Crypto investing is a venture that has gained significant traction as one of the viable methods to make money online, and this is because of the potential of digital assets for a moonshot. However, more often than not, investors find themselves jumping to buy crypto because of FOMO (fear of missing out) or panic-selling during a market dip.
Giving your emotions room to drive your investing choices can never have a good outcome, as it can profoundly impact your financial health as well as your mental wellbeing.
But fret not, we’re here to help you navigate the dynamic world of cryptocurrencies. Read on to find out our best tips on how to avoid emotional investing!
Do your research
Research matters significantly when investing in cryptocurrencies, because it allows you to grasp all the ins and outs of the market. Before choosing a particular project, it’s essential to understand its use cases, market potential, technology, and whatnot, as these factors will help you determine whether the project is indeed worth it.
For example, before investing in XRP, it’s natural to check xrp news today from reputable sources and see if it is a good choice for you, depending on what you’re expecting to get out of investing, and your risk tolerance, among other considerations.
Many investors have lost money by making decisions based on rumors or market hype. To avoid this, check the project’s whitepaper, follow development updates, and consider experts’ opinions.
Establish clear goals and stick to them
The next important step when investing in cryptocurrencies is to define your investment goals and create a plan for achieving them. No matter the timeline of your goal, whether short-term or long-term, a plan will help you remain focused and control your emotions so that they don’t take over you.
So, write down these goals and refer to them as regularly as you can because they will guide your decision-making and remind you of the strategies you’ve put in place.
For example, if you want to hold XRP for a few years before selling it, your plan will help you avoid the temptation of selling it during market dips.
Diversify your investment portfolio
There’s a reason why they say diversification is a golden rule in the crypto industry– it can reduce your overall risk significantly in contrast to holding just one asset. You don’t want to put all your eggs in one basket because that could result in losses if the project of your choice does not perform as expected.
To create a well-balanced crypto portfolio, consider distributing your investments across large, medium, and small-cap projects and give them the right weightings. As a rule of thumb, the lower the market cap, the higher the risk.
Remember to assess your risk profile, as it will determine what works best for you, and make sure to strike a balance between each of the categories mentioned earlier.
Keep up to date with the news but don’t overreact
While staying up to date with the latest news in the crypto market is essential, you should never make decisions based on short-term price swings. In the end, you need to remember the bigger picture when investing in cryptocurrencies: namely, the reason why you decided to invest in the first place.
Panic selling happens frequently during bear markets, causing investors to exit the market at a low price due to fear. When feeling doubtful, remember not to get sucked into price activity, and return to the value proposition of a crypto project instead.
Suppose you’ve invested in an asset with impressive fundamentals that you believe in; in this case, there isn’t anything to worry about in the long run.
Anyone familiar with the crypto market knows that the price of Bitcoin increased exponentially in a matter of ten years, and although investors saw unbelievable returns, it took an entire decade until that happened.
So, rather than seeking instant gratification, focus on long-term results instead.
Seek professional advice
Remember that there isn’t anything wrong with leveraging others’ wisdom to succeed in your crypto investing journey. After all, there are people out there who are more well-versed in cryptocurrencies than you, so why not seek their help when needed?
A certified crypto financial advisor can guide you in the process of creating and managing a crypto portfolio, ensuring you make informed decisions.
You can also take advantage of education platforms, as there are plenty of them available, offering content on crypto, security, blockchain, and NFTs, to name a few, ranging from investing tutorials and how-to guides to a comprehensive glossary of crypto terms.
There are many crypto experts, such as crypto influencers, investors, and blockchain developers, who share information on innovations in various blockchains and talk about projects in which they are heavily invested.
They share their expertise for informational purposes through social media; however, this information isn’t meant to replace financial advice you can get from a certified professional.
Also, remember that you should avoid advice that comes from family and friends, especially if they aren’t active as crypto experts or advisors and have limited advice to provide.
While it can be fun to join online communities such as Reddit and Quora when investing in cryptocurrencies, the primary purpose of these forums is to share experiences and discuss crypto projects. They are not a reliable source for individual financial advice.
The bottom line
Emotional investing is one of the most significant hurdles that crypto enthusiasts face, and this is because the volatile nature of the market can fuel strong, overwhelming emotional reactions.
However, there are various strategies you can implement to help you make rational decisions and keep emotions out of the investing game, such as diversifying your portfolio, staying up to date with the latest trends and news, and remembering your goals.
Ultimately, succeeding in this industry comes down to cultivating the necessary discipline so that you won’t lose focus when there’s an unexpected price swing.
