January 04, 2021

Investor's Guide: How to Invest in Cryptocurrency and Minimize Risks. Part 2

We continue to talk about the key rules for investing in cryptocurrency. In the first part, we gave a lesson in what not to do: a situation that will lead you to a loss of 30—100% of the investment. Now is the time to show how to act for a positive result. Today we tell you what methods of asset management exist and how to minimize the risks for each one.

Four ways of trust management

There are different ways of trust management In cryptocurrency, just like in traditional finance. The main ones:

  • The direct transfer of funds to a trader. This method is the riskiest: most traders are anonymous persons and they can disappear with investor’s money. When working with a private manager, be sure that you control the funds.
  • Transferring keys to a trader or service. The minus is a large amount of entry (from $ 10,000). Also, the trader still has opportunities for appropriating money: there are schemes for it. We will analyze them in a separate article of the guide.
  • Copy trading: copying the actions of successful traders. There are copytrading applications, and you just need to download and install one. Trade will be carried out automatically. There is a low cost of entry, from $ 100. But the algorithm is obviously less profitable than that of the “original” trader. The trader could even have profit, and the one who follows - loss.
  • PAMM account. Investor funds are collected on a special account; the trader receives trading keys. He cannot withdraw money but only allowed to trade. The plus is that there is a low entry threshold; the trader does not control the withdrawal of funds; the investor's profit is equal to the trader's profit, minus the commission. Also, in the case of PAMM, a trader risks his own money too: they are also in the fund. Therefore, he is more charged with the result.

We do not recommend the first method because of the high risks. The third method is the least profitable. In methods 2 and 4, the optimal ratio of profit and safety, but you should choose a trader very carefully.

Where to find a responsible trader

To work successfully, a trader needs to create a personal brand. Therefore, many of those who trade cryptocurrency and are looking for investors maintain channels on Telegram and on Youtube. Look for trader channels like Ed Khan Crypto Gallery and connect with their owners. If such online media has regular posts, long lifetime, and a lot of followers, It speaks well for the trader. But remember that channels are often used for scums.

If you have friends who gave money for asset management and got a good result, ask for their advice. But only if they received the agreed profit and the funds were returned to them in full.

If you want to save time looking for a specialist and choose the best option based on objective criteria, check out the traders' portfolio on Equite.io. On the main page of our service, a rating of experts in cryptocurrency trading is displayed, and you can contact most of them.

As for the choice of a PAMM account, it is important to pay attention to the company's reputation and legitimacy: carefully read the constituent documents, the management agreement and, if possible, consult with a lawyer.

Read in the next article of the Guide: How to check the competence of a trader. Where to watch his trading results and what values ​​are good.