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5 steps to generate profits with investments in cryptocurrencies: VIDEO

Cryptocurrencies are not the future of investments, they are the present. But before entering, ask yourself the following questions.

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This article was translated from our Spanish edition. Opinions expressed by Entrepreneur contributors are their own.

Cryptocurrencies are not the future of investments, they are the present. Today there are establishments that accept this type of digital currency for the purchase of their products and there are a large number of people who are investing in them, generating very considerable profits.

But around them there are also a myriad of myths and ideas that generate rejection, and even fear, many people who refuse to use them as an investment method. In this sense, it is important to follow the following five steps so that your investment in cryptocurrencies is positive, generates the profits you are looking for and does not become a catastrophic loss of those savings that you want to convert into assets:

1. What are you investing for?

The first thing you should do, before putting money into an investment portfolio with cryptocurrencies, is to define the reason and the time in which you want that investment to work. Therefore, it is not the same to invest to buy a long-term house, than to do it because you want to have an extra income every certain time.

You should also know that each cryptocurrency has a different behavior and a very high volatility, which can play in your favor or against you. That is why you must also inform yourself about the movements of each one of them and be clear about which one adapts to the need that you previously established.

2. Investment or bet?

Doing an analysis of the market, the behavior of currencies and trends, derived from information provided by experts, will help you to ensure that your investment does not become a bet. As an investor, you should consider that the possibility of doing so without the necessary analysis and relevant knowledge of the market is nothing more than gambling, and that makes the possibility of losing everything overnight even more latent.

Also, a common mistake derived from not doing that analysis is to panic when cryptocurrencies have a sudden drop in value. Knowing in advance that this is possible and in fact very likely, will help you understand if it is a good time to withdraw, or continue with that investment waiting for the currency to recover, and even when that upward variation could arrive.

3. Bitcoin? Get to know the rest of the cryptocurrencies

Perhaps the most popular cryptocurrency is bitcoin. But beware, it does not suit everyone's investments and there are other options for you to get a significant return through digital currencies. Yes, Bitcoin is the most valuable because it is the most popular; but also, being the most transacted, it is the one with the most expensive commissions.

That is, what if instead of going directly to Bitcoin you investigate how Ethereum, Ripple or Dash is moving. In some of these options you can even find greater growth, despite the fact that the value of the currency is lower than that of Bitcoin, but that for the amounts you plan to allocate it is ideal and helps you obtain greater profits.

Another thing that you should investigate thoroughly when investing is in which portfolio or wallet you will decide to start with your investments. Especially aspects such as its withdrawal policies, transaction fees and percentages that you must pay every certain time.

Image: Executium via Unsplash

4. Invest without emotions

Any investment should be done without emotions. Before choosing one or the other cryptocurrency because one of your best friends made a significant profit or because you read on the internet that you can earn a lot of money, think about why that investment is convenient for you and be objective when setting your goals.

Be aware of the volatility that surrounds them. The time that an investment can take to generate profits, and even knowing that in the value of this type of currency there may be unforeseen events that generate exponential increases or losses at any time, is essential to avoid feeling disappointed in the event that such a situation occurs. Present.

5. Diversify

Just because you have invested in one cryptocurrency does not mean that you cannot invest in the rest. An important recommendation is to invest in more than one cryptocurrency so that, in case the volatility of any of them is very negative, you have more options with which you can obtain a greater profit.

In addition to the above, it is important to know at what point of its historical maximum is each of the cryptocurrencies. That is, some of them may be valued at a higher price than another, but far from its historical maximum, which means that it has undergone significant downward variations.

Investing in cryptocurrencies consists of informing yourself and being clear about the concepts and the environment that surrounds them. Studying, analyzing and preparing before allocating an amount of money is essential to prevent the investment from becoming simply a bet in which you do not know what is going to happen. On the contrary, you must invest with a purpose and knowing that nothing is written in the digital currency market.