Best Cryptocurrency Advice For Beginners Investing In Crypto

Best Cryptocurrency Advice For Beginners Investing In Crypto

Blockchain | 11 minutes to read | 05.11.2022
TL;DR Don't FOMO into coins because you see the price rising. Use rational thinking when investing in crypto rather than emotions. Do you own research rather than rely on what random people on the internet say. Read white papers and familiarize yourself with what your favorite cryptocurrency does. Make sure you understand some of the popular terms in crypto like blockchain, market capitalization, consensus methods, decentralization, supply, and smart contracts. In order to cushion the impact on any potential losses you should diversify your portfolio and include a strong backing of Bitcoin or Ethereum. Scams happen in the crypto world. Watch for these and know them so you don't get caught in them. There are a lot of scams, but the biggest seem to be pump and dumps. Keep your seed phrase safe since that is what will allow you to access you wallet. Definitely never lose this.
A lot of us wish we could go back in time to when we first started investing in crypto and gave ourselves some advice. I know I do, and if you ask someone else I guarantee they would say the same thing. Since lessons in crypto can cost you thousands. Not because there is any actual price tag, but because the mistakes that you make can cost you literally thousands of dollars. We're here to help make sure that you lose the least amount of money possible. Maybe even gain some! Here are 6 crypto investing tips for beginners.

Don't FOMO

FOMO means fear of missing out. FOMO is that feeling you get when you see a coin rising in price. Everyone thinks it’s going to the moon! You better get in while you can otherwise you will lose out on tons of potential money! Most of the time, FOMO is going to cause you to lose money. Especially when the hype wears off and the market corrects itself, you’ll most likely find yourself with a coin that’s worth a lot less than when you bought it. It might take months, even years, for that coin to hit the price you got it at, if it ever even does. Take Dogecoin for example. It was at an all time high around the time Elon Musk was going to host Saturday Night Live. Everyone was buying DOGE and the price just kept climbing and climbing. It got to over $0.70 per coin and people were still buying! Until, during the episode of Saturday Night Live, people started really selling their coins and the price dropped. If you were one of the unlucky ones who bought around the high because of the hype, unfortunately, you probably lost money since Dogecoin has never been that high again. If the price has risen quite significantly and you’re hearing lots of chatter about the coin, chances are you are already too late to make a decent amount of money. Instead, you should focus on the long run, and only invest in projects that you absolutely believe in. If your project is good, and you think it will be around in a few years, then it shouldn’t matter what other coins are doing currently. Another thing is that no one can ever predict the price of crypto no matter who they are, how smart they are, or what they say. People on Twitter or Reddit can create some serious hype around prices of coins, especially when they are on the rise. They don’t know if the price is going to keep rising or crash the very next day. It’s up to you to invest wisely without being guided by your feelings. Last thing with FOMO. If you take anything away from this article, remember this: only invest what you are willing to lose. It can be really easy to toss in a lot of money on a project that you are hoping will double, triple, or even multiply your life savings by a hundred because you see a project rising significantly. Instead, you should use DCA (Dollar Cost Averaging). This simply means to put in smaller amounts of money over a period of time no matter what the price is. It’s a smarter, less risky way to invest, especially with the volatility in cryptocurrency.

Do Your Own Research

There is a great tip to investing: only invest in the things that you know. You don’t want to just listen to what anyone says on the internet, especially Twitter. It’s most likely that these people have invested in certain coins and they want you to invest too, so that the price of their investment goes up. And people fall for that even if they don’t even know what the coin is other than its name or a logo. The cryptocurrencies that will be around for the long run are the ones that provide an actual value. It’s up to you to determine what you think which ones will provide value. Here are a few tips to doing your own research and finding the perfect coin for you. The easiest way to understand a certain crypto is to read the white paper. A white paper is a document created by the developers of a project that explains the technology and what the project is trying to accomplish. Every reputable cryptocurrency has a white paper, and you can usually find this easily on their website. You can also get easy access to a crypto’s whitepaper on Coinbase and other exchanges. If a crypto project does not have a white paper, don’t invest. Check to see if there is any kind of roadmap for the project. A roadmap is what the project plans to do in the future and when it is trying to accomplish those things. There should be short term and long term goals for the project. This will give you an idea if the crypto will still be around in the future. Don’t be afraid to compare crypto. There are different types of crypto out there - currencies, software platforms, oracles, sidechains, and tons of others. Comparing Bitcoin to Ethereum is like comparing apples to oranges because they are so different. But comparing Cardano to Ethereum is much better since they are both trying to accomplish the same thing. You should have at least a good idea of what the purpose of the crypto is, what it is trying to accomplish, and what the future plans of the project are.

Understand Crypto Terms

Being able to understand cryptocurrency terms piggybacks off of the “only invest in what you” know rule. There are many different cryptocurrencies out there and some of them can be complicated to understand since the white paper will use all sorts of crypto jargon that you may have no idea about. You can't understand a crypto that uses smart contracts if you don’t know what a smart contract is or even what blockchain is and how it works. And again, you don’t want to invest in anything you don’t understand. Some terms that you might want to understand are blockchain, market capitalization, consensus methods, decentralization, supply, and smart contracts. Familiarize yourself with the more popular terms that are used in cryptocurrency, especially the ones that will help you when researching certain coins to invest in. Knowing them will definitely make things easier for you. We wrote an entire post with all of the most popular crypto terms that every beginner investor should know.

Diversify Your Portfolio

Diversifying your portfolio is important since it can help you not lose as much money. For example if you put all your money into one coin and it goes to zero, then you have lost all your money, but if you put half in one coin and half in another and only one goes to zero, then you have only lost half your money. But, don’t spread yourself too thin. Otherwise you might not see many profits. For example: if you split $1,000 into 10 coins at $100 each, and all but one go to zero, and that 10th coin multiplies by 10, then you are left with $1,000. You broke even. Now this time, you invest $200 each into 5 coins, and all but one go to zero, and the last one multiplied by 10, you will have $2,000. A good idea is to start with one coin, and build your quantity slowly. Honestly, your best bet if you are just getting started is to start with Bitcoin. It is the safest play, since it will most likely always be around and be the one coin that will be almost guaranteed to bounce back to its all time high. After you are satisfied with your initial Bitcoin investment, you can start looking into other coins called altcoins. Ethereum is probably the safest altcoin investment, so it’s smart to hold a bit of that before looking into others. Then once you feel comfortable and have done research on other coins, you can start to invest in them too. Remember that phrase, don’t put all your eggs in one basket. A bear market is the perfect time to diversify your portfolio. Learn what you should do during a crypto bear market.

Watch For Scams

There are quite a few scams that happen in the crypto world. This happens quite often with anything that involves money, but since cryptocurrency is so new it’s easy to fall for certain scams before you even know they are happening. A couple popular scams are rug pulls and pump and dumps. They are both quite similar in that both of them will see a spike in price followed by a huge drop in price. These scams mostly rely on a few whales and hype to drive the price up. A rug pull is very intentional to the point where the project was never going to be used for anything other than to make the developers money and scam people. A pump and dump scam can happen on almost any coin because all you need is a few whales to drop loads of money on a crypto, watch the price go up as people jump on the hype, and then sell to get as much value as possible. A very popular rug pull was with a coin called Squid Game that rode the hype of the popular Netflix series. Lots of people jumped on board and the price skyrocketed unbelievably. However, as investors soon found out, it was actually impossible to sell the coin at all. Only the developers were able to sell, and they made massive amounts of money once they sold, while investors watched their coin drop to zero. Learn a few common crypto scams and how to avoid them before you fall for them.

Keep Your Seed Safe

A seed phrase is a bunch of random words that will get you back into your account or wallet if you somehow lose access. Needless to say, these words are very important to you and your crypto, so your seed phrase must be kept safe because there is absolutely no way to get into your account without it. It’s also important that no one else has access to this phrase because if they do, they also have access to your crypto. One way to keep your seed phrase safe is to write it down on a piece of paper and then store it somewhere safe, like, hmmmm, a safe. The reason you would want to write it down on a physical sheet of paper rather than store it online is because it’s more secure. If your phrase is saved as a screenshot on the cloud, a hacker may be able to access that account and therefore access your crypto. If your seed is written on a piece of paper and stored in a safe, the only one with access is you. Most importantly, you do not want to lose your seed phrase. No one, no one, no one will be able to recover it if it is lost. Make sure you remember where you store it. And despite what you may have heard, don’t tattoo your seed phrase to the inside of your eyelids. Just kidding, I’ve never heard of anyone doing that. You can learn even more about keeping your seed phrase safe. Summary When investing in crypto do your best not to FOMO into projects that are skyrocketing in price. Odds are by this time you have lost your chance to make any real profits and will most likely lose a chunk of your money unless you are lucky. Instead, focus on the future, DCA, and hold on to the projects that you believe in long term. It is important to do your own research on a crypto project rather than relying on random strangers (or even your friends) for information. These people are probably bias towards their own coins. Make sure to read any white papers, roadmaps, and compare it to other crypto projects in the same space. Understanding crypto terms is important for understanding crypto as a whole. It will make you a better investor and it will be easier to research certain coins if you know the vocabulary behind it. Diversifying your portfolio is important since it will help you gain more money and lose less money. Having a good backbone of Bitcoin and Ethereum is essential before going out to invest in other altcoins, but don’t spread yourself too thin. Pay attention and don’t fall victim to the countless crypto scams out there. Beginners are especially susceptible to this since they might not easily be able to spot scams. The biggest scams are pump and dump/rug pulls where the price drastically increases only to drop suddenly when whales have sold for profits. Keeping your seed phrase safe is extremely important when investing in crypto. This seed phrase will get you back into your account if you have lost access for any reason. Without this phrase, it is likely that if you can’t get into your account, your crypto will be lost forever. Now that you know the best crypto investing tips, you can learn the best places to buy crypto.
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