Nowadays, we can find a lot of advice for beginners to invest in cryptocurrencies. However, when Bitcoin was introduced in 2009, it was just seen as an interesting financial phenomenon. Although futurists saw their potential, cryptocurrencies did not receive much attention until many years later.
There are many investors who make a lot of money in this market but there are also many investors who lose and lose a lot of assets. If you are new to this market, this is the first lesson that you need to read before you want to profit from the Crypto market.
How Beginners Can Invest in Cryptocurrency
As a beginner, you can invest in crypto by choosing a crypto exchange or broker, creating and verifying your account, depositing fiat, placing an order to buy crypto and choosing a method for storage, such as a wallet.
But that’s just a summary of what you need to do to invest. If you want to learn how to get involved and important investment tips for beginners, then the next section is for you.
Choose a Crypto Exchange or Broker
First, you need to choose a broker or a cryptocurrency exchange. Each allows you to buy cryptocurrency, but with specific differences.
A cryptocurrency exchange is a place for you to trade cryptocurrencies with other buyers and sellers. Fees on these platforms are usually low. However, there are many types of deals and interfaces that can be difficult for a novice to get used to at first.
Some popular cryptocurrency exchanges include Bybit, Coinbase, and Gemini.
When choosing a cryptocurrency exchange, make sure that the exchange you choose allows the purchase of cryptocurrencies with fiat currency, such as USD. Some exchanges only allow trading in cryptocurrencies, which means you will need one cryptocurrency to buy another.
As a beginner, you may not have any cryptocurrencies. If so, you will need an exchange that accepts fiat to buy the cryptocurrency you want.
A crypto broker makes cryptocurrency trading much simpler and easier to understand than an exchange. The interface is easy to use, although the fees can sometimes be higher.
Two popular cryptocurrency brokers are SoFi and Robinhood.
At this point, it can be seen that the importance of e-wallets will become clearer. Some advanced crypto enthusiasts also prefer to keep the money they own in digital wallets. However, not all brokers allow you to move your assets off their platform.
For example, neither SoFi nor Robinhood allows you to move your assets into your wallet or anywhere out of your account on their platforms. If you want to keep your crypto in a secure wallet in the future, consider this when choosing a broker.
Create An Account
After choosing an exchange or broker, the next step is to sign up for an account. These platforms will ask you to verify your identity through different methods. This is necessary to prevent fraudulent activities.
For verification, you may need to submit a photo of your passport or driver’s license. The platform will then ask you to upload a selfie to match your face with your driver’s license or passport photo.
Top Up Cash
To buy cryptocurrency from an exchange or broker, you must have fiat money in your account. You can fund it via bank transfer or your debit/credit card.
Once you make a deposit, it will take a few days before you can use it to buy crypto. The time depends on the platform you are using.
Expert Tip: While you can use your credit card to fund some crypto exchange platforms, we don’t recommend it. Your credit card issuer will treat this transaction as a cash advance. Typically, cash advances are subject to higher interest rates and come with an advance fee. Therefore, you may have to pay a certain percentage of the transaction as an advance fee.
Choose A Crypto To Buy
Once your deposit is available for use, you can choose to purchase from hundreds, or possibly thousands, of cryptocurrencies. Some of the popular ones are Ethereum and Bitcoin.
You can identify a cryptocurrency by its “ticker” symbol, as a short name. For example, BTC is the ticker for Bitcoin. Here are the tickers for some popular cryptocurrencies:
- Bitcoin (BTC)
- Tether (USDT)
- Ethereum (ETH)
- Binance Coin (BNB)
- Cardano (ADA)
Depending on the cryptocurrency you choose, you may not be able to buy an entire coin due to its high price. Fortunately, many exchanges allow you to buy a fraction.
Instead of buying 1 BTC, the nearest price between $40,000 and $50,000, you can buy a percent or any other unit less than 1 BTC.
Select Storage Method
Your bank may be FDIC insured, but not a cryptocurrency exchange. Cryptocurrency exchanges are at risk of being hacked and you can lose money if you don’t keep your investments safe.
As we discussed, if you are buying cryptocurrency from a broker, you will probably have no choice but to keep it in your account. But if you buy crypto from an exchange, you can transfer your coins to a hot wallet or a cold wallet.
Hot wallets run on computers, tablets, phones, and other devices connected to the Internet. Your funds will be stored online in a hot wallet. While this storage method is convenient, it puts your funds at risk of being hacked and stolen due to a constant Internet connection.
Cold wallets are not connected to the Internet. You can “carry” a cold wallet or a hardware wallet with you in the form of a hard drive or USB.
However, you need to be careful when using cold wallets. If you lose the key to your wallet, you may never get your crypto back. Likewise, if the device malfunctions or breaks, you may lose money.
Which Cryptocurrency Is Best For Beginners?
One of the best beginner investing tips we can give you is to invest in popular currencies, such as Ethereum and Bitcoin. These cryptocurrencies are not only less volatile but also offer a high return on investment.
Memecoins like Dogecoin or Baby Doge Coin, on the other hand, are highly volatile because their value is built on hype. The moment the hype wears off, the value drops.
If you want a super safe investment, choose one of the least volatile cryptocurrencies.
What Should You Do When Investing In Cryptocurrencies?
When investing in cryptocurrencies, you have to be careful because one drop in the market can make you lose. Here are some investing tips for beginners to keep in mind.
Read the White Paper
Any list of important beginner investing tips will require that you always do your own research before investing. The white paper of any crypto project is a guide or report that tells you all you need to know about that currency. It details the philosophy behind that cryptocurrency and how it works.
Reading the white paper will bring you two benefits: One, you will get used to the intricacies of a particular cryptocurrency. Two, you can judge a project by its white paper. If it’s poorly written, you know the project isn’t worth the investment.
For example, the Baby Doge Coin white paper and roadmap talks about starting a new religion and many other things unrelated to crypto. Although Baby Doge Coin attracts some investors for its charitable contributions, there is no hype that will make it a good investment in the long run.
Stick to Your Trading Plan
In crypto investing, a trading plan is one of the best investment tips to keep in mind for beginners. It refers to the blueprint that governs how you buy and sell cryptocurrency. Your cryptocurrency trading plan includes the following parts:
- Market Focus
- Risk Map
With a trading plan, you focus and target only those trades that align with your parameters and guidelines. The most important part of creating a trading plan is sticking to it. Only change your plan if a better one is found.
The trading plan will align your strategy with market participation. You work in a controlled environment and get measurable results. This way you can visualize your potential results.
More importantly, a trading plan allows you to manage your risk to limit your portfolio loss. When you stick to a fixed risk-to-reward ratio, you can prevent unnecessary losses.
Don’t let greed rule your decisions. Beginners often invest in cryptocurrencies with high risk due to “FOMO” – fear of missing out. However, they still end up losing money because they don’t know the right time to sell. If making a lot of money was so easy, there would be a lot of people who did.
Therefore, don’t let rush, emotion, or any kind of extraneous information affect you sticking to your cryptocurrency trading plan.
Target Price And Stop Loss
While you don’t want to lose money when trading cryptocurrencies, it is inevitable at some point. However, you can still limit your losses.
A stop loss is a limit you place with your broker to sell your holdings when the price drops to a specific level. By doing so, you minimize the loss you incur. For example, if you buy a token for 50 USD, you can place a stop loss order to sell it if the price drops to 45 USD. In this case, you are ready to take a 10% loss. As a beginner, you must know when to stop loss with a stop loss order.
Meanwhile, the target price of a cryptocurrency is an analyst’s prediction of the future price of the token. Experts set these prices up based on the token’s performance history and earnings forecast.
When investing in cryptocurrencies, check their target prices to get the most out of your investment.
Avoid Timing the Market
It is nearly impossible to enter or exit the market safely without any loss. As you enter the world of crypto investing, you must be prepared for its ups and downs.
It is best to avoid market timing, as it will take up a lot of your time and cause you stress. Instead, invest and get out when the market is too volatile.
After all, you don’t just invest in cryptocurrencies, right? You also have other things to do. To really follow the market, you have to read detailed reports and financial statements, which can get tedious over time.
Furthermore, if you keep an eye on the market, you will find yourself on an emotional rollercoaster. As a result, you may not be able to execute your trading plan.
Invest Only In What You Can Afford To Lose
One of the best investing tips for beginners is to only invest in what you can afford to lose. Don’t let your emotions overwhelm you. When you let distractions – such as sensational headlines and tweets from billionaires – drive your investment decisions, you lose money.
New crypto investors often invest in a particular cryptocurrency just because others are doing the same. Yes, the idea may be appealing, but how can it last? Is that currency hyped right now – or does it also have potential in the future?
Don’t be afraid to get pressured just because everyone around you seems to be investing in a certain memecoin. Instead, do your research, stick to your trading plan, and make sure you scale up your buys.
Beware of Scams
When people first get into crypto, they often make the mistake of not being educated about scams – and how to avoid them.
The Federal Trade Commission recently announced that over 7,000 crypto investors lost a total of more than $80 million in scams between October 2020 and March 2021. As interest in investing in cryptocurrency and blockchain technology grows, more and more people are entering the market without doing any preliminary research.
Because of this, they are easy targets for scammers. Some of them trick investors by impersonating government agents or celebrities. Don’t worry, Elon Musk will not pay you to transfer crypto to him.
Additionally, others will give you “investment tips” in exchange for fiat or crypto. Don’t fall for these scams. The first rule when it comes to investing tips for beginners, don’t trust anyone who claims to give you huge sums of money while what you have to do is so simple.
Diligent Research And Appraisal
Just like stocks, fundamental analysis is crucial when investing in cryptocurrencies. With stocks, you have to consider hedging against inflation and other factors. But with crypto, you need to look at the performance of a currency over the past few months or weeks.
You will find self-proclaimed crypto investment experts everywhere. They will tell you to buy their “get rich” tutorials. Don’t just trust any random source when doing your research.
Listen to licensed financial advisors and always double-check any information you see or hear online. More importantly, do due diligence before you invest in cryptocurrencies.
Simply put, an appraisal is a comprehensive assessment of the cryptocurrency market – especially the specific currency you want to invest in – to establish its commercial potential and at the same time minimize losses.
When you do the proper research, it will increase your confidence when placing buy orders and protect you from being distracted and scared by bad news. For example, cryptocurrency developers can run active campaigns with celebrity endorsements to create hype when their new token hits the market.
As a result, many investors will blindly jump in without doing any research. Once the hype dies down, all is left to nothing. Of the many investing tips to keep in mind for beginners, one of the most basic is not to be impulsive or to act on FOMO. Instead, take it slow. Do your research, read the white paper, see expert analysis – and then decide if you want to invest in a particular cryptocurrency.
Keep Your Keys Safe
Crypto wallet keys are not like car keys or house keys that you can copy. If you lose your keys, you lose access to your wallet – and the money in it.
While you can get your money back in some cases, the process can be lengthy and tiring. Instead, do yourself a favor and try not to lose your e-wallet key.
It is equally important to keep your keys safe from prying eyes. Don’t leave your wallet open or store your keys in places that are easily accessible to others. The best way to protect is to memorize it.
Avoid Emotion-Based Trading
Every guide that contains “cryptocurrency investing tips for beginners” will teach you to put your emotions away before entering the crypto market. Newcomers to investing will often have positive or negative emotions when they win or lose money.
But don’t let these emotions dictate your next move or overshadow your outlook and decisions. The best way to control your emotions is to stop looking at market charts.
If you keep staring at the screen, looking at the ups and downs in the cryptocurrency market, you will inevitably get stressed and make unwise decisions.
Avoid Derivatives Trading
Derivatives Trading allows you to borrow funds from an exchange or broker to make more significant investments and get better trading results. However, as a beginner, avoid derivatives trading as it also increases the impact of a loss on your investment. Remember: only risk what you are willing to lose.
Meme Token Is Risky
Meme token or memecoin are just like any other cryptocurrency, except that they are conceived as a joke or meme. These tokens are a risky investment as they were created without any specific business plan.
The underlying principle driving these coins is speculation. To make any profit from them, you have to study the market movements very carefully and benefit from the increase in demand in the small amount of time you have.
In a post on Reddit, the creator of Dogecoin, a popular meme coin, said, “Pump and dumping, rampant greed, scamming, bad faith actors, demanding from others, hype without research, taking advantage of others – those are all worthless.”
In fact, he left the community because these practices are all too common in meme coin trading. He further instructs, “Keep aware on how vigilant yourself as much as you can cryptocurrency works, how these markets work, never risk more than you could safely lose, be.”
When you buy Bitcoin, you know that there is a white paper with coherent information. You can do your research and plan your trading accordingly. In contrast, the value of the meme coin is driven up – and down – by the level of hype it receives from the market.
Since there is no sure way to determine their true value, you will always be at risk when investing in meme token. You might be taking a nap and a memecoin could lose all of its value. That is how volatile this currency is.
Choose A Crypto
The first rule for newbies to crypto investing is to start with choosing one or two cryptocurrencies. For example, do your research, make a trading plan and buy Bitcoin or any altcoin of your choice.
As a newbie, it will be difficult to learn all the jargon and slang in the crypto world. On top of that, if you try to invest in five currencies at once, you might have to trade off your current job.
While it’s great to diversify your portfolio, it’s a good idea to thoroughly study the fundamental analysis of just one cryptocurrency at first and invest in it. Track your progress and then make other investments accordingly.
Read From Reliable Source
It seems like most people these days are crypto experts. From WhatsApp group chats to YouTube, the amount of information is endless. However, you shouldn’t just trust a source of information you’ve found by accident.
One gold investment tip for beginners is to make sure that you are getting a fundamental analysis of the crypto market from reliable sources. For example, Cointelegraph is the best place to find crypto news. Another reliable source on this is CoinDesk, where you can find out about the current rates of different cryptocurrencies and market trends.
If you invest in Bitcoin and want to learn about it, its developers have a magazine dedicated to that.
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Disclaimer: This article is for informational purposes only, not investment advice. Investor should research carefully before making decision. We are not responsible for your investment decision