Many people approach trading like hunting. They look for any sign of game and stand ready to pull the trigger in an instant. This may seem like an exciting way to approach altcoin investing, but in reality, altcoin investing is more complex than hunting.
With thousands of altcoins on the market, the concept of investing in altcoin more closely resembles investing in stocks, although altcoins are more volatile than company shares. The right time to invest in a particular altcoin depends on which coin it is, its patterns in the past, and what catalysts are expected to raise the currency’s value. This means breaking down and analyzing altcoins and cryptocurrency trading.
About Altcoins
The term “altcoin” was coined as a counterpoint to Bitcoin, the first digital currency released in 2008. The term is formed by the words “alternative” and “coin.” Since digital currency came on the market, there have been thousands of varieties of altcoin.
When people talk about altcoin investing, it isn’t like discussing whether or not to buy gold or lean hog futures. It is more like debating whether or not to invest in precious metals or futures in general. Like the stock market, the concept of altcoin contains thousands of different entities.
The key is not to think in general terms about cryptocurrency but to research specific coins. This will require some time and attention to detail. Although it may be tempting to chase a trend many insist will rise spectacularly in a few days, that is a recipe for a massive fall once these positions are sold off or if the altcoin turns out not to have the value touted on social media.
Research Specific Altcoins
Mark Cuban, owner of the Dallas Mavericks and famed investor who appears regularly on CNBC’s “Shark Tank,” answered questions about altcoin investing on his Reddit. He gave sound advice about cryptocurrency investing, which may not sound as thrilling as the newest double your money altcoin deal on social media, but is worth listening to given Cuban’s track record of success as a high-profile investor.
Cuban recommended against following crypto trends. Many of these are highly volatile trades, and a good number are crypto scams and rug pull schemes intended to steal traders’ money and launder it on the blockchain. The first step is to work with a regulated platform and research specific types of altcoin to decide which is the best investment or trade.
Cuban holds 60% bitcoin, 30% ether, and 10% other altcoins. He warns that altcoins are highly speculative and that there is no predicting which direction they will go. Even Bitcoin shows a high level of volatility and can be brought up or plummet, based on Elon Musk’s comments.
Keep altcoin for the “fun” part of the portfolio, the section that is pure speculation. This can allow you to experiment, see what works and not face huge losses on a core position.
Pay Attention to Patterns
Although predicting the behavior of altcoin can be tricky, looking at patterns can help predict the correct times to buy and sell a holding. For instance, bitcoin tends to move according to comments from Elon Musk or news of companies adopting the currency. So watching how altcoin behaves and what news drives specific coins can be helpful in gaming this market.
Remember to Hedge
As with any other type of investment, it is essential to hedge your holdings with high and low-risk assets. Cryptocurrencies should be hedged with more conservative investments. Following Cuban’s formula of having the majority bitcoin among cryptocurrency holdings, followed by ethereum and a small altcoin holding, is the wisest strategy to follow.
