At the height of the cryptocurrency craze, two software engineers decided to make a joke currency named Dogecoin. The name alludes to a popular meme featuring a Shiba Inu surrounded by words, presumably its thoughts, in Comic Sans font. But, what began as a simple parody of cryptocurrency soon turned into one due to popular demand.

After remaining dormant for eight years, this strange cryptocurrency has come back in the heat of the Gamestop stock tussle. Trading for Dogecoin shot up by 1,421% at the start of February, while its value increased by 56%.

Reddit users mostly fueled the trading spike, infuriated at the practice of short-selling Gamestop’s declining stock for a profit.

4 Tips for Getting Started with Cryptocurrency Market

Regardless, the cryptocurrency market today is devilishly huge.

As of this writing, there are around 6,700 cryptocurrencies in public trading, with their collective value pegged at almost USD$900 billion. The most valuable, Bitcoin, accounts for 63% of the collective value at USD$563.8 billion. Ethereum, Tether, Polkadot, and XRP complete the top five.

Entering this market will welcome you with a steep curve. Bitcoin expert Mark Kramer writes that the failure rate can reach up to 59%, based on an analysis of 902 cryptocurrencies formed in 2017.

There’s also the fact that the failure rate for startups—cryptocurrencies included—is around 90% in the first few years.

Still, if you’re undeterred by these facts and want to push through, tread lightly and keep these few pointers in mind:

1. Account For Uncertainties

Remember Dogecoin from earlier? Before Gamestop, it was practically dead as a cryptocurrency. After reaching its peak in February 2014, it slowly declined in value (although its Bitcoin price had increased slightly).

The cryptocurrency market moves faster and more erratically than most industries. It doesn’t give investors time to forecast its movements and value; they’re just figuring things out as they proceed.

Accounting for such trends won’t be easy, but there are trading services, like VirgoCX, you can use to be better prepared.

2. Don’t Be Motivated By Money

Contrary to popular belief, startup entrepreneurs don’t start a business with profit in mind. A 2020 survey of 605 small business owners found that only 8% said profit was their primary motivation.

Most respondents said their reason was to be their own boss or create something new. It’s crucial to remember this when entering a market where anything goes.

Cryptocurrencies are full of hits and misses. Every investment people make is like playing a round of Russian roulette; one day bullish about the move, only to be disappointed the next after a series of crashes.

If your startup manages to make it big in the first several months, then congratulations. Still, don’t be blinded by what the industry calls FOMO or ‘fear of missing out.’

3. Diversify Your Investments

The idiom that reminds you to ‘not put all your eggs in one basket’ rings painfully true here. Never fully invest in the cryptocurrency market, let alone enter it, without contingency plans.

Cryptocurrencies saw widespread use in the wake of the 2008 financial crisis as a means for people to have more control over their money.

It’s a decentralized currency, meaning no central authority is overseeing it. And, without this authority to set the minimum valuation, any major dump into a cryptocurrency’s system will hurt investors.

Even as your cryptocurrency grows strong, it doesn’t hurt to invest in lesser-risk markets and with the tried-and-true physical currency.

Having a backup investment somewhere else can help recoup any losses and allow you to try again.

4. Keep It Simple

As mentioned earlier, cryptocurrency comes with a steep curve. One reason for its high failure rate is that cryptocurrencies try to enact high-risk strategies with low returns.

As a startup, it pays to take baby steps into the market with simple strategies.

One example is portfolio rebalancing, which reallocates your stakes to multiple cryptocurrencies. If one cryptocurrency increases in value, rebalancing redistributes that increase among the others.

The portfolio will gain in value even if the cryptocurrency reverts to its value before the gain. The rebalancing process usually happens every 24 hours or if it reaches a specified limit.

Conclusion

Even at its most basic, cryptocurrency is complicated. No matter how much you read up on guides and strategies, any up-and-coming cryptocurrency risks an early death if you don’t understand how the market works.

It will be difficult, but not impossible as long as you’re aware of your limitations and not get swept up by simple highs and lows.

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