As we all know, risk is directly proportional to returns, and the natural risk of investments with high returns will also be greater. In the world of crypto assets, the risk of investing in mainstream coins is much lower than that of altcoins, so it is not difficult to understand that some altcoins will have higher investment returns than mainstream coins. There are pros and cons to different types of cryptocurrency investment, so what is suitable for newbies to buy which crypto assets? And how to carry out warehouse management and mentality adjustment?
1、Crypto Asset TypesUnderstanding and Selection
After more than a decade of development, Bitcoin has gradually been accepted and recognized by investors, and more and more users outside the circle have begun to understand Bitcoin and choose to enter the crypto world, and after entering this world, we find that not only Bitcoin is the investment target, but also investors have hundreds of asset allocation options.
1. Mainstream coins
Crypto assets that rank among the top crypto assets in the crypto market capitalization rankings are often referred to as mainstream coins, which are characterized by a large user base, good trading depth, high market activity, and most of them have been tested by history and have a relatively strong ability to resist risks. Mainstream coins generally have a relatively strong consensus in the crypto market, have a larger actual application value, and have better liquidity than general crypto assets, which is a generally recognized investment target by investors.
Therefore, for novice users who have just entered the market, it is more appropriate to allocate mainstream assets, such asBitcoin, Ethereum, Litecoin, Ripple, etc. Bitcoin is the first crypto asset, accounting for half of the market value of the entire crypto asset, and many old users will use its trend as the main reference for allocating other assets, which can be seen for an introduction to Bitcoin and its investment valueWhat is Bitcoin?、Why Bitcoin is worth investing in, the introduction of other mainstream currencies can be found hereWhat is a mainstream coin? What is a Stabilisation Coin? What is an altcoin?。
These mainstream coins are more well-known in the market, more liquid, and less risky, making them a wise choice for new users to invest in crypto assets.
2. Altcoins
Compared to mainstream currencies, counterfeit currency is not a derogatory term. It is also a type of encrypted asset generated through the use of blockchain technology. However, its market awareness, consensus, and liquidity are not as high as mainstream currencies. However, if it encounters an outbreak of popularity, it will also perform well, such as the hype of Meme coins, the outbreak of public chain tokens, as well as GameFi, Layer 2, DeFi, NFT concept coins, etc, They are all guides of investment trends at different time periods. So, does counterfeit currency have investment value? This issue varies from person to person. Based on the historical price trends of counterfeit coins, their fluctuations are significant. Therefore, it is necessary to leave it to time and the market to test. For new users, before investing in a counterfeit currency, it is important to first understand its essence? Is there any application scenario? What is the purpose of investing in counterfeit coins on your own? Be cautious when investing within the scope of confirming one’s own capabilities and risk tolerance.
3、Stable coins, platform currency
There are also concepts such as stablecoins and platform coins in encrypted assets. Stablecoin, as the name suggests, is a digital asset that is not affected by price fluctuations. Its biggest characteristic is price stability, and it will not fluctuate like Bitcoin. To maintain price stability, stablecoins require support from alternative currencies such as the US dollar, gold, or other legal tender packages. Therefore, there are many stablecoins in the US dollar (such as USDT, GUSD, etc.) as well as Facebook’s Diem (Libra) stablecoin project. The emergence of the US dollar stablecoin is mainly aimed at solving two problems: 1) the problem of excessive price fluctuations in digital currencies. 2) Act as a medium of exchange between fiat currency and cryptocurrency. The oldest stablecoin currently available is USDT, issued by Tether, a company formed by Bitfinex, the world’s largest digital currency trading platform, and anchored in the US dollar. The price of 1 USDT is approximately equal to 1 US dollar. The user reserves US dollars in Tether’s bank account, and Tether issues US dollar vouchers with a price equal to one US dollar. Simply put, the amount of USDT issued means how much USD reserves Tether Company has. In addition to USDT, there are also stablecoins such as USDC, TUSD, GUSD, USDK, refueling, PAX, etc. Platform currency refers to the tokens/universal points of digital asset trading platforms, and is also known as platform currency by investors because its application scenarios are mostly within the platform. But precisely because it relies on trading platforms, it naturally possesses its own trading and circulation value. For example, Ouyi’s OKB (OKB).
二、Allocation of different encrypted assets in different warehouses
For novice users who are new to the cryptocurrency industry, it is recommended to invest some idle funds. New users should try not to put their eggs in the same basket when allocating assets, and learn to allocate different encrypted assets according to their positions to reduce investment risks. If you have 1000 yuan of idle funds, you can invest most of your funds in mainstream currencies such as Bitcoin and Ethereum. If you recognize the value of mainstream currencies, you can consider extending the investment cycle. The remaining small amount of funds can be used to allocate counterfeit coins, but due to the large fluctuations of counterfeit coins, it is necessary to pay attention to risk control. When you do not have full confidence and experience, it is recommended not to hold on for a long time, as the high risks it carries are not acceptable to all investors. “Don’t put eggs in one basket” actually has the second half, which is - “But don’t put too many baskets either.”. Asset allocation is actually using the risk differences between different assets to reduce overall risk and lower the volatility of investment portfolios. The true diversification of investment emphasizes the differentiation of investment platforms and wealth management products, from multiple aspects such as platform type, product type, investment period, expected returns, etc. After understanding the allocation of encrypted assets, new users also need to pay attention to the entry time, and choosing the best entry time often leads to more profits. If you are a new user who has done sufficient homework, understood and recognized the concept and value of cryptocurrency assets, and is ready to enter, then in fact, every market downturn is a good time to enter. Extend the investment cycle appropriately, and do not worry about short-term fluctuations in exchange for greater returns; If you are a novice user with limited knowledge of cryptocurrency and have only heard of popular currencies such as Bitcoin and Dogecoin, you need to understand the overall market trends and the historical price trends of the cryptocurrency assets you want to invest in. At the same time, you also need to timely obtain the latest news to assist you in making judgments, buying low and selling high, and earning profits based on market fluctuations. Of course, the market volatility of encrypted assets is significant, and risk control needs to be taken into consideration.
三、Position management and mindset management
When there are significant market fluctuations in the cryptocurrency market, position management and mindset management become extremely important. Many investors consider earning money as their primary investment goal, but in fact, it is not the case. Warren Buffett, the stock god, once shared his investment philosophy, which is to preserve capital. The same goes for investing in cryptocurrency assets. When the market fluctuates greatly, our primary goal is to maintain capital, and then profit. Every qualified investor needs to establish their own position management system, and always remember to strictly stop loss. Many people know the compound interest method, which is equivalent to abandoning position management. At this time, it is necessary to achieve absolute strict stop loss. Ignoring it will inevitably result in losing everything. In addition, mindset management is a point that many investors often overlook. Some investors who have some understanding of the K-line are adept at analyzing trends or technical aspects, such as left-handed trading and right-handed trading, Fibonacci retracement, etc. However, if they cannot manage their mentality well, investors are likely to experience great frustration and self doubt due to one or two misjudgments, and even affect their investment and financial management for a long time afterwards, after all, humans are not gods, Unable to make every judgment accurate and error free. If investors can manage their mentality properly, even if there are a few mistakes in judgment, they can quickly tidy up their mood and regroup and start playing. Psychological management can make investors more confident in trading. Good mindset management includes thinking about risks, accepting risks, resisting FOMO emotions, eliminating illusions, and managing expected returns. The ancients said, “A general who fears victory before defeat can be invincible in a hundred battles.”. On the contrary, not accepting risk is avoiding risk, and the consequences can be catastrophic. For example, investors who like to avoid risk often develop FOMO emotions when the market situation is improving, that is, they see a cryptocurrency asset rising one after another and develop a sense of chasing after the price. This blind buying and failure to analyze the market behavior may make investors feel regretful when the cryptocurrency asset falls.
conclusion
As a novice user who is about to enter or has already entered, it is not only necessary to comprehensively examine mainstream currencies like Bitcoin, but also to have a deep understanding of the purposes and values of other blockchain projects. When you recognize the value of the blockchain projects you are researching, such as popular DeFi, NFT, Poka, etc., then your investment confidence will be more abundant, and your risk awareness and stop loss and stop loss positions will be clearer. Of course, like investing in other varieties, investing in cryptocurrency assets is not just about making profits and losses, but also involves risks. Therefore, investors need to pay attention to position management and mentality management, and reasonably control risks.