If you’re new to the world of cryptocurrency, you may be wondering how to get started. It’s a brave new world, and it can seem like there’s an endless amount of information out there. But don’t worry—we’re here to help.
Below are 10 tips for first-time investors that will help make your voyage into the world of cryptocurrency a smooth one.
You don’t have to buy a whole cryptocurrency.
One of the biggest misconceptions about cryptocurrencies is that you have to buy a whole one. But this isn’t true; all cryptocurrencies are divisible. The smallest unit of bitcoin (BTC), for example, is called satoshi—after the pseudonymous creator(s) of the cryptocurrency. And if you’re looking to get started with other coins like Ethereum (ETH) or Ripple (XRP), their smallest units are called ‘Wei’ and ‘Sai,’ respectively.
So how many satoshis can you buy for $1? Let’s take BTC as an example: If you buy $1 worth of BTC at current market rates, then approximately 0.000002 BTC will be transferred into your wallet—this means that every cent ($0.01 = 1 satoshi) equals roughly 2 cents when it comes to buying cryptocurrency!
Do your research and stick to the plan.
It’s important to do your own research, not just read what others say about crypto on the internet. You also shouldn’t be afraid of making mistakes or losing money—that’s how people learn! Set a budget for yourself, and don’t go over it unless you really need something in particular (like some Bitcoin for your next vacation).
There are many types of cryptocurrencies out there, but only a few are valuable enough to last long-term as investments or trading tools: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Ripple XRP, and Dash DASH) are all good choices if you want to invest in cryptocurrency—but beware new coins; most won’t survive long enough for their value to appreciate significantly.
Move to the sidelines during market volatility.
The reality is that you’re probably not going to be able to time the cryptocurrency market perfectly. Instead, have a plan and stick to it: when prices are going up, buy more crypto; when prices are going down, take some profits off the table or hunker down and wait for them to recover. You can always sell at a later date if things don’t work out as planned—but just taking an emotional approach will likely lead to poor decisions.
Diversify your investment.
Don’t put all your eggs in one basket. I’m not going to sugarcoat it: cryptocurrency investing is risky. But the key to staying safe is diversification. Don’t invest a large chunk of your money into just one cryptocurrency because if it tanks, you’re almost guaranteed to lose a significant portion of it.
Instead, spread out across several cryptocurrencies and use different strategies for each one (e.g., HODLing vs mining). How much should you invest? That depends on two things: how comfortable you are with volatility and what kind of investment goals you have in mind.
Understand the risks.
If you’re thinking of investing in cryptocurrency, keep in mind that it’s a high-risk investment. This means that even if your investments do well and you make money, it is possible that you could lose all or part of your investment.
Cryptocurrency prices are very volatile and are affected by many different factors, such as political instability and economic uncertainty. Cryptocurrency markets are largely unregulated, which means that they can be vulnerable to fraudsters and hackers who may steal from investors’ accounts or manipulate the price of cryptocurrencies for their own benefit.
Cryptocurrency exchanges have been hacked before—the most famous one being Mt Gox, which lost 850,000 bitcoin (at the time worth $450 million) due to a hack in 2011—and some exchanges have shut down without repaying customers for their losses.
Finally, cryptocurrency does not have any backing from a central bank like gold or silver has. Therefore, it cannot be insured by the federal government should there be an issue with your account on an exchange or if someone steals coins off your computer they’re being mined.
Know what you’re investing in.
Before investing in cryptocurrency, it’s important to know what exactly you’re getting yourself into. That’s because cryptocurrencies are very different from traditional currencies and investments.
Cryptocurrencies aren’t backed by any government or a physical asset like gold. They’re also not FDIC insured, and they aren’t regulated by the SEC in the same way that stocks are. Additionally, cryptocurrencies aren’t legal tender (meaning they can’t be used as currency). These factors make them high-risk investments that those should only make with a high tolerance for risk and an understanding of how blockchain technology works.
Know how to store your cryptocurrency.
Now that you have purchased some cryptocurrency and have it in your possession, the next step is to make sure that your investment is safe.
The best way to keep cryptocurrencies secure is by using a hardware or paper wallet. Hardware wallets are physical devices that can store private keys (a required part of cryptocurrency transactions) away from an internet connection, while paper wallets make them accessible but not connected to the Internet at all. Both methods provide more security than digital wallets like Coinbase’s app, which requires an Internet connection for anything other than sending funds between users.
Start small and keep it simple.
The first tip for newbies is to start small and keep it simple. You don’t have to rush in and buy a whole bitcoin or even a fraction of one, but you should at least make sure that you are comfortable with the process and understand how cryptocurrency works.
If you do lose money, don’t panic. Remember that in this industry, “risk” and “reward” go hand-in-hand: if something can go wrong, it probably will at some point, but the better prepared we are for those eventualities then, the more likely we will be able to recover from them quickly.
The best advice may be simply not to take unnecessary risks by investing more than you can afford without compromising other aspects of your life – this applies as much within crypto as outside!
Don’t invest based on the hype.
There are many different cryptocurrencies out there, and they’re all competing for your money. It’s easy to be tempted by a new coin that promises to offer something better than its competitors, but you should resist that urge.
Don’t invest based on the hype. Do your own research—don’t just blindly follow the crowd! Invest in what you know, not just the next hot cryptocurrency or token. You should expect that when buying any crypto assets (or tokens), there will be no guarantees about future performance (i.e., it could go up or down).
Have reasonable expectations.
You should not expect to get rich quickly. If you want to become a millionaire in one day, this is not the right advice for you.
You should not expect to get rich without doing anything. If your goal is simply to make money without any effort whatsoever, then this article isn’t for you either.
You should not expect to get rich without risk and effort—which means that if your goal is “get rich quick,” then maybe cryptocurrency investing isn’t right for you after all!
You should also be aware of the following:
- Cryptocurrency investments are risky, so don’t treat them as a retirement plan or rely on them as an income source (unless they’re being used as part of an active business). You may lose some money, or even everything invested when the market goes down;
- Cryptocurrencies have been volatile since their inception (2010) and will likely continue being volatile through 2020 at least—but there are opportunities within those market cycles;
- Many people who bought Bitcoin early on have made huge gains over time (including me), but many more have lost money as well because they didn’t know what they were getting into when buying cryptocurrency;
- Cryptocurrencies aren’t always easy for beginners to understand —you need time/effort/research before jumping into any investment opportunity! It can take months before anyone understands how cryptocurrencies work fully because everything evolves rapidly in this industry.”
Investing in cryptocurrency isn’t too hard if you follow these guidelines. Never invest more than you can afford to lose. This is the most important rule of investing, and it’s especially crucial when investing in cryptocurrency. The value of cryptocurrency can fluctuate wildly over short periods of time. You should never put money into a coin that you won’t be able to stomach losing completely if something goes wrong with your investment. Do adequate research before starting your first investment portfolio, or at least read up on what makes cryptocurrencies different from other assets like stocks and bonds (which are also important investments).
