As the world economy struggles with the challenges that the pandemic lockdowns have caused throughout 2020 and into 2021, we’ve seen an increased interest in cryptocurrencies. This has been a long time coming, with crypto gaining in popularity over the news and now being bought by world governments and major financial institutions so that they can get in on the action.
Whether you’re new to crypto or you’re just looking for some no-strings-attached advice on cryptocurrency investment as we go into 2021, check out our tips below. There you’ll find some basic investment tips as well as a more in-depth guide to buying and trading crypto, and the cryptocurrency mainstays that every trader keeps their eyes on.
As an investor, it can help to consult a self-directed IRA custodian for cryptocurrency. Using a custodian IRA for your crypto investments ensures you keep full control of your investments while enjoying tax deferment or even tax-free returns on your account.
Top Crypto Investment Tips
Before we get into some specifics, there’s basic investment advice that applies to crypto, and many other investments too, that everybody should take into account.
Set a Financial Goal
Any savvy investor should set financial goals before getting too deep into investing. First, you should have an idea of whether you’re investing in the short term or long term. It’s okay if a short-term investment turns into a long-term, but you should anticipate that possibility before you enter that position in the first place.
Maybe you have some day-trading experience, great! You can use those same skills to trade crypto in the short term too. Otherwise, if more patient, long-term investments are more your speed, you’ll want to have a long position that doesn’t demand frequent checkups.
Once you’ve settled on a strategy, pick a number and stick to it. You can’t go wrong with a number ending in a zero or a five, a nice milestone at which point you can take profit and be satisfied.
Establish a Dollar-Cost Average
If you’re serious about investing in crypto and want to make frequent, repeated investments, you’ll want a dollar-cost average. Don’t be the person who dumps a paycheck into crypto without knowing what they’re doing.
Instead, set an investment cap that’ll be your dollar-cost average. For example, you can put $200 into your crypto investments after every payday once a month. Stick to that figure and don’t deviate. By doing this, you can reduce the effects of short-term crypto volatility, which is a reality of popular cryptocurrencies.
Diversify your Investment
This goes for any investment, crypto or not. As the saying goes, never put all your eggs in one basket. When it comes to crypto, everybody thinks of Bitcoin, but resist any temptations to put everything into Bitcoin, especially if you don’t want to get crushed by short-term volatility. If you want to diversify while sticking with reliable cryptocurrencies like Bitcoin, see some of our recommended picks below.
Best Cryptocurrencies in 2021
We’re not clairvoyants, so it’s impossible to tell which cryptos will perform the best in 2021. To that end, keep in mind that this is merely advice and not to be acted on without some due diligence on your part. As an investor, you should try to avoid buying anything on anyone’s recommendation alone.
For first-time crypto investors, you’ll want to stick to some of the more popular cryptocurrencies that yield profit opportunities without being subject to too much risk. Check out our six examples of these cryptocurrencies below:
Bitcoin (₿ – BTC)
Bitcoin is the cryptocurrency, being one of the first on the scene, the most valuable today, and a recognizable name outside of crypto trading communities. Most crypto traders buy some crypto to hold onto as it’s been dominating the market since first coming into use in 2009. Its artificer is the mysterious Satoshi Nakamoto, an as-yet-unidentified individual or group of individuals who wanted to make a decentralized digital currency using blockchain technology, free from central bank control.
This cryptocurrency flagship hasn’t had an easy ride, however. In fact, crypto’s reputation for volatility comes from Bitcoin’s own volatility, particularly during 2017 and 2018 where it crashed from $20k to $3k. As of 2021, it’s recovered and then some. As of the writing of this page, Bitcoin sits at $55k after opening 2021 at $40k, unprecedented growth in such a little timeframe.
Ethereum takes the digital currency ambitions of Bitcoin to its next logical evolution. Where Bitcoin is a currency, Ethereum is the name of the blockchain that uses the native Ether (ETH) currency. By market capitalization, it’s second only to Bitcoin. As a blockchain, Ethereum hosts not only Ether but other cryptocurrencies, making it a mainstay buy for investors operating on a budget.
Litecoin (Ł – LTC)
Litecoin is similar to Bitcoin in many ways, having been developed as an altcoin shortly after Bitcoin started to take off. While that mimicry gives some confidence in the cryptocurrency, it’s not even a percentage of the current Bitcoin price at the writing of this page. If you liked the sound of Bitcoin but don’t want to spend too much acquiring it, you may want to load up on Litecoin and hope that financial viability comes back for Bitcoin’s forgotten cousin.
Dogecoin (Ð – DOGE)
As a bonus, here’s a cryptocurrency that’s made news in the past due to its repeated rises and falls in relatively short periods of time. That’s right, this is a cheap but volatile coin that you need to be careful when buying. Based on the doge meme, Dogecoin was created in 2013 as a parody of Bitcoin by IBM software engineers. So, why’s it here? 2020 and 2021 saw big rises in this cryptocurrency. The jokey appeal of this coin has led to a lot of backing by young and old investors alike but this attention can be fickle. In the grand scheme of things, it’s worth more now than it has ever been and may continue upwards over time. Given how cheap it is nowadays, this might be a good cryptocurrency to buy and forget until it hits your newsfeed again.