The topic of today’s article may seem quite trivial to many people. However, when working with the community we began to notice that not everyone understands the general principles of investing, not to mention the specifics of investing in cryptocurrency. Next, we’ll delve deeper into the topic and explain the most important and meaningful points.
Diversification and risk management
It is no longer a secret that investments in the cryptocurrency market are the most promising in terms of returns. Compared to traditional markets, you can find a better risk-to-reward ratio here. The main reasons for such great prospects of investing in the cryptocurrency industry are its technological sophistication and low capitalization. Now investors from all over the world are interested in technologies, services and companies working on the Internet. It is this trend that will provide a steady inflow of capital to the market in the near future.
However, low capitalization is a point with which it is necessary to know how to work. It is the reason of high volatility, which gives an opportunity to make a lot of profit and lose a lot. To make a profit on the market with high volatility, it is necessary to follow the simplest rules of risk-management, diversifying your investments. We have identified three basic rules:
- Have several areas of investment activity at once. For example, when investing in NFT, do not forget about Bitcoin, Ethereum and altcoins.
- Maintain a risk-to-reward ratio of 1 to 2 or higher.
- Risk your own capital only.
Following these rules will significantly reduce risks and help you make a steady profit.
The investment horizon is the time period, during which investor expects to achieve the expected return on investment. There is a specific investment horizon for each investment area, which is optimal. For example, for investments in the NFT market the most optimal investment horizon is a period of 6 months. Observing the investment horizon you will be able to extract the maximum expected profit.
Return on investment
Right now, the crypto market gives much higher returns than traditional markets. A very good result is a return on investment of around 30–50% per month. Some investors and traders can extract even more, but it requires a lot of experience and deep understanding of the market. But you should not believe obviously fraudulent projects promising too high returns. Guaranteed profitability happens only in bank deposits and government bonds of some countries, and it is almost zero there. A professional manager will never promise you a guaranteed high yield, but he will always tell you the maximum loss he can afford. This is the difference between a professional and a fraudster.
An investment pool is united funds of a group of investors for the purpose of their further investment in a certain object of investment. Investors of the pool gain profit collectively in accordance with the share of their contribution to the pool. This tool is the most convenient for newcomers to the cryptocurrency market, because investing is not the easiest type of activity in itself, and investing in the cryptocurrency market requires special skills and knowledge. An investment pool manager has both deep theoretical knowledge of the market and more practice under his belt. However, managers should also be checked in personal communication. As a rule, professionals can openly display their knowledge, explain the logic of position opening, and answer specialized questions. For example, Octopus Crypto Capital pool managers communicate with the community of the project in our chat -t.me/OctopusCC_Rus, there they also answer all questions. Also, do not forget about diversification of their investments and when investing through pools. For example, it would be correct to distribute your capital evenly between the pools, which operate in different markets and have different strategies.
You can invest in pools of our fund and buy OCC tokens through our Telegram bot — t.me/Octopus_VC_bot.