Tips to Get Started with Cryptocurrencies

Tom Handy

7 tips from someone who has invested in the crypto market

With companies, banks, and well-known investors jumping into the crypto market in 2021, you may feel the need to join in as well. Or maybe you saw an advertisement promoting a crypto exchange or maybe news about Dogecoin or Shiba has crossed your path.

The crypto advertisements and news, whether intentional or not, have probably caught your eye by now. Cryptocurrencies are quickly entering mainstream media.

Bitcoin is the king of this market. It is the first cryptocurrency and you can compare Bitcoin to Gold in the precious metals market.

Let me start off with that, I am not a techie. So I cannot give you the true technological explanation for cryptocurrencies.

As for me, I am an investor. That is what attracted me to this market.

I look for ways to multiple my fiat money. Bitcoin had a better rate of return than my local bank.

In 2017, I had a few people pitch me to join a MLM or network marketing company that was on a cryptocurrency project. I joined one but only after talking to a few people. The cryptocurrency MLM didn’t work out.

At first, it took me a while to understand Bitcoin. This was money that you could not see, taste, or touch.

After finally understanding the crypto market, I made my first Bitcoin purchase in December of 2017. Of course, you could say this as the wrong time, since Bitcoin crashed at the end of the month.

If you plan to invest now, you may be in a similar situation.

Bitcoin runs on a cycle. Some cryptocurrency experts believe the current cycle may end in the next few months.

Since cryptocurrencies are new similar to computers in the 1990s, no one knows what the future holds. The market may crash or it may have small price swings.

Many companies have invested in Bitcoin and a few other cryptocurrencies. We may not see as big of a drop as before. Or the market could drop as it has previously with price drops by over 50%.

Whatever you decide to do, invest money that you can afford to lose. The market may drop tomorrow and the money you invested could drop by 20% to 30% or more.

Whether you are just getting started or have never invested, here are some tips you should consider.

Seven things you should know

1. Know your goal when you invest in cryptocurrencies

Before you invest a dollar or even hundreds of dollars, you need to know your endgame when you invest in cryptocurrencies.

Do you plan to hold the cryptocurrency for a few days, a few months, or a few years? Each timeline is different.

When you invest in the crypto market, be aware that the market moves very fast. A lot of movement happens when you least expect it to happen. Sometimes the movement happens while you’re asleep.

Unlike the stock market, the cryptocurrency market moves 24 hours a day, and it does not take a day off.

So you need to know your goal before you invest in the market.

2. Be aware of FOMO (Fear of Missing Out)

If you have seen the rise of Bitcoin or any cryptocurrency go from a couple thousand to six figures, don’t rush into the market if you fear you’ll miss out. This is when you need to look at the market with clear eyes.

As previously mentioned, know your goal when you invest. The same applies here, don’t jump into an investment because someone mentioned it or you see a chart of a cryptocurrency that has risen 100% for the day.

You have most likely missed the biggest gains, and it is possible the crypto could crash as soon as you jump in.

Pick a few cryptocurrencies that interest you and spend time watching the price movement. Follow the cryptocurrency on a crypto app.

Read about the history of the crypto on CoinMarket Cap or CoinGecko.

  • Review the website for the cryptocurrency
  • Look at the founders
  • Find out the purpose of the cryptocurrency
  • Ask yourself, does the project seem legitimate?
  • See if the crypto has a Twitter page where they share the latest updates

There is more to investing just because you see someone mention the name of a cryptocurrency.

3. Do your own research (DYOR)

When a cryptocurrency interests you, do your own research. Don’t buy a crypto because someone mentioned it. Do the research.

Investing in the crypto market takes a little legwork on your work. Find the cryptocurrency that you believe has potential and also suits your risk tolerance.

Naturally, some cryptocurrencies have passed the initial test such as Bitcoin. Others have the potential such as Ethereum but one day it could be Solana or Cardano. The market changes and moves very fast.

Development on these cryptocurrencies continues just as much as Apple changes its iPhone.

You cannot invest and then sleep on what you invested. The crypto market continues to evolve.

4. Choose a reputable exchange

There are a lot of cryptocurrency exchanges. An exchange is like a bank where you deposit money and get loans. Each bank has different rates and types of loans. The same is true for cryptocurrency exchanges.

Cryptocurrency exchanges have different cryptocurrencies, exchange rates, types of crypto lending platforms and rates, and other features. Some even offer trading platforms.

Just as a bank offers different features, cryptocurrency exchanges are the same.

It’s best to try out the exchange and see which one you like best. Everyone has their own personal preference.

Some of the popular exchanges include Coinbase, Coinbase Pro, Gemini, Binance.US, KuCoin, Hotbit, Klever, Voyager, Crypto.com, and others.

Not every exchange may be available where you live. Not every state or country has accepted all of these exchanges.

Then there is Robinhood and WeBull. These online stock exchanges offer cryptocurrencies. There is one big difference between these and the other cryptocurrency exchange I listed.

Robinhood and WeBull do not let you take your crypto off the exchange. So you do not own the keys to the crypto. These platforms do.

With most cryptocurrency exchanges, you can take the crypto off the exchange and move them to your own online or hardware wallet. You can consider this as holding on to your own crypto rather than an exchange.

A big reason is many exchanges have been hacked in the past. Some exchanges will cover the stolen crypto but others will not.

Two popular hardware wallets are Ledger Nano and Trezor. The hardware wallets are good if you want to keep your cryptocurrency locked up for a long period of time.

Just make sure you have the patience to transfer your cryptocurrency from an exchange to the wallet.

Some online wallets include Blockchain, Exodus, Mycellium, and others.

These are not the only exchanges and wallets since there are many other ones.

When you create a wallet, make sure you remember or record the password and key phrases. You will need this information to access your account.

5. Invest a small amount so you don’t lose it all

When it comes time for you to invest, I encourage you to invest a small amount. You will want to get the experience of buying your cryptocurrency.

It is possible you may make a mistake and lose your money if you are not careful.

After you have invested, then you should watch the price movement of the cryptocurrency.

Once everything is fine, then set a routine to buy more. You may want to dollar cost average and buy once a month. Or you may want to buy when you have spare money to invest.

Make sure you spend money that you don’t need to pay your bills and living expenses.

6. Understand the tax rules

A few years ago, the cryptocurrency market was like the Wild West and there were no rules. Now there are rules and the tax agency will come to collect on your gains.

Most exchanges will send you a report on your gains and losses so make sure you keep an eye out for that when you get ready to file your taxes

Basically, you will owe money if you made a trade within 365 days or less or over a year. When you make a trade in less than 365 days, you will owe short-term gains. This amount is about 20% but it depends on your income.

When you make a trade over 365 days, this is considered long-term gains. You will owe money but it will be less than if held your cryptocurrencies for less than a year. The longer you hold your cryptocurrencies, the lower your tax will be.

I am not a tax accountant so encourage you to work with a tax professional.

7. Let your brain and not your heart do the thinking.

When investing in cryptocurrencies, it is easy to let your emotions get the best of you. Try your best to have a plan with your investment.

Let your brain make your decisions.

It is too easy for your emotions to take over.

You need to know your game plan.

The cryptocurrency market moves very fast and there are a lot of factors you have no control over. As long as you have a game plan and set your buy and sell criteria, you’ll be better off.

Set your stop-loss order so your cryptocurrency doesn't wipe out all of your gains.

If you can handle the dip, have some cash on the sideline so you can buy more of your favorite cryptocurrency.

Final thoughts

These seven tips covered some of the basics on what you need to invest in cryptocurrencies. This does not cover everything but enough to get you started.

Continue to read and learn as you invest in this market.

Let your brain do most of the work as your emotions will pull you each time forcing you to make a trade.

Do you have any tips or suggestions?

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.

Comments / 0

Published by

Sharing information about Texas, and the movers and shakers you need to know.

El Paso, TX
5135 followers

More from Tom Handy

Comments / 0