The rampant bull market of 2021 ensues, as more institutional and retail investors decide to join the game. For many, what once seemed like a scam or a risky investment is not an opportunity they cannot skip.
If you’re a beginner, looking for some advice on what cryptocurrencies you should start buying, this guide is written for you. In the next few chapters we will discuss everything beyond your decision to buy Bitcoin, and how you can most benefit from the current situation. Let’s get started.
Before you go ahead and invest in cryptocurrencies, there are several factors you should use as indicators to determine what you will be buying. It will also give you a good idea about yourself as a person, and how you might or might not be able to handle volatile market conditions.
- Short, mid, or long time preference
There are three types of investors in the cryptocurrency space. Short term traders, swing traders, and hodlers. The first category enters a trade for just a few hours, minutes even, in order to benefit from a short price movement. These are also the traders that use leverage or other types of derivatives products. Swing traders prefer to trade in longer timeframes, from weeks to months, “swinging” in the direction of the market. Their strong point is their ability to perform sentiment analysis and they most often trade in spot markets. Finally, hodlers are those with the strongest understanding of a project’s fundamentals, and believe in its long term price appreciation. They are patient, focused on the long term, and don not sell their coins to benefit from small market movements.
- Risk resistance
Investors tend to behave in a certain way when faced with uncertain situations. And in the crypto markets, those are quite common. Short-term traders are those with the highest tolerance to risk, and strong emotional intelligence. Mid-term (sentiment) traders take less risk as they simply follow the conditions of the market. Finally, hodlers take the least risk since they bet on low-risk projects with strong fundamentals.
- Only invest what you can afford to lose
Contrary to popular belief, most traders invest way more than they can afford to lose. This, in turn, makes them more emotional during times of high volatility, which results in wrong trading decisions. Crypto trading has many elements of gambling, and it would be a good idea to see it as such. Don’t get too attached to a coin and invest more than you can spare.
What to buy depending on your type
Now that you have a better idea of the different types of traders, you most likely recognize yourself somewhere in there. If you are completely new to the market and have no experience whatsoever, it is best to simply hold onto your coins and watch from the sidelines, until you get a better understanding of market dynamics. By doing so you will be able to find common patterns that result in fluctuations when it comes to the price of cryptocurrencies.
Having said that, let’s delve into the coins you could invest in depending on your profile.
For short term traders, you can literally invest in any cryptocurrency. It is important to make your decision based on charts and indicators, trying to find a good entry and exit point. Most short term traders benefit from investing either in strong cryptocurrencies, like Bitcoin and Ethereum, since there are lots of historical market data to asses. Others prefer coins with strong fundamentals that are still below their ATH price. Such coins could be ADA, EOS, TRX, ZEC, XRP, and others.
Mid term traders tend to invest in coins that are either “trending” in the market. They might also short coins that are hated by the community due to a number of different reasons. At this point, the most trending projects are split in two categories:
- Exchange-based tokens of popular platforms, like Binance (BNB), and FTX (FTT).
- Cryptocurrencies related to DeFi with strong fundamentals, like XVS, UNFI, LINK, DOT, and LIT.
If you’re this type of trader, you want to be looking at the public sentiment regularly, to ensure that you sell you tokens before the market turns its attention to another trend.
Finally, long term traders invest in cryptocurrencies with proven use case, strong fundamentals, and strong communities. These are the coins that new investors feel like they have “missed out” on, without understanding their true potential. If you plan to invest with low risk and hold onto your coins for several years, consider investing in Bitcoin or Ethereum, as they fit all these criteria.
Having gotten this short introduction, we recommend doing further research on the coins mentioned above. By doing so you will be able to make better investment decisions.