By James Yeo //
December 29, 2021

Have you ever wondered how much your life would change if you’d just bought 1 Bitcoin 10 years ago? Many people have, and the hefty price of over $50,000 for 1 BTC nowadays makes them feel like it’s too late to invest in cryptocurrencies. 

But that’s not true: the crypto industry is very much still in its infantry, but it’s also incredibly unforgiving so you shouldn’t just jump head-first into the water and hope for the best.

This article aims to provide you with the right mentality on how you should approach cryptocurrency investing, as well as tips that are tailored to this industry.

Understand Cryptocurrency Before Throwing Money Into Them

This seems like common sense but you’d be surprised how many people just invest in crypto because they saw others making profits from it. Ask yourself if you know what Bitcoin is. When encountering a new cryptocurrency, find out what value it brings to the table, what problem it will solve.

It’s also a good idea to learn about blockchain technology in general—there are many cool blockchain applications other than a currency, such as blockchain games, NFTs or decentralized casinos. Do research on how a coin is mined and the terminologies used in crypto discussions.

A healthy base of knowledge will help you determine if a crypto project has actual value.

Read more about the Crypto Lingo here too: What is FUD, HODL or FOMO in Cryptocurrency Lingo? Find out more here!

The Crypto Market is Like Any Other Market

Just because it is the most volatile doesn’t mean that the crypto market plays by its own rules.

You can incorporate knowledge and principles from the stock market or the real estate market into your crypto journey.

If you don’t have any such prior knowledge, it’s good to do research on investing in general first.

Long-term Horizon

Many successful investors including Warren Buffett believe in long-term holding as the best method of investing. It’s impossible to consistently ‘time’ the market correctly so holding for long-term is much less risky. 

Pick your investment based on value. If you genuinely believe a project/company has more intrinsic value than their market price suggests, you should hold their stocks despite what’s going on in the market from day to day. 

“If you’re not emotionally stable enough to buy a stock and accept it’s ups and downs, don’t buy any stocks.” -Warren Buffett.

This cannot be more true for the crypto market, which is a rollercoaster ride and a half. Impulsive buying and selling based on the price changes will get you nowhere. Of course, when you’re starting out don’t be too hard on yourself.

Overcoming the fear of missing out and the panic when your stock drops is easier said than done, and 99% of investors all struggle with it to some extent.

Minimize Risk

There will always be risk in investing, but the better the investor, the more risk they’re able to minimize. One way to do this is to diversify your crypto portfolio.

By investing in multiple cryptocurrencies, you decrease the risk of losing all your investment should one project go horribly wrong.

Another golden rule to live by is don’t invest all your money in anything. Only invest what you’re willing to lose, and this in most cases is about 5-20% of one’s income.

Over-investing won’t just put your livelihood in danger but it heavily affects your mental health as well.

How To Spot ‘Shit Coins’

In the world of cryptocurrencies, ‘shit coins’ are those that serve no real purpose, coins whose value only comes from building up its own hype. Shit coins may see their price tripling itself within a few weeks but a big crash is always around the corner, making investors lose all their assets. They’re basically scams in disguise.

Therefore, avoiding shit coins is something all crypto investors try to do, but it’s not always so easy. Some people believe that if you haven’t heard of a currency, it’s bound to be a shit coin. This is not true: while most shit coins are relatively small and obscure, there are more sophisticated signs to spot them:

  • Unrealistic promises: If the developers guarantee that you will make money from it, it’s most likely a shitcoin. Any legitimate person in the crypto world knows that it’s impossible to guarantee such a thing.
  • The team hides their identity: There is no good reason to do this for a normal crypto project. Why should you put money in the hands of someone you don’t even know the name of? 
  • Lack of whitepaper: A white paper is a document that informs you in detail what the product does, how it will work and where it’s going. Without such a thing, the coin might as well be nonexistent.
  • Dubious timeline: Any crypto product will have a roadmap estimating the developing progress, but if the timeline is too far in the future, it’s a big red flag. If it takes multiple years to be released, how can you tell there won’t be another similar product released elsewhere by that point?
  • Signs of unprofessionalism: Poorly-designed websites, grammar errors and a social media profile that rarely engages with the audience are all signs for you to stay far away.

Stay Away From ICOs

ICOs are Initial Coin Offerings, which is a marketing strategy employed by many crypto start-ups. It’s essentially the crypto version of IPO (Initial Public Offering) in the stock market world, except riskier and less regulated.

There are legitimate ICOs, but most of the scene are filled with opportunists and scammers looking for a quick way to cash in money. Any average Joe with enough budget and time can make a white paper and website, then write a bunch of pseudo-technological jargon-filled word vomit on there. That’s all it takes for many naive investors to fall in the trap and give these people millions of dollars. So don’t be one of them.

Creating a Crypto Wallet

Once you’ve done with all the theory, it’s time to actually create a wallet—it’s where you’ll store your assets.

crypto wallet

There are 2 types of cryptocurrency wallets: hot wallet and cold wallets. A hot wallet is connected to the Internet so it’s more susceptible to online attacks, but it makes it much easier to transfer/trade crypto.

In contrast, a cold wallet is offline, making it safer but less convenient.

You can also utilize both kinds of wallet. For the assets that you have no intention to sell, trade or spend, you can keep them in a cold wallet. And you can use a hot wallet to store a portion of crypto that is meant for trading.

There are a variety of wallet brands out there. Make sure to do your own research on which wallet is most suitable for you, but here are the most popular ones:

  • Coinbase: This is one of the most dominant names among cryptocurrency exchanges. The Coinbase app is very easy to get used to and it also has a Visa-backed debit card which is compatible with Apple Pay and Google. All in all, the Coinbase wallet is a good match for beginners.
  • Trezor Model T: It is a cold wallet created by Czech company SatoshiLabs. The Model T wallet is around $200, with a great emphasis on security, achieved by having the entire software open-source. Transparency always leads to better scrutiny.
  • Exodus: A non-custodial hot wallet, which means even though assets are stored online, only the wallet owner has access to the private key that acts as the password to the wallet. Exodus supports over 130 cryptocurrencies, can run on Mac, Windows, Linus, Android and iOS and is compatible with Trezor’s Model T hardware.
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