6 ways to navigate safely through cryptocurrencies

The crypto-market is a new-born marketplace. Trading cryptocurrencies offers a substantial potential for gains, but there are also risks that the crypto-traders should be aware of, in order to navigate safely through this new market which has not been regulated yet.

1.Know your product.

Today, there are more than 2000 cryptocurrencies free-floating on web-based exchanges. All of them are based on blockchain technology, but many of them proved to offer little to their holders in long-term.

Therefore, it is important to gather enough information before deciding to invest in rising cryptocurrencies. The rise could be due to fundamental reasons, but also be triggered by speculative motives, as we will discuss later in this article.

For now, let’s concentrate on the basics. Long-term investors are interested in cryptocurrencies because they rely on the blockchain technology and they offer a decentralized trading platform to their holders. But other features such as the purpose of use and anonymity are also important in determining a cryptocurrency’s future value. The cryptocurrencies with ability to fulfill investors’ requirements have the greatest chance to survive and spread.   

If you think that banana coins are the future of the organic banana trading, you could invest in them. If this does not make sense to you, you should stay away.

2.Learn to deal with volatility. 

The crypto-market is presently in an exponentially booming phase. Cryptocurrency prices are highly volatile, as millions of new coins are issued each day, while tens of thousands of new traders join the market worldwide. 

The euphoria in the crypto-market is not ready to ease just yet. Some players in the market are interested in investing in the underlying technologies, while others simply chase opportunities of massive speculative gains. And nobody exactly knows what the future is made of.

Hence, it is important to accept that you are navigating through an agitated market and should become comfortable with decent price swings. 

Remember, as long as you haven’t realized losses by unwinding a losing position, things could reverse in a short matter of time. Therefore, it is critical for novice traders to avoid making decisions hurriedly. 

Set your stop-loss levels according to high volatility, but don’t change them to take more risk as the market moves. 

In other words, be tolerant, but stay disciplined.

3.Be attentive to sharp price moves.

Cryptocurrencies partly owe their popularity to high upside volatility. Tens of thousands of speculators rushed into the crypto-market over the past year to benefit from wild price moves. 

While speculation is widely accepted in traditional financial markets as well, synchronized trades are forbidden by law. This is not yet the case in the crypto-market. Therefore, it is important to spot and avoid manipulated markets.

‘Pump-and-dump’ is one of the most popular market manipulation themes in the crypto-universe. It happens when a group of traders agree to simultaneously buy a selected cryptocurrency to pump the market. Once the market price reaches a pre-defined target, the group then dumps their holdings and books profits before the price falters further.

Given that the crypto-market is not well regulated yet, there are frequent attempts of market manipulation.

4.Diversify your portfolio.

With more than 2000 crypto-currencies available for purchase, it is possible and recommended to invest in a portfolio of cryptocurrencies, instead of buying a single cryptocurrency. 

Though, the ultimate goal in the crypto-market is to collect bitcoins, which could be seen as the base currency in the crypto-market, some other currencies managed to solidify their position in the market. 

Therefore, investing in a portfolio of cryptocurrencies could help traders managing their risk, although the correlation among the cryptocurrencies tend to be higher in a bear market.

5.Choose your crypto exchange wisely.

It goes without saying that choosing a trusted trading partner is crucial. 

Many service providers in the crypto-market faced technical issues and severe external attacks over the past couple of months. These issues could be easily avoided by making sure that a trading platform offers liquidity, safety and stability. 

A trusted trading partner should be capable of providing a seamless trading experience in investing, trading and safely withdrawing funds.

Therefore, it is important to have a professional support team on your side, at all times.

6.Keep your cryptocurrencies safe.

One of the major risks in the crypto-market is cyber-attacks and hacks. Experts in crypto-trading recommend traders to keep their digital belongings on a so-called ‘hardware wallet’. A hardware wallet is simply an augmented USB memory stick, where private crypto-keys are stored and could be used to authorize transactions without exposing them to the internet.