You’ve finally made up your mind: you’re ready to give investing in cryptocurrencies a chance.
Well, you’ve chosen a good time to sate your interest. The top cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) have seen explosive growth in 2017, and with the advent of mainstream, institutionally-backed Bitcoin futures, it seems 2018 is poised to see even bigger growth.
Don’t know where to start, though? No problem. We’ll talk you through all the major points a beginner should be aware of when it comes to investing in any crypto.
Investing in Cryptocurrencies
First thing’s first: you need to prepare yourself for extreme price volatility in this ecosystem. Consider Bitcoin’s recent price surge past $17,000 USD, when the current number one crypto had just cracked $10k only days prior:
That acute volatility was convenient for investors because it exploded the value of their portfolios upwards. But the space has also seen the exact opposite happen, too. For example, when the Mt. Gox digital assets exchange collapsed in 2014, so too did the bitcoin price.
Then there’s Ethereum, the number two crypto according to market cap. If you can believe it, the price of ETH has appreciated a whopping 6,000 percent in 2017 alone:
Not bad at all, right?
But even in the picture above, the wildness of the volatility is clear. See how the ETH price basically got gouged in half between June and August.
That rollercoaster-like volatility is mindbending to traditional investors. But it’s important to consider how the wild price movements largely arise from the prematurity of the crypto ecosystem.
At the end of the day, there’s no guarantees as to what happens next for crypto prices. But what is certain is that the underlying tech and revolutionary capabilities of the most promising cryptocoins, and mainly Bitcoin as the first-mover, gives reason for optimism.
Background: Where’s This Crypto Craze Coming From?
Many underinformed pundits have called cryptocurrencies a scam in general. Yet Bitcoin, the genesis cryptocurrency, will go down in history alongside the printing press and the Magna Carta as among the most indomitable hallmarks of human achievement. And this is something prospective investors need to keep in mind.
The Magna Carta, a blood-born expression of every human’s soulful yearning for justice, checked a tyrant King for the first time. And on an unprecedented scale, the printing press gave voice to the voiceless. It gave thought to the thoughtless. And it paved the way for the genesis of truer human liberty in ensuing centuries.
And so an Age of Freedom arose. An age with its own growing pains — growing pains that Bitcoin and the cryptocurrency craze it’s inspired can help to irreversibly mitigate.
To prove its beginning, the first Bitcoin block was signed with that day’s headline: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” It is true poetry that Bitcoin was birthed in the beginning days of the 2008 Financial Crisis, but it’s no surprise.
That’s because Bitcoin was created to solve the very cause of the Great Recession: the abuse of the peoples’ trust by centralized institutions.
Alas, the anonymous creator or creators behind Bitcoin coded up the solution: a blockchain ledger through which value, even ideas, could be transacted person-to-person, trustlessly, permissionlessly, and resistant to any censorship – no third-party middlemen required.
That’s an ultimate expression of personal liberty, no? Because money, as scholar Andreas Antonopolous tells us, “is a language. Money is a language that human beings created to express value to each other.”
Now no one – from Kim Jong Un to President Trump and anyone in between – can prevent you from expressing value to anyone in the world. That is sovereignty the likes of which humans have never had before, and the ramifications are titanic.
Bitcoin is like the next Magna Carta, then. It is the equalizer between people and those in power. It gives the common people a check on power that is the next great milestone in humanity’s long struggle toward freedom. And in a domino-like effect, Bitcoin will, and has already, paved the way for new blockchains that will also make freedom more perfect.
Imagine decentralized institutions in the future that are powered by blockchain smart contracts, not by bureaucratic middlemen who have a tendency to muck just about everything up.
Blockchains will decentralize our societies from top to bottom, and the progress made will be humanity’s best chance yet to materialize unprecedented justice and kindness.
That is the promise of Bitcoin. And that is why the Bitcoin Boom is not a traditional speculative bubble.
Should I Invest? And How Much?
We at Blockonomi can’t give you financial advice; you’re the author of your financial future, and it’s in your hands to do your own research and decide if investing in cryptocurrencies is right for your particular situation.
And it’s other worth stating that there are hundreds of cryptocurrencies. Some are promising, and some are total scams. Generalizations can be tricky, then.
What we can do is point you toward what some other people think and at the fact that cryptocurrencies are an objectively groundbreaking tech that have the potential to revolutionize our societies for the better from the ground up.
Now, you’ve already heard the dozens of pundits who’ve said Bitcoin is dead or going to die soon, but the very fact that you’re here reading this article suggests you’re interested and wanting to know what investing might look like if you decided to take the leap and dive into the crypto ecosystem.
To that end, consider the recent comments of former Fortress hedge fund manager Mike Novogratz, who recently told Bloomberg that investing between one to three percent of your net worth is enough of a position to give you safe exposure to cryptocurrencies without being subject to a high degree of financial risk.
Those are practical and fair guidelines. Even conservative ones. But it’s better to err on the side of caution, especially if you’re not a seasoned, veteran investor.
At this stage, the most crucial maxim you can internalize is this:
Do not invest more in cryptocurrencies than you can afford to lose.
That is to say, only invest a given sum into crypto if you’re willing to see that sum drop to $0. Not that such a horrific crash will happen. But steep flash crashes have happened before. “Black swan” events like China’s recent crypto exchange ban and scams still seemingly abound as the space is premature.
Scammers Want Your $$$
Not every crypto project is as trustworthy as the space’s heavyweights, namely Bitcoin and Ethereum, whose number one and number two positions respectively in the market capitalization are well deserved according to what these titans of industry can “bring to the table,” as it were.
In other words, there are crypto projects that are really just scams that are dressed up and marketed to deceive crypt investors.
And some investors really have lost everything in the scams that have popped up in the community thus far. The best thing you can do to ensure you don’t become a victim is to research, research, research. Be scrutinizing and meticulous in what you choose for your portfolio. Go with coins that have established themselves with strong track records over the past several months or years.
Promising Cryptocurrencies to Invest In
Every project has its pros and cons, but to a large extent, the market speaks for itself. Most of the coins in the top 10 cryptocurrencies according to market capitalization at press time are strong projects.
Generally speaking, current standouts in the top 10 include:
- Bitcoin Cash (BCH)
- Litecoin (LTC)
- Dash (DASH)
- Monero (XMR)
- NEM (XEM)
There are still loads of interesting projects in the top 100 coins by market cap, but you start getting riskier and riskier the further you get from the top 2. At least as it stands presently.
How to Buy Cryptocurrencies
We have put together guides for purchasing the main Cryptocurrencies, Ethereum and Bitcoin. Once you have purchased these, you can then use these to buy other currencies on different exchanges.
Purchase Ethereum and Bitcoin:
- How to Buy Bitcoin using a Credit or Debit Card
- How to Buy Bitcoin With PayPal
- How to Buy Ethereum using a Credit or Debit Card
Best Exchanges for other Currencies:
- Best Cryptocurrency Exchanges for Beginners
- Coinbase Review
- Binance Review
- Coinmama Review
- Paxful review
- CEX Review
- Localbitcoins Review
- Bittrex Review
Cryptocurrency Investing Strategy
Let’s dip into the basics of strategy now.
Strategy 1: “Hold”
When it comes to investing in cryptos, there are two basic strategies: holding and daytrading. The general idea remains the same for both: buy low, sell high.
Holding is optimal for novices and newcomers who aren’t professional investors or the savviest of traders. Users who are holders are just focused on accumulating as much of a given coin as possible in hopes of creating a trove as a result long-term price appreciation. It’s a straightforward strategy that barely has a learning curve.
What’s ideal, then, is to buy up as many coins as you can while markets are “in the red.” In other words, when prices are down. To maximize potential gains, you want to buy when prices are lowest.
That’s easier said than done, though. And it’s a principle you can disregard if you’re feeling extremely bullish about a project over the long-term. Say, for example, that you believe Ethereum is going to hit $3,000 one day. Well, if that projection ever materializes, it will make little practical difference if you bought ETH at $300 or $400.
Strategy 2: “Daytrade”
Your other alternative is to daytrade, which is where you’ll execute market buys routinely in hopes of turning your trading investments into something larger.
We’re going to refrain from going much deeper into this strategy because it’s absolutely not recommended for beginners. Investors lose thousands every day trying to outmaneuver the crypto markets.
You should take your time and learn a lot more about the ecosystem before you even consider daytrading as an option. Still, though, the idea is to buy low and sell high.
Securing Your Investments For Long-Term Holding
When Bitcoin first launched, one BTC was worth far less than .01 USD. Now, at press time one bitcoin is worth ~$16,800. That’s the most fundamental example of the long-term gains that the crypto space has seen so far.
And, while there’s no guarantee that crypto prices will continue to vault up in this manner, there’s the distinct possibility that mainstream adoption in the coming years could make a handful of cryptocoins worth considerably more in 5, 10, 20 years, etc.
The gamble is figuring out which projects will be the winners. That’s the risk.
But, in the mean time, the best thing you can do while you try to wait for gains is to secure your holdings in the safest, most secure manner possible.
The best way to do that? Get yourself a cryptocurrency hardware wallet.
Exchanges and software wallets have been far from full-proof so far when it comes to guaranteeing the safety of users’ funds. On the other hand, hardware wallets are the most impenetrable “vaults” currently available for crypto holders.
The most dominant hardware wallets you can buy today:
- Ledger Nano S
- Ledger Blue
- TREZOR One
- TREZOR T (launches January 2018).
These wallets are incredibly safe because they store your crypto offline, mitigating the threat of prowling hackers. And these devices are created so securely that they can even interact with infected computers with no need for concern.
Investing 101: Track Your Trades
If you’re going to start investing in cryptocurrencies, then you’re going to want to start keeping track of all the relevant info. The tax man’s going to want his cut no matter where you live, so you can preemptively prevent any kerfuffles by accounting for all your investments and trades.
A great site for this purpose is cointracking.info.
It lets you easily plug in all your trades, which will go a long way for making sure you’ll be organized when you need it most.
Other sites that you might find helpful for accounting purposes include CoinMarketCap, Coincap.io, and CryptoCompare.
Find Trustworthy Resources
The decisions you make in the crypto space will only be as good as the resources you used to back those decisions up.
There’s a lot of noise and a lot of bias in the ecosystem, so it’s crucial for you to find resources you can trust. People with a wide breadth of technical knowledge are always a great place to start, like YouTubers Boxmining and Ivan on Tech.
Just try to consider industry experts according to what their motivations might be. Is X project trashing Y project because they’re competitors or because there are serious and legitimate red flags in play?
Having resources you can trust will help you make sense of these kinds of quagmires.
If you’d like a more casual environment where there’s still an informative atmosphere, try out the various crypto-related subreddits on Reddit. Their rife with insightful conversations regarding investing in cryptocurrencies.
Keep Your Finger On The Pulse Of The Space
Going off that last point, the crypto ecosystem is very much so a news-driven field. For example, when China banned cryptocurrency exchanges in October 2017, cryptocurrency prices in general acutely tanked the whole world over.
If you have market orders open or investment goals on the line, you should regularly check the news regarding all the major happenings and headlines in the space.
Major crypto stories spread through social media like wildfire, so even just pulling your Twitter up periodically can be enough to keep tabs on what’s up.
Remember To Not Get Too Caught Up
You might be tempted to throw all your energy into cryptocurrencies. That’s a fine idea, but just remember to keep it healthy. Everything’s best in moderation.
Even if you’re making gains, don’t let that get to your head either. You don’t have to check CoinMarketCap every five minutes, life will go on regardless of whether your portfolio is in the red or green for today. The more obsessive you get, the more rash you get, and your investment decisions will suffer accordingly.
And that’s when people’s portfolios get burned beyond repair. Don’t let that be you.
Try to stay balanced and even and keep everything in perspective. You’ll invest smarter and give your financial future its best chance at security.