Investing in the crypto market is a challenge, to say the least. It seems to defy any rules that apply to other markets, and investors can simply be overwhelmed by the volatility and the technical nature of the market.

That said, it’s not without reason that many popular investors and companies are beginning to apportion a greater part of their portfolio to cryptocurrencies. The crypto market may be an unpredictable one, but in the long run, it has proven to be attractive to many individuals.

So, how does one invest in crypto and ensure that they are not left burning? The volatility may be off-putting, but there are some basic rules that you can apply to ensure that you get the most out of your capital. This is what we endeavor to explain here. But do keep in mind, that nothing is guaranteed, so the age-old principle of investing as much as you can afford to lose remains the top rule.

1. Never Invest More Than You Can Afford To Lose

Any successful and reasonable investor will tell you to only invest in as much as you can afford to lose. This applies to all markets, and even more so to crypto, which can see double-digit drops in hours. The current investing world has its fair share of reckless investors, who throw away life savings on a handful of stocks, but that is a surefire path to doom.

The crypto market has seen unprecedented growth in value and just as large drops in value. It’s still a nascent market, without regulatory checks and early-stage technical barriers. This can lead to some unfortunate situations, such as hacks, fraud, and a flurry of sell orders that might appear to happen on a whim.

As such, investors should take a small portion of their capital — to reiterate, only as much as they can afford to lose — and budget it towards a select few cryptocurrencies.

2. Dollar-Cost Averaging (DCA)

The principle of dollar-cost averaging very much applies to the crypto market. DCA is used to beat volatility, and the latter is a major characteristic of the market. By investing small amounts over time, you can stem any losses and make more efficient use of your capital.

It is worth noting that, by using this method, you will be paying a little more in network fees, but any gains you make should render this negligible. You could do this on a weekly or monthly basis — the details are left up to you. If you’re feeling particularly positive about where the market is going, then you can set aside some extra capital for when the market seems to be at a low.

3. Detailed Research, Stick to the Fundamentals

Research still matters in the crypto market. While it’s not as clear-cut and direct as investing in a publicly traded company, it still plays an important part in the investment process. The process of researching cryptocurrencies for investment could be an entire topic on its own, but here it is out of the scope of the discussion.

Some of the principles with which you will be guiding your research are whether the project and crypto in question have a valuable and unique use case, the technical elements of the project, the management team, and the potential to disrupt the particular industry or space it is working in.

However, in all cases, you should always focus on the fundamentals. Does the project have a transparent and honest team? Do the financials, in terms of expenditure and allocation towards investors, add up? Does the technology seem like something that has genuine potential?

4. Stick to the Major Assets

Of course, for many, the comparatively complicated and novel way of researching cryptocurrencies may be intimidating. For these individuals, it may just be better to stick to the major assets that have survived the test of time. Bitcoin and Ethereum are the best examples of these assets and have endured many rough bear markets.

There are several others as well, though it becomes much harder to say whether those other major assets with large market caps have the potential to survive in the future. This applies to Bitcoin and Ethereum as well, though the consensus is that these two have already proven themselves worth considering.

5. Safe Storage

Outside of investing itself, one major requirement when dabbling in the crypto market is the act of storage. It’s not uncommon to hear investors losing access to their exchange accounts or, in the worst case, losing their funds altogether because of a hack or security incident. Storing your crypto holdings securely is of paramount importance, and the onus is on you.

As such, serious investors should consider what is called a hardware wallet. These are wallets that have additional security features to ensure that your funds cannot be stolen. Investors should not hold their cryptocurrencies on exchanges or software wallets, at least for any appreciable amount of crypto.

6. Employ Common Sense

Above all, investing in the crypto market requires common sense. It is easy to get swept up in the hype and commotion surrounding a spanking new project, but more often than not, this leads to heavy losses. It is even easier to get involved in a meme token that rises considerably purely from a rallying of individuals online — like Dogecoin — but this is a double-edged sword, with one side much sharper than the other.

Like with the stock market, you want to diversify. There are several projects working on some key problems and use cases, and these have the potential to cause some major disruption. It is not guaranteed, but like with the various sectors in the stock market, you can apportion your capital across these projects.

The Bottom Line

Investing in the crypto market can seem daunting. It is a novel space that does not seem to follow many rules. However, there are some fundamental approaches you can take to ensure that you make good use of your capital.

There is no need to be gung-ho about investing, as many enthusiasts would have you be. Apply the basic tenets of investing and use common sense, and you may find that the crypto market is not as overwhelming as you once thought it.