How do novices configure encrypted assets?

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Understanding and Selection of Encrypted Assets

After more than ten years of development, Bitcoin has been gradually accepted and recognized by investors. More and more users outside the circle have begun to understand Bitcoin and choose to enter the encrypted world. After entering this world, we found that there are not only Bitcoin as an investment target, but also hundreds of asset allocation options for investors.

1. Mainstream currency

Encrypted assets in the top ranking of encrypted market value are usually called mainstream coins, which are characterized by large user base, good transaction depth and high market activity, and most of them have experienced the test of history and have strong ability to resist risks. Mainstream currency generally has a strong consensus in the encryption market, with great practical value and better liquidity than ordinary encrypted assets, and is generally recognized by investors as the investment target.

Image source: Ouyi official website

Therefore, for novice users who have just entered the market, it is relatively more appropriate to configure mainstream assets, such as Bitcoin, Ethereum, Litecoin, Ripple Coin and so on. As the first encrypted asset, Bitcoin accounts for half of the market value of the entire encrypted asset. Many old users will take its trend as the main reference for configuring other assets. For the introduction of Bitcoin and its investment value, please refer to What is Bitcoin and Why Bitcoin is Worth Investing. For the introduction of other mainstream coins, please refer to What is a mainstream currency? What is a stable currency? What is a knockoff coin?

These mainstream coins have high market familiarity, strong liquidity and relatively low investment risk, which can be said to be a wise choice for new users to invest in encrypted assets.

2. shanzhai coins

Counterfeit coins are compared with mainstream coins. The word "shanzhai" of shanzhai coins is not a derogatory term. It is also an encrypted asset generated by using blockchain technology, but its market familiarity, consensus and liquidity are not as high as those of mainstream coins. However, if there is an outbreak of heat, it will also show good performance, such as hot-fried Meme coins, public chain tokens, and GameFi, Layer 2, DeFi and NFF.

So, is there any investment value in shanzhai coins? There are different opinions on this issue. Judging from the historical price trend of shanzhai coins, their ups and downs fluctuate greatly, so it needs to be tested by time and market.

For new users, before investing in a fake currency, what is its essence? Is there an application scenario? What is the purpose of your own investment in counterfeit coins? Invest cautiously within the scope of confirming your own ability and risk tolerance.

3. Stable currency and platform currency

There are also concepts such as stable currency and platform currency in encrypted assets.

Stable currency, as its name implies, is a digital asset that is not affected by price fluctuations. Its greatest feature is that its price is stable, and it will not skyrocket and plummet like Bitcoin. In order to keep the price of "stable currency" stable, it needs the support of stable currency with some alternative value, such as US dollar, gold or other legal tender packages, so there are many US dollar stable currencies (such as USDT, GUSD, etc.) and Facebook's Diem(Libra) stable currency project.

The emergence of stable dollar currency is mainly to solve two problems: 1) the problem of excessive price fluctuation in digital currency. 2) Act as the medium of exchange between legal tender and cryptocurrency. At present, the oldest stable currency is USDT, which is issued by Tether (TEDA) established by Bitfinex, the world's largest digital currency trading platform. It is anchored in US dollars, and the price of 1USDT is about 1 US dollar. Users deposit US dollars in Tether company's bank account, and Tether company issues US dollar vouchers with a price equal to one dollar. Simply put, how many USDT are issued means how many dollars Tether has in reserve. In addition to USDT, there are stable coins such as USDC, TUSD, GUSD, DAI and PAX.

The platform currency refers to the tokens/general points of the digital asset trading platform. Because most of its application scenarios are in the platform, it is also called the platform currency by investors. But it is precisely because it relies on the trading platform that it has its own trading value and circulation value. For example, OKB of Ouyi.

Configure different encrypted assets in different warehouses

For novice users who are new to the currency circle, it is recommended to invest some idle funds. New users should try not to put eggs in one basket when allocating assets, and learn to allocate different encrypted assets in different positions to reduce investment risks. If you have 1000 pieces of idle funds, you can invest most of them in mainstream currencies, such as Bitcoin and Ethereum. If you recognize the value of mainstream currency, you can consider extending the investment cycle. The remaining small amount of funds can be used to allocate fake coins. However, because the fluctuation of fake coins is usually large, it is necessary to pay attention to risk control. When you don't have full grasp and experience, it is not recommended to last long. After all, the high risks it contains are not acceptable to all investors.

"Don't put eggs in one basket" actually has the second half sentence, that is, "but don't put them in too many baskets". Asset allocation is actually to use the risk differences between different assets to reduce the overall risk and reduce the volatility of the portfolio. The real diversification focuses on the differentiation of investment platform and wealth management products, and diversifies investment from platform type, product type, investment period, expected income and other aspects.

After understanding the configuration of encrypted assets, new users need to pay attention to the admission time, and choosing a better admission time can often get more benefits. If you are a new user who has done enough homework and is ready to enter the market after understanding and recognizing the concept and value of encrypted assets, then in fact, every market crash is a good time to enter the market, appropriately extend the investment cycle, and don't care about short-term fluctuations in exchange for greater benefits; If you are a novice user who has only heard of popular coins such as Bitcoin and dogecoin, you need to know the whole market trend and the historical price trend of the encrypted assets you want to invest in, and get the latest news in time to help you judge, buy low and sell high, and earn income according to market fluctuations. Of course, the market of encrypted assets fluctuates greatly, so we need to pay attention to risk control.

Position management and mentality management

Whenever there is a big market fluctuation in the encryption market, position management and mentality management are extremely important.

Many investors regard making money as the primary purpose of investment. In fact, it is not. Warren Buffett once shared his investment philosophy, that is, to preserve the principal, and the same is true for investing in encrypted assets. When the market fluctuates greatly, our primary purpose is to preserve the capital, and then to make a profit. Every qualified investor needs to set up his own position management system. No matter when it is necessary to remember strict stop loss, many people know the method of compound interest and jiacang, which is equivalent to abandoning position management. Then at this time, it must be absolutely strict stop loss, and the result of abandoning it will inevitably be nothing.

In addition, mentality management is a point that many investors often ignore. Some investors who know something about the K-line analyze the trends or technical aspects, which can be described as well-organized, such as left-hand trading, right-hand trading, Fibonacci retracement, etc. However, if they can't manage their mentality well, then investors are likely to have great frustration and self-doubt because of one or two misjudgments, and even affect their investment and financial management for a long time to come. After all, people are not gods and cannot make every judgment accurate. If investors can properly manage their mentality, even if there are several misjudgments, they can quickly clean up their mood and re-assemble. Psychological management can make investors more confident in trading.

Good mentality management, such as thinking about risks, accepting risks, resisting FOMO emotions, eliminating illusions and managing income expectations, etc. The ancients said, "If you don't worry about winning, you will worry about losing, so you can fight a hundred battles." On the contrary, not accepting risks is avoiding risks, and the consequences may be disastrous. For example, investors who like to avoid risks are often prone to FOMO emotions when the market is improving, that is, seeing a certain encrypted asset rise one after another and generating chasing psychology. This behavior of blindly buying and not analyzing the market is likely to make investors feel regret when the encrypted asset falls.

Conclusion: As a novice user who is about to enter the market or has already entered the market, you should not only comprehensively examine the mainstream coins like Bitcoin, but also deeply understand the uses and values of other blockchain projects. When you recognize the value of the blockchain projects you have studied, such as the popular DeFi, NFT, Boca and other sectors, your investment confidence will be more sufficient, and your knowledge of risks and the position of take profit and stop loss will be clearer. Of course, just like investing in other varieties, investment in encrypted assets is not only profitable but also risky, so investors need to pay attention to position management and mentality management to control risks reasonably.