Want to Invest Safely in Crypto?
Easy crypto hacks to help you grow your wealth!
With over 50% of the world’s population now owning or transacting in cryptocurrency, it has without doubt become part of the mainstream – the US alone has over 73 million people owning it, which is phenomenal. Even for those who do not directly own it, they perhaps unknowingly have it in their investment funds, retirement savings and via playing online video games.
Though still developing in application, cryptocurrency is a legitimate way of growing wealth. Globally, lawmakers are implementing stronger governance to ensure a transparent and fair cryptocurrency market – much like investing in the stock or property markets. In some countries, such as El Salvador, cryptocurrenices have even become legal tender.
During the nascent days of cryptocurrencies, opportunities were plentiful for “get rich quick” strategies. Bitcoin was sky rocketing, and early adopters were seeing returns of over 100% in months! These opportunities are now far and few between.
But that doesn’t mean that cryptocurrencies cannot still provide a good return. In fact, if invested wisely, the returns of crypto can easily beat that of a bank, yet maintain a similar risk profile. So why keep your money in a bank, when you can get better returns in crypto. It’s a no brainer to convert your cash to crypto via an exchange and earn a better return.
But how can I reduce the risk? Well there are some simple crypto hacks that you can easily implement to optimize your returns and grow wealth safely.
If investing in crypto safely with optimal returns is important to you, then please read on.
Table of Contents
Hack 1. Be a HODLer
Hold on to your crypto, instead of buying and selling frequently. Timing the market is impossible, and trading often will burn your profits through trading fees.
Yes, it’s undeniable that the cryptocurrency market fluctuates more than other investment markets and there are many “day” traders that attempt to profit with the daily movements. This is NOT easy.
- can dedicate your entire time to analyzing the market,
- have all the tools and resources at your finger tips,
- have the smarts to interpret data quickly, plus,
- have the capital to hold steady in a downturn,
being a day trader will end in losses.
It is far easier and safer to be a HODLer – which means someone who “Holds” crypto for the long term. When buying and holding for the long term there are several benefits.
First, is that you don’t burn through your profits with trading fees. Every time you buy and sell crypto, you will be hit with a transaction fee by the exchange. These fees appear to be small – ranging between 0.5% to 3%. But these fees accumulate and will become significant if you are trading often. For example, if you trade every day for the year, your fees will amount to 150% p.a of a base transaction at best!
Second, for some tax jurisdictions there are benefits to holding crypto for more than one year. We discuss further the advantages of knowing tax rules, in a following crypto hack. However, there are NO tax jurisdictions which provide tax concessions for short term investing.
Lastly, timing the market is near impossible. Unless you can find a clear arbitrage, it is difficult to have certainty of price movements. Crypto prices movements can be attributed to many factors such as celebrity Tweets (e.g. Elon Musk), geopolitical friction, government policy and economic macro and micro management.
Therefore, invest in crypto for the long term. Don’t buy in and out frequently, because it only makes it harder for you to turn a profit.
Hack 2. Don’t use Charting
Charting is often used to time the market. Don’t buy into the myth of charting to predict the future.
Many investment products will come with a disclaimer “Past performance is not indicative of future performance”. These disclaimers are often a requirement by law to ensure that investors are aware of the risks of trading in the stock market. Similarly, trading in cryptocurrency is exactly the same.
Charting is a form of analysis that looks back at the past. It captures price movements into data sets which can be visually seen in a graph or chart and is touted to enable a prediction of price movements.
Simply put, charting is using past performance as an indicator of the future. Which ironically goes against the premise of the disclaimer.
Charting analysts are great with looking at the past and correlating causes to price movement. It’s always easy in hindsight to draw conclusions. Far more difficult (if not impossible) to project to the future.
If you do attempt to use charting, you will be bombarded with jargon such as “support levels”, “ceilings”, “candlestick” and other numerous words which are meant to represent patterns on a chart. At the end of the day, interpreting “art” is just as effective, i.e. a waste of time.
Charting is NOT a crystal ball into the future. But, what we do know, is that overtime, cryptocurrencies that are useful, purposeful and widely used will generally go up. Buy and hold and let cryptocurrencies grow in wealth for you.
Hack 3. Use DeFi Lending Platforms
Don’t let all your crypto sit idle on a wallet. Earn a return, just like putting your cash in a term deposit.
When people hold excess cash, they can put their cash in a savings account or term deposit to earn interest. It doesn’t need be at a bank, could be at any financial institution that will take the deposit and then lend it out to borrowers. In return for accepting your deposit, the financial institutioni will pay you interest.
Similarly, with cryptocurrencies, you can also deposit with financial institutions that borrow and lend. These institutions are often referred utilize DeFi Lending Platforms – Decentralized Finance. A DeFi Lending Platform means that lending and borrowing can be conducted without going through a third party. Though this sounds great, going through a financial institution that can aggregate deposits and lend has safety in scability and scope. A decent return on deposit can be obtained, but be aware that some institutions are riskier than others. Their risk is correlated to who they lend cryptocurrency to. The more secure the ability of the borrower to pay back the cryptocurrency, the safer the return on your deposit.
Keep to the reputable and well known lending platforms such as Celsius.Network. There are a few others that are also good, but do your research carefully.
Make your crypto work for you, and earn interest like you would with cash.
Hack 4. Tax Rules
Each country has its own tax rules. Know that rules as these will dictate how to grow crypto wealth.
There are only two certainties in our lives – death and taxes. Inevitably the success of cryptocurrencies and the wealth that it brings has invoked the application of taxes. It’s amazing how quickly tax rules can come into existence, while policies regarding application can take several years to formulate.
Pushing this observation aside, unfortunately tax rules and tax implications must be considered when investing in crypto. By and large, the majority of jurisdictions have considered cryptocurrencies as an asset that is similar to shares in the stock market. As a result, there can be tax concessions that apply once cryptocurrencies are held beyond one year.
This is particularly evident in countries such as the US and Australia whereby the capital gains is taxed at a lower rate. Other countries may not have a short term vs long term tax rule, but still will have a length of term to define investing in cryptocurrency.
For day traders and businesses that use cryptocurrency as a form of earnings, income tax rules will apply. Income tax rules are generally less attractive than investment capital gains and losses taxes.
Remember, that each country is different with tax rules, hence it is important to gain a basic understanding. But in general, tax rules will support the strategy of being a HODLer.
There are tax advantages in your jurisdiction – know and understand them.
Hack 5. Diversify
Spreading investments to several cryptocurrencies will reduce volatility
Often it is easy to think that one particular cryptocurrency is going to be a winner, but that is not always the case. No matter how much research you perform, there is no guarantee that the value of any cryptocurrency will go up. This is the same for any asset. Though many critics will highlight that a cryptocurrency could eventually become worthless, so too can shares in a company.
It is therefore wise to spread investments across several cryptos. It doesn’t have to be in the tens, can be just two or three, which is sufficient to reduce risk signficantly to bring it to an acceptable level.
Spreading risk via several cryptocurrencies is a form of diversification. Diversification is used in many investment products such as ETFs (Exchange Traded Funds), Managed Funds, Retirement Savings, Pension Funds and many other investment vehicles.
Diversify your cryptocurrency investments to reduce your risk.
Hack 6. Invest within your means
Investing in crypto is the same as investing in any financial asset. Don’t go ALL in.
Financial advisors will often suggest only investing with money that you can afford to lose. This philosophy applies not only to the stock and property market, but also to cryptocurrencies. Cryptocurrencies are volatile and can fluctuate. It is also unknown, when you will encounter financial stress and may need to liquidate your cryptocurrency assets. As a result, it is prudent to not invest all your excess savings into cryptocurrency. Use some of it, not all of it. These will allow you to sleep each night and not stress about the daily movements of crypto.
Only invest with capital that you can afford to hold on the side in crypto.
Hack 7. Wallet selection
Store your crypto on a good cold wallet. Not on an exchange.
If you use the crypto hack of being a HODLer instead of a trader, then you will need to use a good cold wallet to keep your cryptocurrencies safe. Cold wallets that use external hardware to store crypto keys are far more effective than keeping them on an exchange. This is because you have total control of the keys and it isn’t as burdensome for you as a day trader.
A day trader on the other hand will need to pass their key regularly with an exchange to continuously buy and sell. A day trader, will therefore find it easier to store their crypto with an online wallet with an exchange. It is far more efficient and may even save with transaction fees.
A HODLer, on the other hand does not need to transact often and can therefore lean towards safety with storage first without the need to consider efficiency of transacting.
An excellent cold storage hardware wallet can be easily purchased online. Many will have various security features which will help you keep your crypto safe.
Choose to store crypto on your own cold hardware wallet. It is the safest method for a HODLer.
Investing in cryptocurrencies is not hard, but money can be lost quickly and easily without heeding some simple crypto hacks.
Avoid day trading and looking for that quick buck. Though it may appear to be exciting as a day trader, it is a lot of hard work and needs full time commitment. In addition tax rules usually favor the investor and not the day trader. Research further to your juridictions tax rules to ensure you have the right cryptocurrency investment strategy. Utilize the benefits of depositing your crypto as a borrowing and lending crypto institution, this will make your investment work for you and not sit idle on a wallet. Finally, when choosing a wallet, use a cold hardware storage that will keep your keys in your control.
These crypto hacks are easy to implement for any investor. Use them to grow your crypto wealth!