The less-discussed aspects of crypto investing you need to know about 

In recent years, investing in cryptocurrencies, whether through direct purchase or alternative means, such as BTC futures and options or spot crypto exchange-traded funds (ETFs), has become a major financial trend. Lured in by the high return potential and the growing availability and accessibility of digital currencies, an increasing number of traders and investors have turned to this new asset class in search of diversification opportunities. 

These virtual coins and tokens are also free from the constraints of traditional assets since they’re not controlled by any financial or government entity. Therefore, they can provide enhanced privacy and anonymity whilst also ensuring inflation protection. 

The need to do a deeper dive into crypto 

The rising popularity of crypto investing also led to the emergence of all sorts of guides and educational resources on the topic, aiming to provide new entrants with the basic tools and know-how to navigate this space safely and efficiently. These sorts of initiatives are more than welcome, considering the novelty of digital currencies and the risks and challenges associated with them.

However, the majority of guides address more or less the same themes and topics. If you’ve read one, you feel like you’ve read them all. The conversation usually revolves around the technical structure of digital currencies, the different types of crypto, investment risks, common investment strategies, the factors influencing prices, spotting trends, regulations, metrics, analytics tools, and so on.    

Although this is valuable and necessary information, it leaves out many vital aspects that are less discussed despite their importance. So, let’s fill in the gaps with some key expert insights for a more comprehensive understanding of crypto investing.  

Investment risk is not exclusive to crypto 

The risks that come with investing in digital currencies have made the topic of so many debates, studies, posts, and discussions in the financial sphere that there’s hardly a soul out there who hasn’t heard about how hazardous crypto investments are. If you’d never invested in anything else but crypto, you’d almost believe that all other asset categories are safe havens, which couldn’t be any further from the truth. 

Indeed, digital coins are much more volatile than their conventional counterparts, owing to their newness, lack of regulatory clarity, and speculative nature. This makes them significantly more unpredictable and, therefore, riskier than other types of investment, which is something investors should be aware of so they can adopt the right strategies and stay safe.  

But now that everyone has gotten the memo that getting into crypto is a tricky business and could result in major losses even for the most cautious of investors, it’s time to put things into perspective and look at the risk profile of other assets as well. What many forget to mention when discussing crypto risks is that there’s no such thing as a risk-free investment. No matter what you decide to invest in, be it stocks, bonds, real estate, art, and so on, there’s always a chance you might lose your funds. 

Obviously, some assets are riskier than others, and cryptocurrencies score high in this respect. But this also makes them more likely to bring in considerable gains. So, this is neither new nor unusual for an industry that emerged less than two decades ago. 

Resisting FOMO is more difficult than expected 

FOMO, short for fear of missing out, is another widely vehiculated concept in the crypto sphere, so most traders and investors are well acquainted with it. In a crypto context, it basically refers to the feeling of anxiety and unease that investors get when they see other market participants making a profit or jumping on a certain trend, which leads them to believe they’re missing out on important opportunities to generate wealth. This could cause investors to go against their better judgment and make rash choices. As expected, basing trading decisions on emotions rather than rational thinking doesn’t usually end well, and if it does, it’s probably out of sheer luck. 

Experts warn that simply knowing about the FOMO phenomenon doesn’t make it any easier to deal with it. Relying on self-control and trusting one’s ability to maintain a rational stance doesn’t always work, as the pressure to act quickly and the information overload can be truly overwhelming, making one act impulsively. Therefore, it’s necessary for investors to learn and adopt strategies to keep emotions in check and ensure they don’t fall into the FOMO trap. This usually starts with an honest assessment of their risk tolerance, having a clear investment strategy, understanding volatility, and doing your own research (DYOR). 

Focusing on one crypto category is the better approach 

You’ve probably heard the adage don’t put all your eggs in one basket a million times before. While this is a good rule to live by when investing, you also need to adapt it to your specific situation. When it comes to crypto investments, diversification can be helpful as long as you don’t overdo it. The crypto space is as fascinating as it is diverse, comprising a wide variety of subsets such as decentralized finance (DeFi) products, non-fungible tokens (NFTs), or meme coins, each with their own complex rules and characteristics.  

Gaining a good understanding of how each of these categories function implies quite a steep learning curve, and if you’re not willing to put in the effort to educate yourself on these matters, it’s best not to get involved in all of them. 

Instead of trying to put your fingers in all pies and get tangled up in the technical intricacies – which could cause you to make costly mistakes – you might want to stick to the categories that interest you the most and align with your investment objectives. Once you’ve chosen your favorites, do a thorough research on them. This will put you in a much better position, allowing you to make informed decisions and reduce risks considerably, ultimately making you a more confident investor. 

The most important takeaway here is that the learning never stops when you invest in crypto. The industry continues to evolve and shift, so you need to keep up with all the relevant developments in this space, including those that might not get enough media attention, to increase your chances of success.