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There is no denying that some cryptocurrency traders have become millionaires thanks to their successful investments. What is not discussed so often is the sheer number of people who have lost significant amounts of money trying to get rich by investing in crypto.
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Unless you have a huge tolerance for risk, investing in cryptocurrency may not be a good choice for you. However, if you are the type of investor who is willing to take huge risks in the hope of getting rich, you should at least consider using some strategies to minimize the risk while still providing a significant benefit. Here are a few ways to achieve that.
Buy the sale
If you believe in the long-term viability of cryptocurrency, you should treat your portfolio like a stock portfolio. In other words, when there’s a significant dip in the crypto market – which happens quite regularly – that’s your chance to scoop up extra coins or tokens. If you select cryptos that prove to be winners in the long run, adding your investment when prices are low can be a great way to build wealth.
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Stick to cryptos that serve a purpose
There are literally thousands of cryptocurrencies you can trade, but many, if not most, will never pay off. While you may be lucky and make money trading cryptos, if you want to build wealth in the long run, you need to invest in cryptos that have staying power.
Read the whitepapers about cryptos you want to invest in to see how they are linked to the blockchain, what their usefulness is and how they are better/cheaper/faster than any of their competitors. This is the best way to filter the winners from the losers in the long run.
Diversify your assets
By their very nature, cryptocurrencies are speculative investments. If you risk your entire portfolio on a single cryptocurrency, your risk increases exponentially.
Just as you should with a stock portfolio, diversify your crypto holdings among the handful you’ve researched that are viable in the long run. This should increase your chances of finding winners in the long run and minimize your risk of blowing your entire portfolio.
If you are looking for the highest risk/reward option when trying to get rich through cryptocurrency, consider day trading. Cryptocurrency is so volatile that you can often earn significant sums of money over the course of even a single day. Keep in mind that it is also very likely that you will lose a significant portion of your investment.
Stocks are significantly less volatile than cryptocurrency, but most amateur day traders end up losing money. Since crypto is even more unpredictable, the same fate awaits most crypto day traders. But if you understand the trading patterns of a particular cryptocurrency, you may be able to have enough head start to make a profit.
Become a miner
If you want to “earn” your way to riches in the crypto space, instead of speculating directly in the market, one option is to become a miner. Crypto miners are rewarded with coins by validating transactions on the blockchain. To do this, they have to solve extremely complicated mathematical equations, which require a lot of computing power.
Today, most mining is done by companies with huge server farms that handle comparisons 24/7, making it difficult for an individual miner to compete. But one way to participate is by investing in a mining pool, in which a large group of investors pour their money into a massive mining operation that has a higher chance of success. Remember that there are no guarantees in the mining space either.
Take advantage of forks and Airdrops
Forks and airdrops may not make you rich overnight, but they are a great way to accumulate excess cryptocurrency, which can help you build wealth in the long run. Airdrops are essentially promotions of new cryptocurrencies that developers release to spread awareness and recognition. Forks occur when an existing cryptocurrency changes or upgrades its protocol, typically giving existing holders free coins on the new or updated network.
If you can participate in one of these handouts, it is a great way to get free cryptocurrency.
Make sure you understand the risks
Regardless of the steps you take to minimize your risk, investing in cryptocurrency is an inherently speculative business. Some well-known investors, including billionaire Warren Buffett, see no point at all in cryptocurrency, while others believe the entire asset class will eventually crash to a valuation of zero.
While all of these strategies can help reduce your risk, only invest money in cryptocurrency that you are willing to lose. Hopefully, thorough research and a methodical investment strategy will help you get rich investing in crypto, but make sure you fully understand the risks before you start.
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About the author
After earning a BA in English with a specialization in Business Administration from UCLA, John Csiszar spent 18 years in the financial services industry as a Registered Sales Representative. Meanwhile, Csiszar earned both Certified Financial Planner and Registered Investment Adviser titles, in addition to a life agent license, while working for both a major Wall Street wirehouse and his own investment advisory firm. During his time as a consultant, Csiszar managed more than $100 million in client assets and provided individualized investment plans for hundreds of clients.