Are you looking to invest in cryptocurrencies? You will need to consider several stuff before you invest your money. If you are doing this without thinking, then you simply risk losing your investment.
The cryptocurrency world is vast. It does not stop at Bitcoin or Blockchain. You will need a minimum of training and some common sense to hope to make your investments grow. We guide you step by step through these various tips to make your first investments. In detail, let’s look at all the essential points that you will need to pay attention to before depositing your money to buy crypto assets.
Table of Contents
1. Only Invest Money You Can Lose
One of the first pieces of advice we have is the ABCs of investing in cryptocurrencies: you must only invest money that you are willing to lose. This should be money that you don’t need in your everyday life. If you lose this money, you should not have any impact on your life. Do not put the last 300 dollars left in your bank account. Do not use a consumer loan to invest. You alone are the master of your decisions, but these pieces of advice are not to be taken lightly.
Sometimes investing in crypto assets requires a lot of patience. The Bitcoin and cryptocurrency price is known to be very volatile. But that’s not always true; Bitcoin’s curve was, for example, very flat over the second half of 2018… Therefore, you may make gains/losses as fast as to see your portfolio stagnate for several months.
In the event that the market is not at its best, obtaining a return on investment may take longer than expected. You will then inevitably go through a phase of losses. If you need the money to live, the following can happen:
- You will be withdrawing your investment at a loss.
- You will withdraw your investment with a loss. Morale will be greatly affected in your daily life.
- You will attempt to recover by doing irrational things, and you will magnify your losses.
You should therefore only bet money that you can afford to lose. This way, you keep yourself detached from your investment and don’t act on emotion. As a result, the above mentioned negative effects are much less likely to occur.
2. Research the subject beforehand
As the second piece of advice, we suggest getting a minimum of education before considering investing money in crypto assets. Although several people have advised you to deposit money, would you really want to invest in a subject about which you know absolutely nothing? Are you blindly trusting people without doing any due diligence?
As an analogy to other more traditional investments, let’s look at some examples:
- Would you purchase an apartment or house without at least visiting it?
- Would you buy a used car without the paperwork?
- Would you purchase a yearly membership to a gym without looking at what it looks like and what services it offers?
Suppose the answer to these questions is no. In that case, you too should educate yourself about cryptos before investing your money in them. Of course, there is no question of becoming an expert on cryptocurrencies before you start investing. But do give yourself the time to understand the broad outlines of how the medium works.
3. Diversifying your investments
After the first two pre-investment tips, this third tip will focus on diversification. The concept is important in many aspects of your life, and it is also valid for cryptocurrencies. If you do have money to invest, you need to be aware of the adage that you shouldn’t put all your eggs in one basket. In the case that your basket falls to the ground, you will break all your eggs and lose everything. If you have ten eggs evenly distributed in 5 baskets, then you only lose two eggs.
You should apply similar reasoning to your investments. You might want to divide them up as follows:
- Some into real estate.
- Some in stocks.
- Some of it is in cryptocurrencies.
Likewise, the part regarding your investment will also have to follow this principle. You will have to diversify your investment through different crypto assets. The purpose is to reduce the risk as much as possible.
4. Interexchange transfers
Do you follow our first three tips? Great! You can now start buying your first crypto assets! For this, we advise you to use popular platforms such as Binance or Coinbase. With these platforms, you can buy popular cryptocurrencies like BTC or ETH. In order to be able to buy other less popular cryptocurrencies with higher growth potential, you will need to transfer your Ethereum and Bitcoin to what are called exchanges.
The exchanges are platforms where you can exchange your bitcoins for cryptocurrencies that are referred to as an altcoin. The following are some popular exchanges where you can access a multitude of altcoins:
- Binance
- OKX
- Coinbase
- Cryptopia
- KuCoin
- Kraken
- Huobi Global
5. DYOR (Do Your Own Research)
Investment in the top 10 cryptocurrencies is never a big mistake. Investment in some of these crypto assets is even a guarantee of safety. Here, we are interested in knowing how to invest in crypto assets with a smaller capitalization. There are almost 10,000 altcoins. While some have huge growth potential, some are either scams or doomed to disappear. Therefore, one should be particularly careful before investing in one of them.
The 5th piece of advice is a very popular adage in the crypto world: DYOR! This stands for “Do Your Own Research” and means that you should do your own research before investing in a project. Do not invest in the advice of people you do not know (by seeing a post on a forum, for example). To thoroughly analyze a cryptocurrency you are interested in; the following are the different supports you can use:
- Reading the white paper
- The specialized discussion forums
- Using Twitter
- Telegram Channel, Discuss or Skype
- Searching Google
It is very important to do your homework to form your own opinion about a crypto asset. Do not hesitate to take your time before investing in a project. It is better to miss a good opportunity every now and then than to rush headlong into projects that will make you lose money.
6. Beware of scams
The sixth tip we have is about all the scams that exist in the cryptocurrency world. It is important to be especially vigilant about this and avoid them as much as possible. Every now and then we hear about a scam project or token which made people lose lots of money. We recommend you doing your research before buying any token so you don’t fall into these traps.
7. Finding trustworthy people you can follow
The seventh tip is about finding reliable people who can help you with your investments. Some people may not want to spend hours analyzing a project or simply don’t have the time to do so. In that case, you have the option of following experienced people who can give you advice. Nevertheless, you must be vigilant and choose these people with care. The industry is full of scammers or people who are only interested in manipulating the price to their advantage.
The following are some guidelines for detecting whether a person is potentially trustworthy:
- Seriousness and thoroughness
- Modestness of the person
- Explaining all the risks
If there are paid subscriptions, they must be renewable. This will mean that the person will have to give interesting and serious advice to renew his subscription.
On the other hand, the following are some indications that try to show that the individual or group is a scammer:
- Promising easy gains without effort
- Immaturity
- Groups of pumps
- Arrogance
- Single-payment memberships for life
8. Analysis of the market cap size
Out of all our tips given, we haven’t yet talked about a significant point: the overall market cap of a crypto asset you want to invest in. This is our 8th tip. Many newbies rely solely on the unit value of a crypto-currency (the price) in order to determine its growth potential. That is absolutely not the right indicator in order to be able to determine the margin of growth that a crypto asset has. To do this, you need to analyze two different factors:
Market Cap: This is computed by multiplying the unit value of a token by the total number of tokens in circulation. A high market cap has less growth potential than a low market cap.
Capitalization growth since the ICO: A cryptocurrency that has already gained a lot of value since its ICO is less likely to be able to grow. On the opposite end of the spectrum, any crypto that has fallen well since its ICO may, in fact, turn out to be a scam.
Therefore, you will need to be very careful with high capitalizations and carefully research crypto assets that have dropped in value since the ICO, as this can mean several things:
- The project is a scam
- The team has been working hard on the project and is leaving marketing on the back burner for now
- The market conditions have been very unfavorable, and the market cap has fallen along with the rest of the market
9. Monitoring your results
Now we have seen all the best practices for investing in cryptocurrencies correctly, so our 9th tip will tell you how to track your portfolio. After you invest in a project, three scenarios can occur:
- You make money
- Your investment remains stable
- You lose money
Keeping track of your results can be complex because you have to check each of your assets one by one and see how they have evolved from the last time you looked at them. Fortunately, there are some smartphone applications that will allow you to track your results automatically and instantly.
To do this, you simply need to:
- Enter your crypto assets
- The quantity you own
- The value of the purchase
- The purchase date
- The apps will then give you a whole range of information.
Here are the two applications for cell phones that will allow you to monitor your results wherever you are:
- Blockfolio
- Delta
Please try these two applications and choose the one you like the most. But be careful, these apps are addictive, and you may find yourself looking at your crypto wallet every 5 minutes.
10. Safeguarding your crypto assets
The 10th and final tip we’ll give you is about the security of your crypto assets. You have probably all heard of bitcoins being stolen by hackers. While unfortunate, such stories are true and have always happened at the same level: the exchange.
You should therefore be particularly careful and not store your crypto assets on exchanges. You should store them in what is called a wallet for crypto assets. There are different options for this:
- A wallet like Metamask for ERC-20 tokens
- A physical storage medium such as the Ledger Nano S
- A wallet dedicated to a specific crypto.
That way, you practically eliminate the risk of having your cryptocurrencies stolen.
Also Read:
- Binance Review (2022): Is It the Best Crypto Exchanges Out There?
- The Secret Formula of the Profitable Bitcoin & Crypto Trading
- All You Need to Know about Bitcoin and Other Cryptocurrencies: Mining, Buying, Understanding
Conclusion
Here we are at the end of our guide on our tips for optimally investing in cryptocurrencies. Hopefully, it will help you make your first investments in the best possible way. Most importantly, it will help you avoid making mistakes that could prove costly from a financial point of view.
These tips will give you a good foundation and are sufficient to make your first investments. Afterwards, suppose you are still interested in the world of cryptocurrencies. In that case, we recommend that you browse our cryptocurrencies category, which is full of articles on the subject.
