Bitcoin, Ethereum… How else to invest in crypto without risking losing everything

Almost every third young person has already bought cryptocurrency. While the recent price slump has dampened the enthusiasm of some traders, others still view cryptocurrencies as a quick and easy way to get rich. Right or wrong?

Cryptocurrency is scary. Cryptocurrency is fascinating. Especially among young people. According to research (1) by the Paris agency Heaven, 32% of 18-25 year olds have already invested in these digital currencies.

However, the life of cryptocurrencies is not a long calm river. The most famous of these, bitcoin, is currently trading at around $21,000, a far cry from the all-time high of $69,044 hit on November 10, 2021. .

But nothing helps. Despite the drop in prices, every day more new traders start trading. When they start out, newbies think they will get rich quick. Then reality catches up with them. Because very often the dream of a 1000% profit turns into a disappointment, notes YouTuber Owen Simonin, who gave an interview at the end of August on the Surfin Bitcoin Biarritz show.

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7800% increase in three days

And in vain! The cryptocurrency market is still young and is characterized by high volatility. The swings up and down can be astronomical, in part because the capitalization of these assets is still relatively low, explains Nicolas Hron, Zone Bourse strategist.

For example, Squid Game, a cryptocurrency launched after the success of the South Korean Netflix series of the same name, saw its price rise from $0.20 to $15.95, up 7,800% in three days. Investing in such projects is like playing in a casino. The potential income is huge. But risks are just as important, warns Emilien Dutan, a professional trader.

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it’s like a game

A lesson that new investors often learn the hard way. People know that classic trading is a complex topic. But many see cryptocurrency as a game, deciphers Nicolas Hron. They are looking for quick wins and thrills, but they are not always aware of the risks.

And it’s not a danger. No-brokers apps, these new breed of brokers, give pride of place to user experience and are often inspired by video game industry codes to make trading more fun. Maybe too much? Because for some, trading can become a real addiction, says Owen Simonin.

Either way, the recipe works. According to a report by Autorit des Marchés Financiers (2), the number of active clients per quarter without brokers has increased 12 times since the third quarter of 2018. And some exchanges, these platforms for buying and selling cryptocurrencies, today claim several million users, such as Binance, Bitpanda or Coinbase.

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20,000 euro fine

To make matters worse, we hear a lot about winners, but not about losers. The former proudly report their earnings on social networks. The latter are restrained, they do not talk about their losses. This helps reinforce the idea that it’s easy to make money with crypto, notes Owen Simonin.

Not to mention that some unscrupulous influencers use their notoriety to encourage young people to invest in crypto projects… Not necessarily specifying that they are being paid to promote them. In 2021, Nabilla, for example, was fined €20,000 after she was detained for fraudulent commercial practices on Snapchat.

The truth is that it is much easier to lose money in trading than to make money. According to the AMF, nearly 89% of people end up making losses trading the stock markets. And the same goes for cryptocurrencies. Anyone can make money during a bull run, i.e. bullish period. But only a handful of traders manage to win the hard way, says Emilien Dutan.

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successful traders

So how do you put the odds in your favor? A series of studies conducted on tens of thousands of FXCM broker accounts revealed the characteristics of successful traders. Conclusion: the more a trader places a large number of orders per month and the more he uses the leverage effect, the more he risks losing.

Added to this are a few golden rules. Cryptocurrencies are a risky investment, you can allocate, for example, from 5 to 10% of your capital to them. But be sure to diversify your investments and invest only the money that you are ready to lose, recommends Emilien Dutan.

Also, avoid trading 1000 different cryptocurrencies. It is best to focus on a few promising projects and analyze them in detail in order to refine your strategy, continues Emilien Dutan. Before investing, ask yourself, for example: what is the vision for the project? Does the team have other achievements? Is capitalization big enough?

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A lot of time

Also, take the time to practice before you start. And write down your mistakes in a diary so that each time you try to understand what went wrong, advises Owen Simonin. You can also set a stop loss to limit your losses in case prices fall.

Moreover, if you are convinced that cryptocurrencies have a future, you can invest by betting that their price will rise in the long term. To do this, the simplest method remains DCA, or dollar cost averaging, a method that consists of investing a fixed amount at regular odds to smooth out the entry point.

In this case, it might be interesting to separate your accounts and have an account for your long-term investments that you don’t touch, and a second account dedicated to trading, where you can risk more while trying to generate short-term profits, suggests Emilien Dutan.

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(1) Survey conducted by Heaven on 538 young people aged 18 to 25 surveyed in France between 8 and 9 March 2022.

(2) AMF study. Individual investors are more numerous, younger and increasingly turning to neo-brokers in the wake of the Covid crisis.

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