The sound of cryptocurrency coins like Ethereum is echoing around the globe, and for investors, it’s a bubble burst in which you can invest at any time.
Despite the volatility of Ethereum, it’s selling like hotcakes because investors are keen to jump on the crypto bandwagon. But jumping on this bandwagon without understanding how to invest in cryptocurrency can be a risky affair.
For receiving good returns, you require some breakthrough investing tips. With the internet full of finance gurus and each promising to make you the next Bill Gates with Ethereum, the actual techniques that work for Ethereum never come out.
To make your life easier and ensure you see high returns from your Ether investment, we’ve compiled a list of top Ethereum investing tips to follow in 2021.
Ready?
Let’s explore!
Top 7 Ethereum Investing Tips for the Year 2021
Many new investors joining the Ethereum bandwagon want to learn how to get the most out of their digital assets. This is essential because it reduces risk and maximizes your returns. Follow these seven tips to see an Ethereum return like never before.
1. Invest With Care
With a cyberattack stealing personal data every 39 seconds, making a secure purchase of Ethereum has become a topic worth discussing.
But how do you make a secure purchase?
While there are numerous options for making a safe purchase transaction, the credit card purchase wins this game.
If you’re habitual of swiping your card at every POS or offline store, you may buy Ethereum with a credit card.
Using a Master or Visa card to pay for Ethereum is as simple as online shopping. Just enter your card details, punch in an OTP and make a purchase.
Companies like Moonpay provide an investor the best route to purchase Ethereum using a credit card.
Other secure solutions for buying Ethereum include a decentralized exchange, Ethereum ATM, cryptocurrency exchange, or cash. While most of these purchase methods are less prone to cyberattacks, you may consider any of these based on your preference.
Pro-tip: As mobile phones are easy to temper and breach, never deal in a large sum of
Ethereum through a phone. Why? It can put your hard-earned money at risk.
2. Focus on Diversification
One of the easiest and golden ways of investing in Ethereum is diversifying your portfolio. Why?
No one can predict the future. There is no guarantee that Ethereum will witness a rise in the coming years.
That’s why Ethereum investors focus on asset allocation or diversification to average out their loss when a particular digital currency or market undergoes severe turmoil. This is similar to the hedging concept.
It’s advantage is that when one digital currency hits rock bottom, you always have something in your portfolio that witnesses an upward trend.
With unpredictable market volatility, it doesn’t make sense to put all your eggs in one basket. If your basket falls, all your eggs will be broken!
Pro-tip: While diversification can reduce your risk, it can often lower your overall investment return.
3. Give Preference to Copy Trading
Another excellent way to witness high returns without studying or analyzing the crypto market is through copy trading. As the name suggests, copy trading is a trading process wherein you copy the investments of an experienced trader or investor.
While copy trading is legal, it doesn’t take much time to set up a copy trading account on platforms like Coinmatic and 3Commas.
All you have to do is create a profile on one of these platforms and select a trader you want to follow. Your decision may depend on numerous factors like previous performance, overall risk score, and the number of followers.
Once you select a professional investor, link your account with their trading movements. When they sell or buy Ethereum, your portfolio automatically replicates their behavior.
Interestingly, both these platforms allow you to choose multiple traders to follow and give you the power to decide how much budget to allocate to each trader.
Pro-tip: Usually, automatic replication of a trader’s order stops if you lose a predetermined amount or if the value of any purchased asset drops.
4. Choose a Reliable Digital Wallet
When planning to buy Ethereum, remember that it’s an easy trade-off between security and flexibility. While digital coins may depict a stable behavior, the same doesn’t hold for a digital wallet you select.
An excellent example is the famous DAO incident that occurred in 2016. Within two months of DAO’s launch, the company lost a whopping $50 million of ether to hackers.
Choosing the wrong and untrustworthy digital wallet can make you lose your hard-earned money much easier than you initially thought.
If you’re planning to buy Ethereum using a wallet, choose between a hot or cold wallet. While hot wallets are ideal for everyday Ethereum users, they may have some security risks because they connect to the internet. Within a single click of a button, you can make Ethereum purchases on your phone or computer.
However, as cold wallets don’t connect to the internet, they are often considered a more secure way of buying Ethereum and other cryptocurrencies. While cold or hardware wallets offer superior storage solutions and excellent security, they are impractical for someone who trades regularly.
Pro-tip: Regardless of the wallet you choose, ensure it’s a non-custodial wallet where you hold the wallet’s private key.
5. Defi Staking
Just like fixed deposits and bank savings accounts, you can earn a passive income from your cryptocurrency assets.
Surprised?
Don’t be because Defi staking is the hottest trend. It’s a powerful concept that leverages the benefits of decentralized finance. You can receive annual interest using this concept.
Today, investors like to generate a regular passive income by buying and holding cryptocurrency. Interestingly, unlike a savings account where you earn an interest of less than 2%, with Defi staking, you can earn anywhere between 2-25% or even higher.
You can easily stake and hold Ethereum. But did you know that everything good comes with some risk? And, the same applies to Defi staking.
Some shortcomings of Defi staking are as follows:
Defi platforms are unregulated, which means there is no consumer protection in case you lose your capital investment to frauds or online thefts. Also, many Defi platforms don’t get their computer code audited by a third party to ensure that hackers don’t exploit the laws and steal customer’s information.
Pro-tip: If you’re planning to use and lock away your money in a Defi platform, perform your due diligence beforehand to prevent facing any issues.
6. Prepare for Volatility
Undoubtedly, the cryptocurrency market is a highly volatile one, so prepare yourself in advance to witness the ups and downs of this market.
As you invest and watch your assets, you’re likely to see dramatic swings in prices.
Don’t worry because it’s something normal. There is nothing to panic or get worried about.
Though cryptocurrency like Ethereum is a rage right now, it is still in the infancy stage. Investing in something new always comes with challenges. So be prepared for it, conduct your research, and invest conservatively for a profitable investment.
Pro-tip: Don’t expect instant results because that’s not how cryptocurrency works! Cryptocurrency profit trickles down to those who show a great deal of patience.
7. Start Small
While you may be fascinated by the success stories of people who earned thousands of dollars with Ethereum, don’t fall into that trap unless you verify the claim.
When starting new with any digital currency like Ethereum, take small steps. Why?
This digital currency is not regulated by the government, which means that certain stakeholders and inside people can significantly impact its value. They can crush your hard-earned money without giving any warning.
Even though you may consider yourself wealthy, it makes sense to invest small in Ethereum.
The frustration of losing money to unwarranted crashes can take a heavy toll on your financial and mental well-being.
Gradually, as you understand this market and gain an in-depth understanding of Ethereum, you can increase your portfolio’s size.
Pro-tip: If you’re confident of your market analysis and investment skills, consider investing a sum you think is appropriate.
Investing in Ethereum
The world of cryptocurrency is sensitive, volatile, and a perpetual one. Mastering the art of ether investment isn’t a cakewalk, and you cannot achieve it in a short time.
So, don’t pressurize yourself and try to become a wizard on day one!
Instead, focus on these investment strategies to stretch your funds, and it will most likely give you a high level of return based on your risk-taking appetite.
While you may be confident of your investment skills, Ethereum investing works a little differently.
The golden rule of Ethereum investment: When you worry about the risk of your investment, close it or reduce it for a safer option.
Also, invest and trade in Ethereum, an amount you can afford to lose without disturbing your mental peace.
Which of these investment tips are you planning to use for buying Ethereum?
Do share your thoughts with us!
About the Author:
Priya Jain is a professional copywriter with 8 years of experience. She has an MBA and engineering degree. When she is not writing, you will find her teaching math, spending her day running behind her toddler, and trying new recipes. You can follow her on LinkedIn and Twitter.