Bitcoin, ethereum… How to still invest in cryptos without risking losing everything

Almost one in three young people have already bought cryptocurrency. And while the recent price slump has dampened the ardor of some traders, others still see cryptocurrencies as a quick and easy way to get rich. Right or wrong?

Crypto is scary. Crypto fascinates. Especially among young people. According to a study (1) from the Parisian 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 best known of these, bitcoin, is currently trading around $21000far from the historic peak of $69,044 reached on November 10, 2021. And its main rival, ethereum, lost 55% of its value within 6 months.

But nothing helps. Despite the fall in prices, more budding traders are getting started every day. When they start out, newcomers think they will make a fortune quickly. Then reality catches up with them. Because very often the 1000% fantasy yield turns to disappointment, observes YouTuber Owen Simonin interviewed at the end of August at the Surfin Bitcoin Biarritz show.

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7800% increase in three days

And for good reason! The cryptocurrency market is still young and is characterized by a high volatility. The upward and downward variations can reach astronomical amounts, in particular because the capitalization of these assets is still relatively low, explains Nicolas Chron, stratgist at Zone Bourse.

For example, the Squid Game cryptocurrency, launched after the success of the eponymous South Korean series on Netflix, saw its price explode from $0.20 $15.95, or 7800% increase in three days. Investing in these kinds of projects is like playing in the casino. The potential returns are gigantic. But the risks are just as important, warns Emilien Dutang, professional trader.

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It’s like a game

A lesson that novice investors often learn the hard way. People know that classic trading is a complicated subject. But many see crypto as a game, decrypts Nicolas Chron. They are looking for quick wins and thrillsbut are not always aware of the risks.

And it is not a hazard. The applications of no brokersthese brokers of a new kind, give pride of place to the user experience and are often inspired by the codes of the video game industry to make trading more playful. Too much, maybe? Because for some, trading can become a real addiction, says Owen Simonin.

Either way, the recipe works. According to a report by the Autorité des Marchés Financiers (2)the active clientele per quarter of no-brokers was multiply by 12 since the third quarter of 2018. And some exchanges, these platforms for buying and selling cryptos, claim today several million userslike Binance, Bitpanda or Coinbase.

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20000 euros fine

To make matters worse, we hear a lot about the winners, but not the losers. The former are proud to announce their earnings on social networks. The latter are discreet, they do not talk about their losses. This helps reinforce the idea that you can make money easily with cryptos, notes Owen Simonin.

Without forgetting that some unscrupulous influencers take advantage of their notoriety to encourage young people to invest in crypto projects… Without necessarily specifying that they are paid to promote them. In 2021, Nabilla had for example cop of 20000 euros fine after being pinned for misleading business practices on Snapchat.

The truth is that in trading it is much easier to lose money than to win. According to the AMF, almost 89% individuals end up losing when they trade on the stock markets. And the same goes for cryptocurrencies. Anyone can make money for a bull run, that is to say a bullish period. But only a handful of traders manage to win the hard way, says Emilien Dutang.

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successful traders

So how do you put the odds on your side? A series of studies conducted on tens of thousands of FXCM Broker accounts have identified the characteristics of successful traders. Review: the more a trader spends a large number of orders in the month and more he uses theleveragethe more likely he is to lose.

To this are added some golden rules. Cryptocurrencies are a risky investment, you can allocate 5 10% of your capital, for example. But be sure to diversify your investments and only invest money that you are ready to lose, recommends Emilien Dutang.

Otherwise, avoid trading 1000 cryptos different. The best thing is to focus on a few promising projects and analyze them in detail to refine your strategy, continues Emilien Dutang. Before investing, ask yourself for example: what is the vision behind the project? Does the team have other achievements to its credit? Is the capitalization large enough?

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Long time

In addition, take the time to train yourself before you start. And record your mistakes in a journal to try to understand what went wrong each time, advises Owen Simonin. You can also set up stop-loss to limit your losses in the event of a fall in prices.

Moreover, if you are convinced that cryptocurrencies have a future, you can invest by betting on the fact that their price will increase in the long term. For this, the simplest method remains the DCA, or dollar cost averaginga technique that involves investing a fixed amount at regular odds to smooth out your entry point.

In this case, it may be interesting to separate your accountsand to have an account for your long-term investments, which you do not touch, and a second account dedicated to trading, on which you can take more risks to try to generate short-term returns, suggests Emilien Dutang.

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(1) Study carried out by the Heaven agency among 538 young people aged 18 to 25, interviewed in France between March 8 and 9, 2022.

(2) AMF study – Individual investors are more numerous, younger and have increasingly resorted to neo-brokers since the Covid crisis.

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