Investors who do not act thoughtlessly seduced by the prospect of bigger profits, but weigh all the risks are on track to succeed with trading cryptocurrencies. View the details in our article.

The golden rule of investing in any asset is that you should never invest more than you can afford to lose. Your losses should not be big, experts say. This rule also applies to the now popular cryptocurrency market. Often there is a mad rush: some traders buy bitcoins in huge amounts, while others try to sell cryptos with the biggest possible profit. Analysts offer some rules on how to significantly minimize risks of investing in cryptocurrencies.

Diversify your investment portfolio

Most investors consider the world's No. 1 cryptocurrency bitcoin as the best investment solution ever. However, experts urge traders not to hurry and have a look at other digital currencies.

To reduce the risk of losing your money, you can buy other no less popular coins such as Ethereum, Litecoin, Ripple, Bitcoin Cash, Dash, NEM, NEO, BitConnect and Monero.

Focus on the idea

The blockchain-based technologies are rapidly developing, and the tokens gradually go beyond being just means of payment. They often carry some idea related to the future. It is difficult to predict what idea will persist. So experts recommend buying one token of each cryptocurrency, for example.

This will allow you to minimize risks as even insignificant disagreements between developers of cryptos or a technical problem could spark a great price collapse.

Hedging is a point to keep in mind

It is no secret that the cryptocurrency market is extremely unstable and it is impossible to predict all the risks.

In order not to hover on the brink of failure, you should not rely only on cryptocurrency assets. Analysts recommend buying other assets that are not associated with digital money: precious metals, bonds, shares, etc. This will help you to form a reliable investment portfolio.

It is liquidity that matters

There are many problems associated with low-liquid assets. Avoid cryptocurrencies with small trading volumes. Experts are unanimous in the opinion that an investment should be preceded by a thorough analysis of a situation.

Assess the growth potential

Potential investors should think about what kind of cryptocurrency they want to add to their portfolio. In future, many of them could bring significant income. According to experts, cryptocurrencies with low market capitalization have higher growth potential than that of the crypto leaders. With the growth of popularity, the capitalization of such a cryptocurrency will increase at times. However, it is not always possible to accurately predict such growth, specialists emphasize.

Keep close tabs on technical analysis

Few market players have the idea of what the technical analysis is and do not understand price charts related to a particular cryptocurrency. Experts say that literacy in this matter is crucial for proper investing and minimizing risks. Without this information, it is difficult to monitor the cryptocurrency market dynamics. The technical analysis studies price fluctuations and sales volumes on charts, trying to predict future changes. Such a strategy is very important for investors.

Proof-of-Stake mining is worth paying attention to

There are some alternatives to traditional mining and Proof-of-Stake (PoS) is the most common. PoS allows users to mine coins without additional equipment. The number of tokens you have determines the amount of compensation. In some cases owners can earn interest by leasing their coins.