128% this is the year to date return of the general crypto market. This means that cryptocurrency owners saw their holdings more than doubled in less than six months. As mentioned in my previous post, there are good reasons to be bullish on blockchain. Here are five tips to keep in mind when investing in any asset, including cryptocurrencies.


1. Write down your investment strategy.

Seriously. Just write it down. It doesn’t matter whether your strategy is “buy and hold” or active management in a certain universe of coins. When you write your strategy down, first, you formally articulate it and, second, you are less likely to deviate from it in the future.

The write-up could include just a handful of items:

How much to invest;
Stop loss level (especially if you engage in speculative trading);
Take profit level;
Time horizon to measure the results and/or review the strategy.

This will save you a great deal of money and nerves in the future.

Example: I will allocate $1,000 to coin A in my portfolio. I will exit position should the value decline to $750 or reach $1,500. I will review my strategy on the 20th of September.


2. Be ready to tell apart signal versus noise.

All investment channels in both fiat and especially crypto are overloaded with information. Make sure that you don’t base your investment decisions on the noise.

Price and only price is a fact. Everything else is just an opinion. Take it with a grain of salt. Rule of thumb here is the longer your investment horizon, the less information you really need within your investment period.


3. The market can remain irrational longer than you can remain solvent.

It is believed, that the quote belongs to the renowned macroeconomist John Maynard Keynes. Just like in the previous point, the price is a fact. Even if you strongly believe that the market is overvalued or undervalued, don’t rush to get into a trade unless you get strong evidence that the market is moving in the right direction.

It is especially important for leveraged short positions, where a single strong market movement could wipe out your portfolio.

4. Don’t take leverage unless you have years of experience in trading.

Leverage is serious and should be taken seriously. Leverage was introduced in traditional fiat world to amplify volatility of not so volatile assets like major currency pairs or stocks, where even a 5% change during the day is already a large move to make it to the headlines of the evening news. Surely, cryptocurrencies are way more volatile. You can check Investopedia speculating on this matter.

This means that you should think of using leverage only if you are both, extremely confident in your view and have sufficient experience in trading to actively manage your position. By all means, this includes having a written investment strategy to control your risk.

All in all, leveraged positions are more a tactical instrument that should not form a substantial part of your investment portfolio.


5. Diversify your investments.

Diversification and investment come together. Your investment portfolio should be diversified. First, your investment portfolio should include both crypto and fiat assets. Second, even on the crypto level, your portfolio should be well diversified.

There is nothing wrong with strategically overweighting certain coins and underweighting others, but it’s rather foolish to have your crypto allocation fully represented by one coin. If you are not convinced, watch this 5-minute video by Ray Dalio, American billionaire investor and hedge fund manager.

Direct diversification, like purchasing a wide variety of stocks, might be costly for the majority of investors. In the fiat world, investors could save on the transaction fees buying products that represent a portfolio of stocks, like those issued by iShares, the division of Blackrock. For crypto, you could browse Blackmoon products, for instance, Top 10 market cap.

Cryptocurrencies represent a new investment frontier and, according to Cambridge Associates, should become a part of a well-diversified investment portfolio. Like with any other investment, rigorous and well-defined strategy trumps the game of chance and yields better returns to the investors.

Define your investment strategy, filter away noise, take the price for the fact and consider everything else as an opinion, don’t play with leverage and diversify your investments to boost your chances for success.

Handy links to stay tuned to our updates:

Website: https://blackmoonplatform.com

Telegram channel: https://t.me/blackmooncryptochannel

Facebook: https://www.facebook.com/blackmoonfg/

Twitter: https://twitter.com/BlackmoonFG

Reddit: https://www.reddit.com/r/BlackMoonCrypto/

DISCLAIMER

Investment in cryptocurrencies carries a high degree of risk and volatility and is not suitable for every investor; therefore, you should not risk the capital you cannot afford to lose. Please consult an independent professional financial or legal adviser to ensure the product meets your objectives before you decide to invest. Regional restrictions and suitability checks apply.