Before we start, please be advised that I wrote this Beginner’s Guide to Crypto Investing as an informational article and not as financial advice (NFA). I’m also just a newbie in crypto investing and trading and I only started last February 2021. By no means I’m an expert in this field. However, I’d like to share with you guys my personal experience so you can have an idea about what investing in crypto is like.
And also, if you need financial advice about investing, please consult a professional financial advisor to minimize the risk of losing your hard-earned money.
Let’s start, shall we?
Understand Your Financial Capabilities and Limitations
Prior to signing up with a crypto exchange, I gave myself some time to understand my financial capabilities and limitations. I reviewed my assets and liabilities, sources of income, expenses, etc. And from there, I drafted a mini-plan on how much I can afford to invest (and lose in case – but hopefully it doesn’t happen hahaha).
I personally don’t want to jeopardize my other investments and as well as my peace of mind and sanity just because I didn’t do my own due diligence prior to investing in crypto.
I know that crypto is being hyped right now on Twitter, Facebook, online news, etc and it’s easy to get carried away by all the FOMO’ing (if there’s such a word LOL!) that’s been going on. But it’s always best to prepare before embarking on any kind of journey, right?
Do Your Own Research (DYOR)
Once I have done making a financial assessment for myself, I started researching crypto. This is a very broad topic, to be honest, and it can be overwhelming especially if you don’t have any idea about it just like when I started. But the first few things that I researched were (but were not limited to):
- Buying and selling crypto
- Depositing and withdrawing funds
- Risks of crypto investments
- Ways to earn money from crypto
- Fees comparison of various exchanges
After I gained some basic information about crypto investing, I spent more time researching various crypto that interests me:
- History of the crypto
- Development and management team behind the crypto
- What is it trying to solve (Use Case)
- Historical growth
- Ongoing projects
- Ongoing challenges
- Partnerships with other businesses
Speed Up Your Learning
The development that’s been going on is insane and to be honest, it’s really hard to keep up with everything that’s been going on because there’s just so much to learn. I’m speeding up my learning by doing the following things:
- Subscribe to the Twitter accounts of the crypto I’m planning to invest on
- Subscribe to the Youtube accounts of the vloggers that I perceive as providing the most information without the hype such as:
- Activate notifications on both Twitter and Youtube so I can be notified when new content is posted
Only Invest Money that You Can Afford to Lose
After I did my personal financial assessment, research the basics of crypto investing and research the crypto themselves, I then proceeded to sign up with a few crypto exchanges.
I signed up with Binance because they’re the biggest exchange as of the time of writing which also means, they’re more liquid than the smaller exchanges out there. I also signed up with Kucoin, because I realized that a lot of coins that are not listed (yet?) on Binance are in Kucoin.
I also signed up with Crypto.com just because I want to have their Visa card. I have not submitted my billing statement though since it’s a requirement for address verification. I’m still waiting for it to arrive.
After I signed up with these exchanges, I then proceeded to transfer funds. As a basic rule of thumb for all investments, only invest what you can afford to lose. And since I can’t afford to lose any money hahaha, I only invested a small amount of money.
Avoid FOMO and the Hype at All Cost
I’ll be honest with you, this is easier said than done especially as a newbie. Most of my losses were because of FOMO’ing and following the hype. Luckily, my crypto portfolio is diversified and some of my crypto holdings just absorbed the losses. What I meant by this is when you total my crypto investment (gains + losses + incurred fees), I’m still way up because of the gains of my other holding.
It’s so difficult to avoid FOMO and one of the best ways to avoid it is by keeping yourself informed and updated with all the developments in the crypto world, especially with the crypto that you’re holding.
Pick the Right Horse errr the Right Crypto
I’m not going to advise you which one to pick because it should be your personal decision. But if you’re going to ask me, I only invest in a crypto that has a strong use case, has existing partnerships with other crypto and non-crypto businesses, has strong development and management teams, etc.
When picking crypto, I just imagined myself investing in a traditional business. When investing in a traditional business, you need to know as much information as you can in order to make an informed decision, right?
Why? Because after all the FOMO’ing and hyping subsides, those who have a strong use case will just continue to grow. In my opinion, that’s just basic business. Businesses with strong products will eventually prevail.
Maximize Your Earning Potential
After a few weeks of using Binance, I learned a few other ways to maximize my crypto earning potential.
One thing that I do is take advantage of the staking opportunities in Binance to increase my crypto holding.
Basically, after I bought crypto, I then proceeded to save and stake them to earn interest. I also add the interest that I gain on a daily basis back to the savings account to increase my earning potential. It’s like manually compounding your interest in Binance savings.
You can also ‘farm crypto’ by becoming a liquidity provider in various DeFi protocols. This, of course, entails a higher risk so always study DeFi protocols before you invest your money.
By the way, just a quick reminder again that this is not financial advice so please Do Your Own Research (DYOR) before you try any of these.
Minimize Your Risk
I minimize my crypto investing risk by distributing my funds in multiple cryptos. Some of my friends only hold one or two cryptos and when their crypto is/are up, then they see huge gains. However, when their crypto is/are down then they also see huge losses.
In my case, since my funds are distributed in a lot more crypto than what they’re holding, I don’t see that mind-blowing gains, but I also don’t experience that humongous dips.
Again, this decision is based on my personal financial assessment of myself. And this is also based on the current market prices. I’m sure that I might also experience big dips when the bear market comes or if there’s any huge event that will affect the entire crypto world.
Since I have very limited funds and my online selling business is not doing that good in the pandemic time, I can’t afford to take a bigger risk.
And also, part of minimizing your risk is protecting your crypto. Sadly, just like any other industry, there are scammers out there waiting to scam newbies in the crypto world.
The developments in the crypto world are insanely fast and in order to maximize your profit and to minimize your risks, you have to keep yourself updated. Just like any other industry or business, a new business might make the existing businesses obsolete and this will affect their value of course.
So, keep yourself updated by constantly reading the developments of the crypto that you’re holding, their direct and indirect competitors, and the overall crypto industry as well.
Crypto investing is fairly new compared to other existing investments out there. I find it actually exciting. I’m learning so much new on a day-to-day basis and I’ll be sharing those learning in this blog as well.
Again, before I end this post, I just want to remind you guys that this is not intended to be financial advice and if you need some help or assistance in your investments, consult a professional financial advisor. And before you put your hard-earned money in any form of investments like stocks, real estate, or crypto, always DYOR!Beginners' Guide to Crypto Investing Click To Tweet