Last Updated on May 20, 2021 by MoneyVisual
Investing in cryptocurrencies can be tricky for an average business person. The cryptocurrency market is highly volatile and requires a definite financial plan or strategy. Investments tend to have better returns in comparison with other investment platforms such as stock exchange as a result of the decentralization of the cryptocurrency market.
The market is independent and has no specific rules governing it. Therefore, it is easy to lose your investment in a short period, but you can also make good returns at the same time. Here are some tips and tricks to ensure returns on your investment.
Lower Your Taxes to a Minimum
Cryptocurrency profits, airdrops, and other giveaways, staking coins, interest earned after lending currency, among others, is income. It means that you have to pay taxes for all your daily earnings. Selling cryptocurrencies also requires you to pay taxes.
To increase your returns, identify significant ways to reduce the amount of taxes you pay. You can hold onto your cryptocurrencies, ensure to file all your paperwork jointly especially if you have a spouse, and reduce your earnings or income by deferring income to a later date or month, making donations. Be sure to continuously review your income rates to ensure that you do not lose it all in taxes.
Buy and Sell Incrementally
Each investor wants an investment that is bringing in good returns and is long term. If aiming for the same with cryptocurrency investment, then you have to consider positioning yourself. You can do this using dollar-cost averaging or value averaging when purchasing crypto assets.
These tips aim at ensuring that you don’t lose all your investments as the crypto markets are quite volatile. For example, the demand for cryptocurrency in India continues to face very many regulation changes together with scams and other legal matters. These create instability, leading to significant losses.
Study the Cryptocurrency Cycles
Study the behavior of each coin while in its cycle, know when it dips or in a downward trend and when it peaks. If it dips, then buy and when it rises, then sell. Dipping means the price you incur will be low while it peaks, the price is also highest.
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It translates to higher returns if you sell when it is at its highest peak. However, you might consider making the sale as the coin starts to gain momentum as it can decline any minute.
Cut Out the Noise
Avoiding the fear of missing out (FOMO) and fear, uncertainty, and doubt (FUD) that makes you overreact and make immature decisions, is also critical as it limits emotional decisions and promotes logical planning and strategies. Ignore the sound and the hype that is online as it may cause a substantial loss.
We are not saying that you do not read or scheme through them, no, what we mean is that it is crucial to compare information gathered from different sources before making a decision, whether to buy, sell or remain to hold your current cryptocurrency rather than sell it. It also means that you have to safeguard your returns by making the right decision.
Secure the Value Charts
Bitcoin is the dominant currency that is in use in the cryptocurrency market. It primarily purchases all of the other crypto coins including altcoins. Knowing how to value the coins, you are buying means you increase your returns even with the smallest margin. The information allows you to react fast to changes in the cryptocurrency exchange market, which in turn earns you higher returns.
Understand the Crypto Markets
The crypto market is 24 hours, 7 Days a week activity requires constant monitoring. It enables one to keep up with the changing prices, buy and sell at the appropriate times. Investing in APIs will ensure that you enforce your strategy even when not around. It will gain you more returns for sales made at midnight while asleep rather than losing on the opportunity. It can be challenging to do this, and therefore, you might need an application to keep you informed of the changes in cryptocurrency markets.
Set Clear and Precise Investment Goals
Know whether you are going for long term or short term investment goals. Long term investments attract lower taxes such as investments whose returns come at the end of the year. It saves paying fees each month from profits made. Settling in the long term reduces that amount of taxes paid saving you on returns.
Set limits that define how much you invest and what is remaining. Do not spend everything all at once. Sometimes, there is a dip in the market you can make a purchase and sell doubling your investment returns. Besides, sometimes your investment can go down as well, which means you should always be ready for the worst in these markets.
Identify the Best Environment to Make Your Trade
Digital currency includes cryptocurrencies as they enable individuals to perform transactions and other exchanges while online. However, they are not legal in all countries around the world. Many states have no regulations governing the crypto market, making it easy for you to lose or gain money.
If aiming for significant returns on investments made, seek countries that have freer operations, i.e. no overreaching regulations, improve technological platforms and even advocates the use of cryptocurrency for trading purposes. With this, you have the assurance that you will receive returns from investment. In addition, focus on states that offer IRS tax relief on many expenditures/investments. This will reduce the tax to be paid while increasing returns.
Making good returns is dependent on how well you know your market and the variables that make it. Identifying possible opportunities and understanding the benefits, consequences of making such an investment and the potential returns it may bring in the long run is just but the tip of the iceberg.
One can also be a part of the 2021 IRS Fresh Start Program which would allow individuals and business owners to pay off their debts easily through the span of six years. With the above tips, you can make profits increase within the time the investment has been made.