The overwhelming majority of new cryptocurrency users have a trading or investing mentality but also lack an understanding of the core principles behind cryptocurrencies and this market.
Some may have invested in the long run, however, there are also details important enough to safeguard this investment.
I decided a beginner’s guide was necessary but also felt a lengthy one would not be ideal. Newcomers want to learn the basics and they want them fast, in a message format that would give them a hint or a general impression.
I will make this easy, but I will also make a second part later with more details. I was also a beginner like everyone, and I was searching between bits and pieces to find answers and validate claims.
This article is for all the newcomers and the investors that embraced crypto recently.
Welcome to Crypto users of Robinhood, CashApp, e-Toro, Revolut, PayPal, and any others using similar apps or crypto-exchanges to invest and trade!
1: Crypto in Exchanges is NOT your Crypto
You don’t own any cryptocurrency until you withdraw it to a non-custodial wallet, one that provides the private key and seed phrase. You only own your cryptocurrency when you move it outside of any apps/websites you used to purchase them.
Yes, these top crypto exchanges and trading rooms will always tell you that funds are “Safu”, but history has proven otherwise.
You don’t own any crypto in Coinbase, Binance, Kraken, Bitstamp, Bittrex, or anywhere else you bought it. The crypto is still in the Exchange hot wallets and has not moved to a different address until you withdraw.
If you bought crypto through a trading app that doesn’t allow yet withdrawals, you should get out and buy from somewhere else. Sell it for fiat and buy again using any other option available that allows withdrawals.
There are also ways to buy crypto without risking your private information. KYC is mandatory in most exchanges but not all.
2: Never Feel Safe. This is still the Digital Far West
You always have to protect your private key and seed phrase. If you just hold this information on a text file on your desktop, it is a threat. Cryptocurrency demands attention, research, and responsibility.
Wallets may contain vulnerabilities. A database with details can be leaked and a phishing email arrives with a malicious link to a cloned website that requests your phrase and keys. It is vital to only follow the official website, and contact through the official channels. Be skeptical about everything you do. You may notice a very small detail, don’t bypass this, and never be in a rush when transferring money.
There will be nobody to help you with your funds if you get hacked. The centralized exchanges are not liable to recover your stolen funds or reimburse anyone even if their websites and databases get hacked.
You are not safe when talking to anyone online and can’t trust anyone. Even those you think you know can be impersonators. There are fake profiles and someone may be posing as a relative or a friend. Never trust anyone online, not just in the crypto field.
Cryptocurrencies have solved the trust issue. Everything is verifiable and with time and experience, you learn to recognize what is at risk. There are stakes that some don’t want to risk stealing small funds. But as the sizes grow, you never know if someone will turn.
Take time and never rush into any decision. This will help you with your approach and reduce the risk of making a poor decision.
Are you scared after reading this? You should be. As you should be with your money in the bank. Not safe either, and there are various dangers many don’t understand. It is always better to take responsibility for controlling the funds and increasing security.
3: Invest with a PLAN— Never go all-in
Don’t go all-in. Investing requires diversification in various assets.
As you can’t just invest in real estate or just gold, it is the same with crypto. For some wealthy individuals, crypto represents just 1% of their investment value.
Many investors find this value too low and increase it up to 5–10%. The potential of the digital economy is far outweighing the risk so some investors are just holding everything in cryptocurrency. Although, this option is not suggested.
We are in a very volatile market and it could take just one mistake, hack, bad news, or any event, for the market to dive and bear run to begin.
During a bull run, you will probably 10x your money (at least), but when a bear market begins, get ready for huge losses and lots of pain. This is all impermanent, though. You only lose when you sell at a cheaper price. However, some cryptocurrencies will never recover.
And some that only managed to recover partially. Even Ripple did not manage to recover and reach previous heights. We have even more examples that present networks with advanced technology (Bitcoin Cash, Monero, ZCash, XRP), still they failed to convince investors in the 2020–2022 bull run, and are still far behind their previous all-time heights.
I have discussed with many XRP investors that bought at $3 and three years later it seems that 50% loss is the best deal they can get.
The plan could vary. You may want to hold and accumulate more, others use DCA to increase their cryptocurrency positions, and some have a standard amount in USD, selling when it grows higher and perhaps adding when prices are moving too low. It is all personal, and I can’t suggest how to invest to anyone. Probably most crypto newcomers already are trading or investing in stocks, so they undertake risks already.
4: Don’t Announce Crypto Holdings Publicly
Talk about Crypto, since this always helps as there are billions with questions and want to listen. But never discuss how much you hold. Don’t tell your friends or relatives either, this will only bring trouble. Talk to everyone about cryptocurrency, but not about how much you are holding.
When suddenly the value of your crypto reaches hundreds of thousands or millions, then you will move back to your social media and blogs trying to find and delete these comments. There are always backups and recovery of deleted posts is an option for those that investigate further.
There are just far too many watching. You don’t want everyone to know your crypto wealth. Just don’t announce it anywhere. I could give hundreds of examples of how this went wrong.
When prices rise and investors’ profits soar, many have this urge to just announce it to social media, friends, and family. If you are about to do this, think about all the things that can go wrong. Some may even despise this approach and become a factor to lose followers if the approach contains smugness. Scammers are always eager to learn this information too.
5: Scammers are always Lurking
Scammers have multiplied like locust in the crypto field. It always attracted them, since there was always money to be made. Although, as more people enter, they increase in numbers and evolve.
Scammers, usually have nothing to lose. They are ruthless, and their sole life purpose is to scam other human beings. Just our grief for losing funds brings them joy. Usually they will end in prison, but it seems that crypto gives them an easy ground.
There are many articles that explain how scammers work, but it is important to know that scammers often evolve and create better techniques, so we need to be constantly vigilant.
6: Don’t Sell the Dip
When trading, you can’t ever find the exact top and sell. You can’t find the exact bottom either. So, try to focus on ignoring the small windows of what is not an opportunity and focus on learning how to trade. Set goals and targets and don’t sell everything.
Traders understand the game is about buying low and selling higher. While I don’t plan to sell back to fiat, unless there is an emergency, still, a drop will bring dramatic change to the mentality of the investor.
This is human nature, and the need to grow thick skin with your investment is imperative. Following the herd (or the trend) is usually a mistake.
This is a negative value and any bearish term in a thriving industry only lasts months or maybe up to two years. The worst mistake some investors and traders did in 2018 was to exit crypto and only look back when prices were overheating again.
Sometimes prices may have no more upside potential. The market runs in cycles, though. A real economy experiences boom and bust cycles, but the crypto economy is currently running at a 25x speed of that.
Dips lately are always bought, and prices recover. While I explain not to sell the dip, many understand that the bullish cycle will one day end. It is a matter of adjusting and re-adjusting according to each one’s strategy, but the worst suggestion would be to sell at the point where most other investors are stocking up.
7: Bitcoin is not a Safe Investment
There is no safe investment and no store of value in crypto. At least we can’t claim that, yet.
Bitcoin exists for just 12 years. This is hardly enough time to consider any asset a “store of value”.
It is a speculative asset and while its price keeps rising and is well connected with major markets today (ETFs, CME, Bakkt, Grayscale), still it is not in the market for this long to be under any such narrative. Bitcoin (BTC) has not passed the test of time, has seen no major recession, and has had little relation to negative macroeconomic events.
Some individuals think Bitcoin (BTC) will become a store of value within time. It takes a long time to reach the status of gold, though, and many narratives are often dropped and replaced.
Of course, there should be a careful approach and selection of cryptocurrencies that make a solid case as an investment. This, however, doesn’t mean that BTC and ETH will always be at the top.
Both have problems that seem they will never solve. For many analysts, Bitcoin has had its cycle and offers nothing today. While I don’t completely agree, there is a valid point in this argument. Way better cryptocurrencies exist today. Bitcoin just keeps capitalizing on its brand name. It sells Bitcoins but to different target groups each time.
2013, MtGox and the Chinese investors, 2017 the retail investors, 2021 the institutional investors.
There is another target group, the governments, and there is a test phase today in one of them. El Salvador. While this test needs a few years, still, I think that El Salvador wasn’t the best nation to have such a test. An economy with hyperinflation tendencies would be a better match to further identify the strengths and weaknesses of the Lightning Network.
8: “HODL” will make you Rich!
There is meaning in holding, but the point is “when” influencers tell investors to keep HODL since you will probably learn about HODL when the price has outperformed any previous bubble territory and looks unstable enough to crash to a floor 80% lower from this level.
CZ is the CEO of Binance and looks like a permanent bull that supports the market with his wealth. However, Binance has already made CZ a multi-billionaire.
I suppose with this Tweet there are a few details all beginners need to extract:
Crypto influencers, Exchange CEOs, Twitter, and Reddit, in general, are promoting their investment and businesses. These are not the major research tools available. There are informational websites online, but most details require months of research. Don’t expect to learn everything in a week.
Prices will correct after a parabolic climb, and a bear market is always possible. If an investor bought at the top, it may take many years to recover, and depending on the crypto assets bought, there may never be a recovery.
These crypto-influencers may often provide some proper observations. But to a beginner, it is difficult to identify the real valuable tweets from those that make little sense. For better clarity, I encourage avoiding social media as part of a research.
“HODL”, could make investors rich in fiat terms. It is not prudent, though, to buy at any given time. Investing takes time, research and demands a different strategy.
9: Think of the Future
Not in the terms of buying a cool and hyped-up meme-coin and hodl it for 10 years. I don’t think this will help. Maybe if Musk keeps being influential as he is today, he can keep “pumping” the price of Doge, although it looks like the Doge whales are making the most of it so far.
So, this is not “HODL” advice. It is about envisioning the digital economy and which cryptocurrencies will have a role in it.
The Metaverse, for example, is a subject that will be discussed a lot more frequently in the future. We will have a multiverse of Metaverses to choose from, and not just what Facebook envisions. We will be able to select between an Apple Metaverse, a Ubisoft Metaverse, and so on.
These different Metaverses, ought to be interconnected though. This is the point. The most significant feature of the Metaverse will be a transition from corporate-owned digital rights to grant ownership rights of digital assets to the users.
We can only achieve this with the use of NFTs. The only competitor to current NFTs will be more advanced NFT protocols that will still run on decentralized blockchains. There is nothing else so powerful yet and probably will not be for a while.
Source: Pixabay (modified)
So, to any speculators that just think of the short-term profit, better start believing in this technology as well. I plan to invest 10% of my total investment funds in certain cryptocurrencies meeting all requirements to become dominant payment methods within a possible Metaverse.
These should contain features of high speed, low fees, reliable networks with PoW mining, and reflect developments that aim for universal adoption.
10: Trust Yourself and Ignore Everything Else
Ignore this post.
Ignore anything you read hereabouts, ignore everyone.
Seriously. Do your research and trust yourself. You got into Crypto before most of the rest of the world. You are researching now, reading this post, something that the rest 99% will never do.
Verify, cross reference, double-check everything, especially when something looks questionable. Each person has certain skills, and developers often miss the point and don’t realize what the world needs.
There are ideals and various ideologies that rally and find ground in crypto. Often, some narratives are hypocritically promoted and reproduced. While there are ideas and everyone can expand and write a lot, it doesn’t mean this is how things stand.
It takes time to find solid content creators that don’t follow the simple path of obeying the crowd’s demands but perform investigative journalism instead.
Take everything with a pinch of salt, as everyone will be exaggerating.
Hey! Thanks for reading this!
Also, welcome to crypto; this article is for you! I assume some conditions in crypto are clear now, and for more details, I will try to create a better and more detailed guide.
You may all be rich soon if the crypto markets keep rising, but it is equally important to educate further and understand the core concepts behind cryptocurrency. Crypto is not just an investment to help make more fiat money, but has a different target. You learn that in time.
While everyone may require selling part of their crypto for emergency reasons (totally understood), eventually there may be no need.
The acceptance of cryptocurrencies will be universal in the future.
Some may want to keep their wealth in fiat deposits and play it safe, but will also have it shrinking by 5–15% yearly since this is the new inflation model for all economies.
And this is just CPI, while each individual has different needs and different consuming habits. So for the common person (you and me) inflation probably is about 50% today (a moderate estimate).
I used to love my euros, but inflation is reaching ridiculous levels lately. I’m not feeling safe holding fiat in the bank anymore.
Hope that this article helped you understand some of the core concepts and continue your crypto journey with conviction.
Originally published at Medium
Lead Image Source: Pixabay, by TheDigitalArtist
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Concise and to the point, and written in relative layman's terms. LOVE it. I have been in the stock market, as I have mentioned before, for the past 30+ years and this, so far, is a market (crypto) that is VERY different than stocks are.
I am feeling my way around crypto slowly but surely. I am definitely a newbie considering I have only been "at it" for about 4 months or so.
I have to say I loved rule #10 the most. Thing is, from my experience, even in the stock market a lot of people look to what OTHERS think and don't take the time to understand beyond that. In fact, there is of course an entire industry built on lack of knowledge—I believe they are called financial advisors. lol
As for my own positions, I am currently at about 2% in crypto. I may up that a bit, but only time will tell. I do see an interesting future in crypto and want to be onboard to the extent that it makes sense for me.
I found your article extremely helpful. So, thank you. Keep 'em coming. Considering that only about 4% of the world's population even owns crypto, you could have one hell of an audience of newbies that you could make some massive profits from just by writing to them. 😊