When it comes to investment options, crypto’s appeal cannot be questioned. Digital currencies promise heftier returns than traditional assets and boast a series of characteristics like decentralization, innovation, high levels of security, independence from central authorities, complete ownership of funds, and inclusivity that make them stand out from other investment venues.

When the lure and the pull of the crypto market are that strong, it’s hard to look the other way and not be tempted to join the over 560 million crypto owners worldwide, many of which have earned substantial gains and some even built fortunes by trading and investing in crypto.

However, just because the Bitcoin price has skyrocketed over the years and success stories abound, one shouldn’t turn a blind eye to the drawbacks either, as the above-mentioned perks only offer one side of the story. The other one tells of abnormal volatility, sharp price drops, dramatic losses, bankruptcies and scams. Both are just as accurate and real and as a crypto investor, there’s no telling which side of the narrative you’re going to fall on. Since the balance can tilt either way, you’re just as likely to make money as you are to lose it.

So, if you’re still willing to give crypto a go despite the risks, what can you do to avoid making bad investment decisions? Preparation, caution and a few other strategies can be your salvation and shield you from unpleasant events as you navigate the crypto waters.

Do in-depth research

As a novice investor, you might be tempted to think that all cryptocurrencies are more or less the same. In reality, although they have a lot of technological features in common and belong to the same asset category, they also present notable differences that influence their performance and, thus, their return potential.

So, when deciding what crypto to invest in, don’t just follow the crowd blindly, but take the time to research your options thoroughly and see what each crypto brings to the table. This means you have to analyze projects individually, taking into consideration key features and characteristics such as security, scalability, speed, fees, liquidity, and so on. This should help you spot the winners and avoid dead-end projects that offer no value.

Read the Whitepaper

For newer cryptocurrencies that haven’t been in the market for long, you might want to check out the whitepaper. This document contains all the relevant information and details related to a specific crypto project, including its technical structure, features and functionalities, utility, prospects and the overall vision and goals.

If you’re not tech savvy, you’ll likely come across a lot of technical terms and concepts you might not understand, but you’ll still be able to gain valuable insights that will clue you in on the project’s potential and help you decide if it’s worth it or not.

Diversify your portfolio

As an aspiring crypto investor, you should already know that diversification is a must. All investors should strive to build a diverse and well-balanced portfolio that isn’t disproportionately influenced by any of the assets it holds, but this is all the more important when you have your eyes set on high-risk investments like crypto.

Applying this fundamental principle means that you not only have to include different types of assets in your portfolio, but you should also spread your crypto investments across multiple tokens and avoid betting it all on major coins like Bitcoin and Ethereum just because they’re more popular and have a longer track record in the market. It’s generally recommended to choose crypto assets that pertain to different subcategories, such as NFTs, stablecoins, or utility tokens.

Create a strategy and stick to it

Many crypto investors are just as volatile in their trades as the crypto market itself, basing their decisions on emotional impulses rather than data and rational thinking. In a market that’s highly undepictable, behaving erratically can only lead to disastrous results. This doesn’t mean you shouldn’t be flexible or adjust to changing market conditions, but you do need to devise a specific strategy and stick to it so you can enjoy some stability and avoid the dreaded FOMO.

Stay in the know

The crypto market is in constant movement, so if you want to survive the ebbs and flows, you have to learn to move with it. To do that, you need to stay informed on the latest events and developments in the industry and keep track of the factors that might influence crypto prices and thus impact your portfolio. Crypto-specific sites and forums are generally the most reliable sources of information in this respect. Staying up to date with whatever is happening in the crypto space should help you identify trends early on so you can decide on the best course of action.

Be patient

Investing in crypto can result in high gains, but it’s not going to happen overnight. Being too eager and expecting instant profits can push you to make bad calls and ruin your chances of success. That’s why it’s important to learn how to manage your emotions and practice patience. In general, focusing on the long-term and holding assets for extended periods can yield better results than trying to time the market and concentrating on short-term gains. The risk of losses is also greatly minimized when you have a long-term approach, as you won’t be as vulnerable to price fluctuations.

Be wary of scams

Although the crypto industry is no longer the Wild West it once was, and as it’s getting increasingly more regulated, this doesn’t mean it’s free from bad actors. Scammers and fraudsters still populate the crypto space and are always on the lookout for inexperienced investors that they can take advantage of. Security should be your main priority when investing in crypto, so make sure you vet each project carefully, choose a safe wallet, and opt for reliable crypto exchanges for your trades.

Developing good investment habits and being extra careful when making important decisions can keep you safe even in a hectic market like crypto.