Now on the Internet there are many different tips for investing in cryptocurrency for novice private investors. However, in 2009, when Bitcoin was just introduced, no one really knew anything about it. Even though some people saw its potential, the really strong interest in cryptocurrencies did not come until many years later.
Crypto investments are gaining huge popularity. This is mainly due to the billionaires and IT professionals giving huge support to DeFi decentralized finance systems. Today, investors can use Bybit and other exchanges to buy and sell cryptocurrencies.
However, if you plan to invest in currencies for profit, you need to understand that cryptocurrencies are investments with high returns and no less high risk. Cryptocurrencies are extremely volatile, which means that you can suffer significant monetary losses from your savings if you start investing without having some knowledge.
In this guide, we will provide some tips to help you avoid the dangers of the world of cryptocurrencies.
How beginners can invest in cryptocurrencies
To get started, you need to choose a cryptocurrency exchange or broker, create and verify an account, deposit fiat currency , place your first crypto order, and choose a storage method such as a wallet.
But this is just a summary of what you need to do. In this article, we will tell you how to enter cryptocurrency and give extremely useful tips for novice investors.
Choose a cryptocurrency exchange or broker
First of all, you need to choose a broker or exchange. There are certain differences between brokers and exchanges.
A cryptocurrency exchange is a place where you can trade cryptocurrencies with other traders. Commissions on these exchange trading platforms are generally low. However, exchanges have many types of trading and different interfaces that can be difficult to understand at first.
Popular cryptocurrency exchanges are Bybit, Coinbase, and Gemini.
When choosing a cryptocurrency exchange, make sure you choose one that allows you to buy digital currency with fiat currency, such as US dollars. Please note that some exchanges only accept cryptocurrencies. Accordingly, you may need to buy it elsewhere and only then deposit it on the exchange.
If you don’t have cryptocurrency, or you don’t want to buy it yourself, then you will need an exchange that allows you to buy cryptocurrency for fiat.
With a cryptocurrency broker, trading is much easier and clearer than with an exchange. The interface is easy to use, however fees can be many times higher.
Two popular brokers are SoFi and Robinhood.
Keep in mind that not all brokers allow users to store their assets outside of the platforms. As you read this article, you will understand the importance of crypto wallets. Some advanced crypto enthusiasts prefer to store their assets in hardware wallets .
SoFi and Robinhood, for example, do not allow users to transfer their funds to a wallet or anywhere else from their account. Be sure to consider this factor when choosing a broker if you plan to store your cryptocurrency in a personal wallet in the future.
Create an account
Once you have chosen an exchange or broker, you need to register on the platform of your choice. It requires the passage of various types of verification of the user’s identity. This is necessary to prevent fraudulent activities.
As part of the screening, you may be asked to provide a scanned copy of your passport or driver’s license. The platform will then ask you to upload a selfie to verify with your driver’s license or passport photo.
To buy cryptocurrency on an exchange or from a broker, you must have fiat currency in your account. You can deposit money into it using a bank transfer or your debit/credit card.
Depending on the platform you use, it may take up to a few days for the funds to be credited.
Pro tip: We advise you not to use a credit card to deposit funds to cryptocurrency exchange platforms, as your bank will process this purchase as a cash withdrawal. Generally, there is a fee and a higher interest rate for cash withdrawals from credit cards . Thus, you will have to pay a certain percentage of the transaction as a cash withdrawal fee.
Choosing a Cryptocurrency
Once the money you deposited is available for use, there will be hundreds if not thousands of cryptocurrencies to choose from. The most popular cryptocurrencies are Ethereum and Bitcoin.
You can identify a cryptocurrency by its “ticker”, an abbreviation that looks like a pseudonym. For example, BTC is the ticker symbol for Bitcoin. Here are the tickers of other popular cryptocurrencies:
● Tether (USDT)
● Ethereum (ETH)
● Cardano (ADA)
Depending on the cryptocurrency you choose, you may not be able to buy the whole coin due to its huge price. Fortunately, many exchanges allow you to buy parts of coins.
Instead of buying 1 BTC, which has been in the $40,000 to $50,000 range lately, you can buy a hundredth or any other derivative unit of bitcoin.
Choosing a storage method
Your bank may be FDIC insured, but a crypto exchange is not. Crypto exchanges are at risk of being hacked and you can lose your money if you don’t secure your investment.
As stated earlier, if you are buying cryptocurrencies from a broker, then you will probably have no choice but to keep the assets in your account. But if you buy cryptocurrency on the exchange, then you can transfer your assets to hot or cold wallets.
Hot Wallet works on computers, tablets, phones and other devices connected to the Internet. Your money will be stored online in a hot wallet. And while this storage method is convenient, it is at risk of hacking and theft of your funds due to the constant connection to the Internet.
The cold wallet is not connected to the Internet. You can “carry” your cold or hardware wallet with you in the form of a hard drive or USB.
However, you should also be careful when using a cold wallet. If you lose your wallet private key, you may never be able to access your cryptocurrency again. If the device fails or breaks, then you can also lose your money.
What is the best cryptocurrency for beginners?
It is best for a beginner to invest in popular currencies such as Ethereum and Bitcoin. These currencies are not only less volatile, but also provide a high return on investment.
Memcoins Dogecoin or Baby Doge Coin are quite volatile as they are overpriced by the hype. But as soon as the hype passes, the price immediately drops.
If you do not want to take on too much risk, then choose a currency from the least volatile cryptocurrencies.
What should be considered when investing in cryptocurrencies?
You should be careful when investing in cryptocurrencies, as one fall in the market can lead to significant losses. Below are some important tips for new investors.
Read the Currency White Paper
New investors should always do their own research before making an investment. A white paper of a crypto project is a guide or report that describes everything you need to know about this currency. It reveals in detail the philosophy of a particular cryptocurrency and the mechanism of its operation.
Reading the White Paper will provide two benefits: firstly, you will learn the intricacies of a particular cryptocurrency. Secondly, using White Paper, you can create a general impression of the entire project. If the “white paper” is poorly written, then it means that the project is most likely not worth investing in.
For example, the White Paper and the Baby Doge Coin development plan talk about the creation of a new religion and many other things that are not related to cryptocurrencies. While Baby Doge Coin attracts some investors with its philanthropic activities, this coin is mostly driven by hype, making it a poor long-term investment.
Stick to your trading plan
A trading plan is one of the most important things in crypto investing. It defines how you buy and sell cryptocurrencies. The trading plan consists of the following components:
● Object of application of market efforts
● Risk map
By following a trading plan, you stay focused and only target trades that match your parameters and recommendations. The most important part of a trading plan is following it. Change your plan only if you have found the best trading method.
Cryptocurrency trading plan aligns your strategy with market movements. You work in a controlled environment and get measurable results. Thus, you can set yourself investment goals.
What’s more, a trading plan allows you to manage risk and limit portfolio losses. You can prevent unnecessary losses by maintaining a fixed risk – reward ratio .
Don’t let greed drive your decisions. Beginners often invest in volatile cryptocurrencies due to “FOMO” (Fear Of Missing Out) – the syndrome of lost profits. However, in the end, they lose their money, because they do not know when to sell the purchased assets. If a lot of money was easy to earn, then all people would be rich.
Don’t let rush, emotions, or any other outside factor stop you from sticking to your trading plan.
Predicted Prices and Stop Losses
No one wants to lose their money, however, when trading cryptocurrencies, this is inevitable. However, you can set a limit on the amount of losses.
A stop loss order is a loss limiting mechanism that sells your assets when a certain price level is reached. The stop loss value is set by the trader himself. By setting a stop loss, you minimize possible losses.
For example, if you buy a token for $50, then you can set a stop loss that will sell that token if its price reaches $45. In this case, you are willing to afford to lose 10%. A beginner should understand the mechanics of a stop loss, as it will help to significantly reduce losses.
The predicted price of a cryptocurrency is a forecast of the future price of a token from analysts. When deriving this price, experts are based on the historical performance of the token and profit forecasts.
To maximize the value of your investment, check the projected prices of the assets you intend to invest in.
Do not try to determine the entry or exit from the market
You need to understand that it is almost impossible to enter or exit the market without any losses. You have to be prepared for the ups and downs of cryptocurrencies.
It is best to avoid timing your entries and exits as this will take a lot of your time and nerves. Better to just invest in the market and get out of it when it gets too volatile.
After all, you have other things to do. To really follow the market, you need to read long articles and financial statements, which get tiresome very quickly.
Moreover, if you constantly monitor the market, you will experience changing waves of stress all the time. As a result, you are likely to deviate from the intended trading plan.
Invest only money you can afford to lose
One of the best tips for new investors is to only invest what you can afford to lose . Don’t let your emotions rule you. If sensational headlines, billionaire tweets, and other distractions influence your investment decisions, then you will end up losing money.
Beginners often invest in a certain cryptocurrency just because everyone else is doing it. Yes, the idea may be tempting, but will it pay off in the long run? Is the currency just hype, or does it really have potential?
Resist the temptation simply because everyone is investing in one memcoin or another. It is better to research the currency yourself, stick to your trading plan and make sure that your purchases are worthwhile.
Avoid Cryptocurrency Scams
People often start investing in cryptocurrencies without having studied all the pitfalls and fraudulent schemes. Accordingly, they do not know how to protect themselves from scammers.
The Federal Trade Commission recently stated that more than 7,000 crypto investors lost more than $80 million in total in fraud between October 2020 and March 2021. As interest in crypto-investments and blockchain technologies grows relentlessly, more and more people enter the market without doing any prior research.
This makes them easy prey for scammers. Scammers can pretend to be government agents or celebrities. We assure you, Elon Musk will not offer you money for sending him cryptocurrencies.
Another type of scammers offers you their “investment tips” in exchange for money or cryptocurrencies. Don’t fall for these schemes. It’s very simple – do not trust people who promise you huge amounts of money for simple tasks.
Research and scrutiny
As with stocks, fundamental analysis is critical when investing in cryptocurrencies. When investing in stocks, you need to consider inflation hedges and many other factors, but with cryptocurrencies, you only need to consider the dynamics of the currency over the past few months or weeks.
Self-proclaimed crypto investment experts are crawling out of every doorway. They offer you to buy their guides like How to Get Rich Easily. Do not trust all sources in a row.
Listen only to qualified financial advisers and always double-check all the information you find on the Internet. Moreover, do a thorough due diligence before investing in cryptocurrencies.
In simple terms, due diligence is a comprehensive assessment of the crypto market or the specific currency you want to invest in. It is carried out in order to determine the commercial potential and minimize losses.
Proper research boosts your buying confidence and protects you from distractions and news. For example, cryptocurrency developers can run aggressive advertising campaigns and enlist celebrity endorsements to create buzz around a new cryptocurrency.
As a result, many investors will rush to invest their money in the project without doing any preliminary research. But as soon as the hype subsides, they will be left with nothing.
So remember – in no case should you be impulsive and act under the pressure of the syndrome of lost profits. Better take your time . Do a thorough research, read the White Paper of the project and study the expert analysis, and only then decide whether you want to invest in a particular cryptocurrency or not.
Keep your keys safe
Crypto wallet keys are not house or car keys. They do not have duplicates, so if you lose your key, you will completely lose access to your wallet and the money on it.
And while in some cases you may be able to get your money back, the process will be long and tedious. It is better to take care in advance that your key is not lost.
It is equally important to keep your key away from prying eyes. Do not leave your wallet open and do not store the key in places that other people have access to. The best way to protect your key is to remember it.
Avoid Emotional Trading
Before entering the crypto market, you should leave all your emotions behind. Beginners quite often face both positive and negative emotions.
Don’t let these emotions dictate your next move or stop you from making decisions. The best way to keep your emotions in check is to stop looking at market charts.
If you are staring at the screen and non-stop watching the ups and downs of the crypto market, then you will inevitably begin to experience stress and make unwise decisions.
Avoid Margin Trading
Trading on margin allows you to borrow money from an exchange or broker, invest it, and earn a higher return. However, beginners should avoid margin trading, because it also multiplies the losses on the portfolio in case of a market drawdown. Remember, you can only risk what you are willing to lose.
Memcoins are a very risky undertaking
Memtokens and memcoins are no different from any other cryptocurrency, except that they are intended as a joke or a meme. These tokens are a risky investment because they are created without any specific business plan.
The fundamental principle behind these coins is speculation. To make any money from them, you must study the market movement very carefully and capitalize on the extremely short-term surge in demand.
In a Reddit post , the creator of Dogecoin (Dogecoin is a decentralized cryptocurrency with a very large community. The “Doge” in the name comes from an Internet meme…), a popular memcoin, said: people for their own purposes – all this is vile.
As a result, the creator left the community because all of the above is too common in memcoin trading. He also advised : “Keep learning about how cryptocurrencies and their markets work, never risk what you can’t afford to lose, be vigilant and careful.”
When you buy Bitcoin, you know that it has a White Paper that clearly states all the information about it. You can do your research and draw up an appropriate trading plan.
But the value of memcoins rises and falls depending on how much hype there is around it. Since it is impossible to determine the true value of memcoins, you will always put yourself at risk by investing in them. It can happen that memcoin loses all its value in just an hour. That’s how volatile these coins are.
Choose one cryptocurrency
Beginners should stick with one or two cryptocurrencies at first. Do your research, make a trading plan and buy, for example, bitcoin or any altcoin of your choice.
It will be difficult for a beginner to learn all the terminology and slang of the crypto world anyway. Moreover, if you are investing in five coins at once, then you may have to quit your job and devote all your time to trading.
While diversifying your portfolio is helpful, you should first conduct a thorough fundamental analysis of only one cryptocurrency and invest in it. Track your progress and only then start investing in other assets.
Get information from trusted resources
It seems like every second person is an expert on cryptocurrencies these days. From WhatsApp group chats to YouTube videos, there is a sea of information about crypto trading, but don’t trust every single source.
One of the golden rules for beginner crypto investors is to make sure that fundamental analysis comes from reliable sources. We recommend Cointelegraph – the best resource for learning about crypto industry news. Another noteworthy resource is CoinDesk . There you can find out about the current rates of various cryptocurrencies and market trends.
If you are investing in bitcoin and want to learn more about it, then its developers have a magazine dedicated to BTC.
In this beginner’s guide, we’ve discussed the basics of the crypto industry and outlined the steps a beginner should take to enter the market and minimize their losses.
So, do your research carefully, stick to your trading plan, don’t get emotional, don’t trust self-proclaimed crypto experts, and get your information from reliable sources.
Hopefully these investment tips will prepare you to enter the DeFi trading market.