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Read this before you buy your first Crypto.

by Alejandro Betancourt 7 months ago in personal finance
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Start small, start safe, and go from there

Image by Gerd Altmann from Pixabay

“You don’t need any money to invest in cryptocurrency. You can get started with just a little bit of time and the internet, if you’re willing to start small, stay patient, and not get greedy.” — Forbes Magazine Writer Kashmir Hill.

Trading cryptocurrencies may seem intimidating at first glance, but it’s relatively easy once you know the basics.

The world of cryptocurrency trading is both exhilarating and terrifying. It’s hard to know where to start with so many different coins, exchanges, and strategies. (more of this on a separate post) The good news is that you don’t need to reinvent the wheel. You can learn to trade easily by starting small until you’re ready for the big leagues.

I’d like to begin by stating that this post contains affiliate links; if you click on them, I may get a small commission. I never recommend anything unless I've tried it myself.

Investing in Crypto is Now Easier than Ever Before

The cryptocurrency market is one of the most volatile ones out there. It started as a niche product for tech geeks but quickly gained traction with investors. It is not surprising that it has now become more accessible than ever before to invest in cryptocurrencies.

There are various ways to invest in cryptocurrency. You can trade on exchanges, buy digital coins, mine cryptocurrencies or participate in ICOs (Initial Coin Offerings).

The first thing you need to do is research which type of coin, wallet, or exchange best suits your needs and goals. The second thing you need to do is set up accounts on different exchanges so you can easily trade your funds back and forth between them. At least two or three accounts are good. The third step is to create your wallets. You’ll have more than one of them. A hot wallet (connected to the internet) is an excellent place to start. Still, suppose you’re serious about it or are thinking about investing a significant amount of money. In that case, I recommend buying a cold wallet (not connected to the internet) like a Ledger Nano X. Crypto wallets are software programs or hardware that can hold cryptocurrency. They have a private key and a public address.

Crypto exchanges allow you to trade one coin for another or even exchange fiat currency into crypto coins.

Then there is mining which involves using computer hardware resources to solve complex mathematical problems to verify transactions on the blockchain network. This process ensures trust between two parties without a third party being involved and controls inflation by releasing new coins at regular intervals, thus incentivizing more people to mine. Mining requires powerful computers, intensive capital, and needs time before it will turn a profit, so be sure not to invest anything if this is the option you choose because your money could end up going down the drain. Most profitable projects can’t be mined with your personal computer at home. Those days are long gone!

Image by Gerd Altmann from Pixabay

Ready to trade?

One of the most important things to learn about trading is a simple rule called technical analysis. Crypto traders use it all the time. Technical analysis tells us which direction price is going based on historical trends. It’s kind of like predicting where clouds are moving since they always carry with wind currents. If investors think that bitcoin prices will go up, they buy bitcoins from someone who wants to sell them at a higher price (the person selling just hopes for this outcome). In turn, these new owners also want to make money, so now they’re holding onto those coins until the demand goes up and people start paying more per coin than they paid themselves when buying in.

Technical analysis deals with analyzing the price history of a security or commodity, looking for patterns that might predict future performance.

Technical analysis is a way of making sense of what is happening with the market and deciphering if the price will continue in the same direction. It involves looking at charts and graphs, studying past prices and current trends, whether the market is in a bull or bear market, and predicting how these factors will affect prices in the future.

One of the essential tools in technical analysis is the trend line.

The mathematical formula for a straight line can be easily applied to stock charts, which are simply graphs plotting closing prices over time. This makes it easy to see if and when an actual price diverges from its perceived value based on past performance or analyst predictions. This difference between what something costs and how much people think it’s worth (known as “value investing”) is one way successful investors make money.

While crypto assets aren’t stocks traded by corporations, some experts believe that they behave similarly enough that many basic principles of technical analysis are applied to them too. Crypto assets like Bitcoin don’t produce any income, but their value fluctuates wildly based on supply and demand. (Bitcoin is USD 60,810 at the time of writing this)

New technology is changing the way we trade. Many people are now looking to Crypto assets to make money, so I suggest these new investors need to understand some basic principles of technical analysis before doing so.

Photo by Roger Brown from Pexels

Hodl

It’s not easy being a crypto holder in this industry. There are so many coins to choose from, and the prices can be volatile. And when you have little or no money, it can seem impossible to invest your way into the market. But there are ways you could support without spending any of your hard-earned cash. Trading is one of those ways; mining is another one.

If you have done all of this and are ready to invest in Crypto, then great! It would be best to start small with investments that won’t cost too much (first-time investors often get burned).

Before you begin investing in cryptocurrency, there are a few things to consider. One of the most important is where you are investing your money. You should always invest in coins that you’re interested in and familiar with. Not all coins are created equal! Research, read the white papers, and look for what other people are saying on specialized forums.

If done right, investing in cryptocurrency is not for everyone, but it can be lucrative. One of the most critical steps to take before investing is understanding that this is more than just buying some coins and then forgetting about them! For example, you need to ensure that they are stored securely on your computer or on an external hard drive. As I said before, I use and recommend the Ledger Nano X. The Crypto market is very volatile, so you need to keep up with news and price movements. If your investments are not secure, then there’s no point in investing at all! Before starting any investment journey, you must understand the risks involved. You might think that cryptocurrency trading sounds easy enough — just buy low and sell high, right? This happens over time for most cryptocurrencies, making buying/selling them seem more manageable than what it really is.

It would be best if you also had an exit strategy. In my opinion, it’s crucial. (I will write about this later.)

If something goes wrong or prices change unexpectedly (which they often do), don’t panic! It would be best if you got used to the high volatility. I have seen my portfolio decrease and increase about 60% in both directions in a few months! That’s a 120% difference in some cases! Not for the faint-hearted. You also need to understand how to protect your wallet and the tax implications on your investments. Depending on where you pay taxes, each transaction may trigger obligations for yourself.

DISCLAIMER: I am not a financial advisor. This post is for entertainment and educational purposes only. I am not recommending financial products, always do your research and make your own decisions about what is best for you.

personal finance

About the author

Alejandro Betancourt

I am a single father, an entrepreneur & a businessman. I founded a couple of venture capital funds. I write about business, tech, finance & the human spirit.

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