Aswe all know, risk and return are directly proportional, and investments withhigh returns will naturally have greater risks. In the world of encryptedassets, the risk of investing in mainstream coins is much lower than that ofaltcoins. Therefore, it is not difficult to understand that some altcoins havehigher investment returns than mainstream coins. Currency investments indifferent sectors have their own pros and cons, so which crypto assets aresuitable for beginners to buy? How to carry out position management andmentality adjustment?
1.Understanding and selection of types of encrypted assets
Aftermore than ten years of development, Bitcoin has been gradually accepted andrecognized by investors. More and more users outside the circle have begun tounderstand Bitcoin and choose to enter the encrypted world. After entering thisworld, we found that not only Bitcoin Investors also have hundreds of assetallocation options for this investment target.
1. Mainstream coins
The crypto assets that rank in the top of the crypto market cap list areusually called mainstream coins. The mainstream coins are characterized by alarge user base, good transaction depth, and high market activity. Most of themhave experienced the test of history and have strong resistance to ability torisk. Mainstream coins generally have a relatively strong consensus in theencryption market, have greater practical application value, and have betterliquidity than ordinary encrypted assets. They are generally recognizedinvestment targets by investors.
Therefore, for novice users who have just entered the market, it is relativelymore suitable to allocate mainstream assets, such as Bitcoin, Ethereum,Litecoin, Ripple, etc. As the first encrypted asset, Bitcoin occupies half ofthe market value of the entire encrypted asset. Many old users will use itstrend as the main reference for allocating other assets.
These mainstream coins have high market familiarity, strong liquidity, andrelatively low investment risks, which can be said to be a wise choice for newusers to invest in encrypted assets.
2. Altcoins
Altcoins are compared to mainstream currencies. The word "shanzhai"in altcoins is not a derogatory term. It is also a kind of encrypted assetgenerated by using blockchain technology, but its market familiarity, consensusand circulation The sexuality is not as high as that of mainstream coins, butif it encounters an outbreak of popularity, it will also perform well, such asthe hotly hyped Meme coins, the outbreak of public chain tokens, and GameFi,Layer 2, DeFi, NFT concept coins, etc. , are the leaders of investment booms indifferent time periods.
So, are altcoins worth investing in? There are different opinions on thisquestion. From the historical price trend of altcoins, the fluctuations of itsrise and fall are relatively large. Therefore, it needs to be tested by timeand the market.
3. Stable coins, platform coins
There are also concepts such as stablecoins and platform coins among encryptedassets.
Stablecoin, as the name suggests, is a digital asset that is not affected byprice fluctuations. Its biggest characteristic is price stability, and it willnot skyrocket and plummet like Bitcoin. To maintain price stability for “stablecoins”, stable coins need to be supported by some alternative value, such asU.S. dollars, gold or other fiat currencies, so there are many U.S. dollarstable coins (such as USDT, GUSD, etc.) and previous Facebook’s Diem (Libra)stablecoin project.
The emergence of USD stablecoins is mainly to solve two problems: 1) Theproblem of excessive price fluctuations of digital currencies. Act as a mediumof exchange between fiat and cryptocurrencies. At present, the oldest stablecurrency is USDT, which is issued by the Tether (TEDA) company established byBitfinex, the world's largest digital currency trading platform. The userreserves the US dollar in the bank account of the Tether company, and theTether company issues a US dollar certificate with a price equal to one USdollar. A simple understanding is that the number of USDT issued means how muchUS dollar reserves Tether has. In addition to USDT, there are stablecoins suchas USDC, TUSD, GUSD, USDK, DAI, and PAX.
The platform currency refers to the tokens/universal points of the digitalasset trading platform. Because most of its application scenarios are withinthe platform, it is also called platform currency by investors. But it is alsobecause of relying on the trading platform that it is born with its own tradingvalue and circulation value.
2. Separate positions to configure different encrypted assets
"Don't put your eggs in one basket" actually has the second half ofthe sentence, that is - "But don't put your eggs in too manybaskets". Asset allocation is actually the use of risk differences betweendifferent assets to reduce the overall risk and reduce the volatility of theinvestment portfolio. The real diversification of investment is to choose thedifferentiation of investment platforms and wealth management products, and todiversify investments in terms of platform type, product type, investmentperiod, expected return and other aspects.
After understanding the configuration of encrypted assets, new users also needto pay attention to the entry time. Choosing a better entry time can often getmore benefits. If you are a new user who has done enough homework to understandand recognize the concept and value of encrypted assets and is ready to enterthe market, then in fact, every market crash is a good time to enter themarket. Properly extend the investment cycle and don’t care about short-termvolatility in exchange for greater gains; If you are anovice user with little knowledge of crypto assets, but have only heard ofpopular coins such as Bitcoin and Dogecoin, then you need to understand theentire market trend and the historical price trend of the crypto assets youwant to invest in, and at the same time obtain timely access to The latest newsto help you judge, buy low and sell high, and earn profits according to marketfluctuations. Of course, the market of encrypted assets fluctuates greatly, andyou need to pay attention to risk control.
3. Position management and mentality management
Whenever there is a big fluctuation in the crypto market, positionmanagement and mentality management are extremely important.
Many investors regard making money as the primary purpose of investment. Infact, this is not the case. Warren Buffett once shared his investmentphilosophy, which is to keep the principal. The same is true for investing inencrypted assets. When the market fluctuates greatly, our primary purpose is topreserve the principal. Then comes the profit. Every qualified investor needsto build a set of position management system of his own. No matter when youmust remember to strictly stop loss, many people know the method of compoundinterest and increase positions. This method is equivalent to abandoningposition management. To achieve an absolute and strict stop loss, the outcomeof abandoning it must be lost.
In addition, mentality management is a point that many investors oftenoverlook. Some investors who are familiar with the K-line analyze trends ortechnical aspects. It is very likely that one or two mistakes in judgment willcause great frustration and self-doubt, and even affect the investment andfinancial management for a long time in the future. After all, people are notgods and cannot make every judgment accurate. If investors can properly managetheir mentality, even if they make a few misjudgments, they can quickly cleanup their mood and get back on their feet. Mentality management can makeinvestors more confident in trading.
Good mentality management such as thinking about risks, accepting risks,resisting FOMO emotions, eliminating illusions, managing profit expectations,etc. The ancients said, "Because the generals don't think about victorybefore they think about defeat, they can fight a hundred battles withoutdanger." On the contrary, if you don't accept risks, you avoid them, andthe consequences may be catastrophic. For example, investors who like to avoidrisks are often prone to FOMO when the market is in good condition, that is,seeing a certain encrypted asset rising one after another and have a chasingpsychology, this kind of blind buying behavior without analyzing the market. Itis likely that investors will feel remorse when the crypto asset falls.
Conclusion: As a novice user who is about to enter the market or has enteredthe market, not only must comprehensively review mainstream coins like Bitcoin,but also have a deep understanding of the use and value of other blockchainprojects. When you recognize the area you are studying When it comes to the valueof blockchain projects, such as the popular DeFi, NFT, Polkadot and othersectors, then your investment confidence will be more abundant, and yourawareness of risks and the point of stop-loss and stop-loss will be clearer. Ofcourse, like investing in other varieties, crypto asset investment is not onlyprofitable, but also has risks. Therefore, investors should pay attention toposition management and mentality management, and control risks reasonably.