Often, a cryptocurrency’s prominence is measured in terms of market capitalization. As of today, Bitcoin is still the reigning king, but Ethereum is quickly rising, carving out a significant market share. For this reason, it is a fantastic investment choice for investors looking to build a crypto investment portfolio or diversify their investments.
However, before you can invest in Ethereum, there are several things you need to learn besides how to buy Ethereum. Today, we’ll share Ethereum investment tips that can help you get started on the right foot.
Understand Ethereum
Investing in something you are clueless about is pointless because you will lose money. Therefore, the first step in Ethereum investment should be researching the cryptocurrency. This way, you will understand what you are getting into. Fortunately, there are lots of internet resources out there that can aid in your research. They should help you understand the fundamentals of the cryptocurrency.
One notable thing you should understand about Ethereum is that it is very decentralized, unlike a blockchain like Bitcoin. The biggest advantage of this is that it makes it possible to create smart contracts. These allow programmers to create a piece of code that can execute on itself when certain conditions are met. They, in turn, allow the creation of things such as decentralized apps (dApps) and decentralized finance (De-Fi).
Clarify Risk Tolerance
Every investor has different goals, and the best way to determine the path to take is by evaluating your risk tolerance. And what is risk tolerance? It is the amount of risk investors are willing to take, given the potential return on the investment. Evaluating your risk tolerance as an investor gives you information so that you know how conservative or aggressive you wish to be as you invest in Ethereum.
How much you want to get involved is one crucial factor to consider when evaluating your risk tolerance. For instance, young investors often have a high-risk tolerance as they can still earn more and have lots of time to recover from losses and increase their gains. However, as you age, your investment strategy will likely shift towards investments providing safe or fixed income.
Diversification is Key!
One thing that will keep catastrophic losses at bay is diversifying your portfolio. Instead of investing everything you have into a single entity, it is advisable to spread your money by buying different cryptocurrencies. Doing so cushions you against losses and allows most of your investments to thrive.
Portfolio diversification also helps you learn more about the other investment opportunities in the crypto landscape. For example, if you have also invested in Bitcoin, you have no choice but to learn about the blockchain and how it works. However, you can also invest in Ethereum and diversify by investing in different types of things. For example, besides trading, you can also stake some of your Ether or hold it for the long term.
Think Long-term
Many investors venture into crypto with the hope that the waves will soon hit the highest levels and they will sell out at huge profits. While this happens, it is less common than it appears because cryptocurrencies are a long-term play. Having a long-term strategy makes it easier to deal with the turbulences of trading while avoiding emotional transactions that most often cost you a lot in transaction fees.
Whatever happens, moving your investments at the first sign of a profit would be unwise as you could be leaving so much more on the table. We understand that seeing prices plummet can be scary, but remember, it won’t be the first or last time. Muster some courage and ride out that wave because one thing is certain – most established cryptocurrencies usually come around.
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