Are You Afraid of Investing in Cryptocurrency? Find Strategies to Help You Sleep at Night

Many people fear investing in cryptocurrency due to its notorious volatility and fluctuating prices. Statistics indicate a significant portion of adults are sceptical about crypto’s safety, yet interest remains high. Employing strategies like dollar-cost averaging, focusing on major coins, and limiting investment amounts can help to mitigate risks and make crypto investments less stressful.

Investing in cryptocurrency can feel like standing at the edge of a roller coaster, especially with the wild price swings. Bitcoin has surged over 1,060% in just five years, but it’s also seen drops of 80%. According to a Pew Research survey, around 63% of adults in the U.S. doubt the safety of crypto investments. Nevertheless, a report from Motley Fool revealed that 20% of American adults own crypto and nearly half intend to invest within the year.

But the good news is, you don’t have to be fearless or lucky to get in on the cryptocurrency action. There are three practical strategies that make crypto investing less nerve-wracking while potentially still being profitable. Here’s the rundown.

First off, let’s talk about handling volatility smartly. The unpredictable nature of crypto drives many investors up the wall. But consider dollar-cost averaging (DCA), a strategy where you invest a set dollar amount on a fixed schedule. This means when prices dip, you buy more units and when they rise, you buy fewer. DCA can help lessen the sting of market downturns compared to making lump-sum purchases. Plus, it automates your investments, removing the emotional stress and uncertainty from your decisions.

Next, after setting up how to invest, it’s time to focus on the coins themselves. The crypto market is littered with poor investments that might lead to losing everything. Instead of gambling on lesser-known coins, stick to established players like Bitcoin, Ethereum, XRP, and Solana, which together make up around 75% of the market cap. These major cryptocurrencies have more liquidity and reliable research backing them, making them safer choices for long-term investors.

Smaller coins often rely heavily on social media buzz or confusing tokenomics, making it hard to gauge their true worth. By concentrating your investments on established coins, you reduce the risks associated with scams and save yourself from the hassle of handling obscure tokens. This strategy can lead to better returns with fewer dramatic downturns.

Lastly, even the most devoted crypto enthusiasts should exercise caution with how much they invest. It’s wise to keep your crypto allocation relatively small compared to your overall portfolio. Starting with just 1% devoted to Bitcoin and increasing through DCA can make a big difference. After about a year and perhaps a few market dips, evaluate how comfortable you are. If all goes well, you could aim for an allocation of 3% to 5% spread across the larger coins.

If you’re still confident after that, consider capping your total at around 10%. Beyond that, the volatility of cryptocurrencies could overshadow your entire portfolio’s stability, making it the emotional focal point rather than a satellite position. To balance this risk, keep the remaining parts of your portfolio straightforward and stable. This helps to cushion the wild fluctuations in crypto and turns potential chaos into opportunities, rather than threats to your financial health.