Elementary Insights To Start Investing Into Crypto
Yesterday, I heard one of my distant relative is pooling some money to invest in bitcoin.
I was like... Whhhaattt?
Someone who hardly understands what is a stock and a server, is buying bitcoin.
So yes its mad craze and crypto phase all around.
I belong to a third world country. And a lot of people I know, who are not geeks and not tech savvy, already own some altcoin or shitcoin. And 'Doge' is probably more popular in India than Ethereum.
There are already a ton of guides and affiliate links flying around about the best exchange and how to register and buy crypto on it.
So skipping all that shabby and over posted stuff, lets learn something that will actually help you over your time there.
Investor Vs Trader
What would you want to be?
Traders are sprinters, they invest in cryptos and exit in days, hours, minutes or may be seconds.
Investors run marathons, they invest in some fundamentally strong projects for longer periods of time and reap returns.
Being a successful trader requires a lot of knowledge and experience. If you are too busy to look at screens the whole day, waiting for a buzz or a news, and you are a beginner with no prior experience in trading, I would recommend you to join the marathon.
Before You Continue - Becoming a millionaire overnight is a sick concept. It requires patience and work to make money in crypto market or any other asset market for that sake. You might become a beggar from poor if you will treat it as a gateway of becoming super rich in no time.
I have come up with some elementary insights, that any newbie or oldie must know to invest in crypto. Even if you have already begun your ride on bulls and bears, I have some tips that can help you save some losses
A) NOT ALL CRYPTOS ARE CREATED EQUAL
While every stock in a stock market represents a piece of ownership in a company. Every crypto listed at a crypto exchange can represent something different.
It can be a governance or ownership stake in a crypto project, a currency to do activity on a digital platform, an asset meant to provide liquidity to exchanges and many more things including being a mere medium of exchange (or transfer of value).
B) DO YOUR OWN RESEARCH
Do not invest blindly in coins recommended by your friends and peers, unless they themselves have become a billionaire by investing in cryptocurrencies. Do your own research and create your own understanding about blockchain and crypto.
When you are buying a crypto, you are buying an asset. Understand that asset, its whitepaper and tokenomics, what is it used for?, who are the people behind it?, what is their roadmap?, are they reaching their milestones in time?, do their twitter accounts have recent updates?, any AMA videos? and everything else you can think of.
DIVERSIFY
“Do not put all your eggs in one basket”, an evergreen advice in a single sentence.
Plan on creating a portfolio with assets distributed over multiple industries and domains. Never invest all your money in a single crypto or projects of similar kind. Invest chunks of money in a variety of projects to diversify your portfolio and negate some risk.
EMOTIONS LEAD TO BAD INVESTMENT DECISIONS
Making profits is all about the timings, when to buy and exit your holdings.
When people buy a crypto after thorough research and it goes up by sixty percent, they exit. They exit in fear of losing what they have already earned. Eventually also losing the returns they were going to make.
And if it starts to go down they refrain to get out of it and wait for a rebound, which rarely ever happens and they end up with their money stuck in a miserable investment.
ALWAYS HAVE AN INVESTMENT PLAN
Always question yourself what is your risk appetite regarding a particular coin before buying it. Pre define a threshold to exit it if it goes down a certain limit.
Do not invest all your money in projects with low market cap (like ranked beyond 50), keep some of it in top 10 or other less risky crypto assets.
YOU WOULD LOSE
Don’t panic, it is fine. I have yet to meet a person who have never lose a single trade in his investing career.
There would be times when things would get out of your hands and you would lose. Do not end up getting discouraged or digging your grave by investing whatever you have to cover up your losses.
People have ended up losing everything while trying to cover whatever they have already lost. Do not make investment decisions in an unstable emotional state and with irrational behavior.
Give yourself some time to process your situation and only invest with a calm and rational mindset. If you cannot tolerate 50% loss in your portfolio, you shouldn’t be in crypto.
STAY UPDATED
Keep following the crypto news along with brushing your knowledge about the blockchain and crypto space. And especially stay updated what's happening to the projects you have invested in and where they are headed.
If you will understand and follow just these very fundamental and basic things. I can ensure you that your ride will be smoother and easier with less headaches.
