Cryptocurrencies offer incredible potential as an investment. Over the years, we’ve seen people both gain and lose fortunes in the crypto market. For most investors, it’s crucial to stick to solid investment principles to manage risks effectively.

When crypto investors fail to manage risks well, their investments can end up feeling more like gambling. This risky situation is worsened by the overwhelming number of cryptocurrency exchanges available to both beginners and experienced traders.

Because there’s no standardized regulation across global crypto exchanges, new investors with little to no trading experience can compete directly with seasoned Wall Street traders. This chaotic trading environment has led to significant losses for both novice and skilled traders. For professional traders equipped with advanced strategies and trading bots, exchanges filled with retail traders, like Binance, are like easy money.

According to Nasdaq, about 90% of traders lose their initial investment within six months when trading forex. Since cryptocurrency is much more volatile than forex, it’s likely that over 95% of crypto traders lose money.

For private investors, the safest strategy is to focus on long-term investments rather than trading, using various strategies to manage risks.

Fortunately, new products are emerging that incorporate best investment practices. One example is the Vest app.

Don’t Chase Hype:
Patience is crucial in the crypto market. Unlike other markets, crypto prices are driven almost entirely by hype cycles. These cycles can send prices skyrocketing in short periods. If you’ve been eyeing an asset that’s rapidly increasing in price, it’s essential not to join the rush and instead wait. These assets will often drop significantly after the hype wears off.

By being patient, you will:
1. Avoid overpaying due to FOMO (fear of missing out).
2. Have the opportunity to buy the asset at a much lower price once the hype dies down.

Diversify Your Portfolio:
Maintaining a diversified portfolio is key to managing crypto risks. If you look at various cryptocurrency forums, you’ll often find people proudly proclaiming they have invested everything in one particular coin. This approach is similar to gambling.

Instead of relying on one asset, it’s wiser to spread your investments across several promising cryptocurrencies, taking into account the risk associated with each. A well-diversified portfolio should include more established currencies with larger communities. Additionally, you can hedge your bets by investing in competitors of certain assets.

Dollar-Cost Averaging:
Investing should be a gradual process. Rather than putting all your money into an asset at once, it’s better to dollar-cost average by buying the asset at regular intervals over a set period. This method exposes you to a range of prices and reduces the risk of buying at a peak.

Here’s how dollar-cost averaging works:
1. Choose an asset and set a fixed schedule for buying it periodically, regardless of the price.
2. The longer the timeframe, the higher the chance you’ll buy at lower prices due to market cycles.
3. At the end of your schedule, you can calculate your average cost and hold the asset until it reaches your profit targets.

Bringing It All Together:
Combining these strategies can help you build a strong cryptocurrency portfolio. Cryptocurrency markets are highly volatile, so adhering to your strategies without getting distracted by short-term price changes is crucial.

While gamblers react impulsively to the market, investors patiently wait for opportunities. By following a few basic principles, you can protect your capital and enjoy peace of mind.

Using a product like Vest can simplify this process, allowing you to set up a diversified, dollar-cost averaged crypto portfolio in minutes.