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If you are an investor, you would know that there are no investments without risks. It’s just that while the risks outweigh the rewards of some investment options, the rewards outweigh the risks of other investment options. Crypto is one of those investments with risks and rewards, and this begs the question, is it profitable? Is it worth the risk to dabble in cryptocurrency?
To answer your question, we will use bitcoin as the yardstick since it is the most popular cryptocurrency. When Bitcoin was first launched, it was worth less than a dollar. Over the years, Bitcoin has grown exponentially to hit $60,000 in 2020. Presently, one bitcoin is equivalent to $23,000, mostly because the crypto exchange market is volatile. However, bitcoin has risen to $60,000, which indicates its potential as a good investment vehicle.
Apart from Bitcoin, several other cryptocurrencies like Ethereum and Solana are doing very well. Their value might not be as high as Bitcoin’s, but they have great potential.
The risk-reward ratio helps you calculate the number of risks you are willing to take as a trader for potential rewards. In other words, through this calculation, you will know the potential rewards for every $1 you risk on an investment.
The calculation involved is very simple. All you have to do is divide your maximum risk by your net target profit. To do that, you look at where you would want to enter the trade. Then, you decide where you would take profits (if the trade is successful), and where you would put your stop-loss (if it’s a losing trade). This is crucial if you want to manage your risk properly. As a good crypto trader, setting your profit targets and stop-loss before entering a trade is important.
Now that you have both your entry and exit targets, you can calculate your risk/reward ratio by dividing your potential risk by your potential reward. The lower the ratio is, the more potential reward you’re getting per unit of risk.
You can start investing in cryptocurrency by following these five easy steps.
Bitcoin: Bitcoin has been around for the longest of any cryptocurrency. It’s easy to see why it’s the leader, with a price and market cap that’s much higher than any other crypto investment options.
Ethereum: Ethereum is a network that allows developers to create their cryptocurrency and deploy smart contracts utilizing the network. While Ethereum is far behind bitcoin in value, it’s also far ahead of the other competitors.
Binance coin: Binance coin took off at the beginning of 2021, increasing from about $38 on Jan. 1 to an all-time high of $683 in May. Because of its performance over time, the Binance coin has proven to be one of the more stable investment options.
Cryptocurrencies are a relatively new investment option, and one that is still in its infancy. For those who want to invest in cryptocurrencies but don’t know where to start, there are a few different options available. One good option is to have a portfolio with an investment firm. These firms will help you build a diversified crypto portfolio that will provide steady returns.
One good recommendation for investing in cryptocurrencies is Reliq Holdings. User reviews for Reliq Holdings are very good, with many investors citing it as a reliable option for investing in cryptocurrencies. This way, you can make sure that your money is safe while you invest in cryptocurrencies.
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Risk vs. reward: should you gamble on crypto investments? was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.