, especially in the world of crypto.

If that loss won’t have a significant impact on your life then you’ve pitched your investment correctly.

4. Keep your crypto portfolio balanced

Another key tenet of any investment portfolio is to keep it balanced.

And it’s the same with crypto.

You should consider spreading your investment funds over a range of carefully selected coins to ensure you don’t have all your eggs in one basket.

It’s a strategy that’s employed in traditional investment markets as well because it helps keep losses lower, while potentially increasing gains.

Diversifying your crypto portfolio means that if one of your investments tanks, you have other options for upside which may negate these losses.

It’s important not to spread yourself too thinly though because you could lose out on greater potential gains.

And never buy coins just for the sake of diversification. Research what you want to buy carefully and decide what percentage of your investment fund you’re going to spend on each token.

You may also want to consider rebalancing your crypto portfolio if one token rises in value significantly more than others.

It’s likely that most crypto portfolios will contain some Bitcoin (BTC) and Ethereum (ETH) as these have the largest market capitalisations and are considered safer than many other cryptos, while having long-term upside potential.

5. Keep your entire portfolio balanced

If you’re into crypto and have added it to your portfolio then great!

But properly diversifying your portfolio will include a spread of investments from different asset classes, not just digital tokens.

While crypto might be one, you should keep other investments such as stock, shares, property and gold in your portfolio as well.

That way, if the crypto market tanks, you’re not too exposed to a single asset class and have other investments to balance out your returns.

Your Bitcoin might have bombed but your shares might be doing well so you’ll still enjoy upside in your portfolio.

While it’s unlikely that every crypto will plummet in value, nothing’s impossible, especially as it’s such a new, untested market.

Remove this volatility by adding some vanilla tracker funds to your portfolio, or other investments that generally experience less volatility.

They’re less exciting, but sometimes boring is good when it comes to investing!

6. Research your crypto investments thoroughly

If there’s one thing that’s absolutely crucial to do before investing in anything it’s research.

Read, read and read some more. And don’t be afraid to ask questions.

If I was given some BTC every time I heard of someone blindly piling into a so-called ‘sure thing’ crypto only to lose their shirt a few weeks later I’d be rich!

These situations demonstrate that we’ve all got different levels of financial literacy.

What might seem like an obvious poor investment, rug pull or, at worse, a crypto scam, to some, may appear a hot investment to others.

But the internet is your friend!

Search for reviews online and visit places like Reddit to see if someone’s already written about the crypto or investment scheme you’re looking at.

You’ll be able to find a wealth of information about crypto exchanges, new projects and brand new tokens so there’s no excuse for ignorance.

If you can’t find anything about the coin or scheme you’re looking at, be very cautious indeed.

7. Start small and move up

While Bitcoin adoption is growing across the world, a lot of people are still finding their feet with crypto.

As such, prices can be volatile and unpredictable, made worse by the tumultuous macroeconomic events of recent years, and potential regulation that could curtail its use.

It’s prudent therefore to tread slowly and carefully with your crypto investment.

In line with keeping your portfolio diversified, you should buy small amounts of the tokens of your choice to start with.

It’s extremely unwise to plunge headfirst into the latest memecoin with your entire investment pot.

This investment route will all end in tears for the vast majority of people!

Remember, slow and steady wins the race.

8. Take advantage of dollar cost averaging

In line with a disciplined approach to crypto investing is the principle of dollar cost averaging.

This is where you buy small quantities of an asset on a regular basis.

At times you’ll buy in a bull market, while other times you’ll scoop up some cheap crypto when things are slumping.

The principle behind dollar cost averaging is that the peaks and troughs will be smoothed out and your investment will continue on a steady upward trajectory, if viewed over the longer term.

This is a principle that’s often applied to more traditional investing as well.

If you sink your entire pot into crypto in one go when the prices are high, you’re potentially sitting on a large unrealised loss.

Gradual purchases made over the longer term is where the smart money is at.

9. Taking a long term view is smart investing

This long term approach to investing, whether in crypto or traditional markets, is a recommended strategy for anyone interested in building a profitable portfolio.

Trying to play the crypto markets on a daily basis is a high risk, high stress strategy which could reap rewards for some, but is likely to ruin the majority of people who try this.

10. Automate your crypto purchases

Trading crypto can be a nerve-wracking business, but trying to buy at exactly the right time is a tough game to play.

As I’ve already said, dollar cost averaging is a great way of building a portfolio over time.

If you want to remove any emotion/market influence from your crypto buys it’s wise to automate your purchases.

All the major crypto exchanges offer this facility, and you can start from as little as $25 in most cases.

Setting up automatic buys allows you to sit back and relax while your portfolio grows thus removing any emotion from your purchase decisions.

11. Use trading bots

If you find the process of buying and HODLing crypto boring but are unsure about playing the markets yourself you could try a trading bot.

Many of the large crypto exchanges have trading bots that you can use to automate your chosen strategy.

Some offer predefined out-of-the-box bots meaning you can add your funds and let the bot do its thing without any further involvement.

Other bots are customisable so you can add your chosen parameters before setting it to work.

They can be useful trading tools when it comes to saving time, but they are by no means perfect and will not guarantee you’ll make a profit.

12. Copy trading

You can take a shortcut to becoming a professional trader by letting someone else do the hard work for you and copying them.

Several major trading platforms, including eToro, allow you to add funds to your account then select a trader to copy.

Your funds will automatically copy what that trader’s portfolio is doing, including all the buys and sells they make.

Usually there’s a good selection of traders to choose from, including those who focus on crypto, and you can research their portfolio and past performance before adding funds to a copy trade.

There’s no guarantee that they’ll make you rich, and ultimately you could lose money, especially if you don’t set up a stop loss.

But it’s a great way to get the feel of professional trading without having to do the work yourself.

13. Study crypto trading strategies

There is no shortage of guides where experienced traders share their knowledge online.

Like crypto recommendations and price predictions that I mentioned earlier, it’s important that you sort the wheat from the chaff.

But learning how to successfully trade crypto, the strategies you can employ and the tools and indicators you can use to help you on your journey is a sure fire way of improving your chances of success.

This is especially true if you’re planning to try your hand at day trading crypto.

You’ll need to use all the resources available to you to stay ahead of the game.

There’s no excuse for being ignorant when it comes to trading as the web is drowning in info that’ll help you.

14. Keep you crypto portfolio safe

Ensuring that your crypto portfolio is secure and out of reach of thieves is a little different than how you protect your stocks and shares, or other traditional investments.

But it’s important to take precautions to keep everything safe.

You may choose to leave your crypto holdings on the exchange where you bought them, which is potentially risky.

While major crypto exchanges are rarely hacked these days (or so they tell us!), there’s still the possibility of your assets being compromised.

Also, the exchanges retain your private keys meaning that they retain control of your assets and could in theory seize them.

Many people move their crypto offline into cold storage, with hardware wallets being a popular solution.

Once you’ve moved your crypto onto a hardware wallet, such as a Ledger or Trezor, you effectively become your own bank.

This means that you alone are in charge of maintaining the safety of your crypto and ensuring that you don’t lose your all-important mnemonic seed phrase which is the key to unlocking your crypto.

If you mislay these details you could lose your crypto forever.

Read my post on how to safely store your crypto seed phrase for more details on keeping your crypto safe.

The upshot of this is that no-one can freeze your crypto assets and they’re out of reach of hackers.

Taking the necessary steps to keep your coins safe makes you a smart crypto investor.

15. Don’t (always) buy crypto because a coin seems cheap

While the age old adage ‘buy low, sell high’ is still regularly quoted, there are times when it’s not always sound advice.

There might be a very good reason why a crypto’s price has fallen, and buying the dip could land you in a world of trouble if it then goes to zero

There’s less risk if your strategy is long-term, but if you’re in it for a quick profit you could get stung.

Buying the dip can leave you with substantial losses in a persistent bear market, and digital tokens already have a track record of some prolonged ‘crypto winters’.

Other tokens may prove to be essentially worthless and have little use case and may even be part of a pump and dump scheme.

Consider your strategy and why the coin has dropped before going all in on what appears to be a bargain.

16. Expect the unexpected

As I’ve already said several times, the crypto market can be volatile.

Yet you’ll always find a trading ‘expert’ who’s confidently predicting the next price move, with others adding weight to their claims.

But sometimes the prices don’t go in the expected direction.

Just because the majority of commentators think something will happen, doesn’t mean it does.

The world of crypto can surprise you, as has been demonstrated by many unforeseen market moves over the years.

So be prepared for some stomach-churning swings that come out of the blue and you’ll be able to act calmly rather than making costly, panic-driven decisions.