Back in 2011, a friend of mine that’s into wild conspiracy theories introduced me to Bitcoin. I was never a revolutionary, so I didn’t care much for “magic internet money” that was created to overthrow the banking elites and uproot the world economy.
Featuring Reddit posts from r/bitcoin started to pique my interest. When China’s ban on digital assets slashed Bitcoin prices, I invested in crypto for the first time. Soon, my investment quadrupled.
I became a self-proclaimed crypto-wizard. The great crypto-crash of 2018 wiped the smirk off my face. Now, I am happy to share what I have learned about investing in cryptocurrencies so that others can learn from my mistakes.
Educate Yourself Before You Invest in Cryptocurrencies
You must be eager to start trading, I get it, but take it easy. You need to learn the basics first. I’m not a tech guru and I’m not in it for the “revolutionary” aspect that much, so I won’t preach about what makes cryptocurrencies so valuable. But, I’ll point you in the right direction.
First, you must learn about blockchain and its basics. Blockchain is behind every valuable cryptocurrency. If a digital coin is not built on blockchain, or any other genuinely decentralized platform, it’s likely a scam.
Do you know what are public keys? Private Keys? Mining? Initial Coin Offerings? What about wallets? When it comes to Bitcoin and most other coins, wallets are much different from the ones we’re used to. Once you get quite familiar with such terms, you can start trading.
Invest Only What You Can Afford to Lose
Bitcoin and altcoins (all coins that are not Bitcoin) have a reputation for being volatile. Although that’s not true at the moment, only invest cash that you can lose. You don’t have to have a lot of money and experience to invest in crypto, but you have to stay grounded. Allocate just a small percentage of your portfolio to digital assets. We’re investors, not gamblers. Even though not everyone agrees, there’s a difference.
Considering price fluctuations, it may be hard to come to a rational decision. Despite the recent success of the market, don’t let greed and fear cloud your mind. My advice is: be wary of investing more than 5% of your portfolio.
Why? Because, technically speaking, digital money isn’t an investment. It’s tender like silver and gold. It does not pay dividends or interest. While you can indeed make money off of crypto, make sure your traditional investments are the main chunk of your portfolio.
Find the Right Coins
There are literally thousands of cryptocurrencies out there. More and more are coming in. But, half of the coins out there are virtually dead – worth less than a penny. Yet, even though Bitcoin is currently the most valuable one, others may be a better choice for investment.
Back in 2017, when I was stoked on Bitcoin, my friend told me it’s very important to know how and where to buy Ripple and ETC, as well as a few other coins, and not just focus all of my attention on BTC. Compared to Bitcoin, Ripple seemed like a penny stock that’s just a waste of time. But, the value of Ripple grew by 36,000% that year. It went from practically zero to $2,4. Naturally, its value decreased when the market burst in 2018, but Ripple is still a great digital asset to invest in.
Point being: don’t equate cryptocurrency with Bitcoin.
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Ethereum, Monero, Stratis, are just some of the other worthy options. So, how can you tell which ones are worth investing in?
Aside from charts and analysis, it’s important to examine the technology behind each coin. For an altcoin to be valuable, it has to bring something new to the table. For instance, Ethereum is famous for the “smart contract” feature which allows you to embed self-executing contracts into transactions.
Monero is famous for the anonymity it provides. Stratis operates on the proof of stake concept, which means you don’t have to waste valuable electricity to generate new coins. So, if there’s a new altcoin on the market in which you’d like to invest, make sure it is innovative. Anyone can copy Bitcoin and brand it differently. Bitcoin is the first cryptocurrency, but that itself doesn’t make it the best one, even though it’s the most valuable one at the moment.
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Don’t Overtrade
Rookies are prone to making 30 trades a day. But, they end up making bad trades and wasting too much money on fees. Then, they trade even more to recoup their first investment. The truth is, you won’t find 30 good trading opportunities in one day. Take it slowly and keep your eyes on the fees.
Keep Up to Date
You must monitor price action and recent developments of your investment. This is one of the main reasons you shouldn’t over-diversify your portfolio. When you have 4 to 8 coins, it’s easier to keep track of them.
Bookmark Bitcoin-talk threads and official websites dedicated to coins you hold. Join relevant subreddits and other communication channels on platforms like Discord or Telegram.
Takeaway
As a takeaway, stick to the unofficial motto we, self-professed crypto-experts, hold dear. And, that is – HODL! Many think it means “Hold On For Dear Life,” but it’s just a misspelling of hold.
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When times get tough, don’t sell your assets. I still hold the same Bitcoins I bought back in 2017.
Plow through the storm. Crypto is a viable investment only when it’s long term. The coin market is cyclical – it falls and it rises drastically. If you strongly believe in the concept and tech behind your coins, and you are truly passionate about them, then hold strong and be patient.