Introduction to Getting Started with Cryptocurrency
Cryptowisser was founded with the ambition of making the complex crypto world more available to everyone. In line with that ambition, we present and compare all crypto exchanges, crypto casinos, crypto wallets, crypto cards and merchants accepting cryptos in an easy and understandable way. But maybe we should step back a little, back to basics, and provide you with some general rules in crypto and what you need to know when getting started with cryptocurrency. That is the purpose of this blogpost. This blogpost is a more concise version of Cryptowisser’s Getting Started with Cryptocurrency-guide, so if you want to read more about each of the rules set out below, consult that guide.
Only invest what you can afford to lose
Crypto investments are highly volatile. You have probably heard about crypto investors multiplying their initial investments with 100 and yes — cryptocurrency profitability can be great. But is Bitcoin a safe investment? No. Are other cryptocurrencies necessarily a safe investment? No. Where there is extreme upside, there is also extreme downside. As such, when trading cryptocurrency for profit, one should only invest what one can afford to lose. Otherwise, you might be sleepless and nervous as long as you’re invested in crypto.
Diversify your crypto investments
Diversification in a crypto-portfolio can be done by investing in different cryptocurrency categories. There are several different ways to categorize cryptocurrencies, but one way is the following:
(i) Currencies (BTC, LTC, etc.)
(ii) Application Platforms (ETH, NEO, LSK, etc.)
(iii) Supply-chain (WTC, MOD, etc.)
(iv) Privacy-focused (XMR, ZEC, etc.)
(v) Blockchain-agnostic (ARK, LINK, etc.)
However, diversification in a crypto-portfolio is more commonly used synonymous with “investing in many different cryptocurrencies”. The reasoning is that if you put all of your funds in one single crypto currency, you take bigger risks, as it is more likely that one single cryptocurrency goes belly-up and loses all of its value, than it is likely that 15–20 cryptocurrencies do it at the same time.
Always pay close attention to BTC (Bitcoin)
The best circumstances for altcoin price increase is when Bitcoin shows organic growth or decline, or remains stagnant in price.
Greed is not always good
Consider withdrawing a certain amount at certain points, to make that amount “safe from potential losses”. Sure, you might miss further gains on the withdrawn amount, but hedging your risks comes at a price. If you wait too long or try to get out at a higher point, you risk losing profit you already earned or even turning that profit into a loss. Get into the habit of taking profits and scouting for re-entry if you want to continue reaping potential profits.
Do your own research — trust no one
Let’s face it. There are a bunch of assholes out there in the crypto world. People who use every opportunity to exploit less-informed crypto investors. They’ll tell you which coins are the best crypto coins to invest in and claim certain coins will moon, just to increase the prices so they themselves can exit. Due to the highly speculative nature of the cryptocurrency markets today, a good investor will always do his or her own research in order to take full responsibility for the potential investment outcome. Information coming from even the best investor is, at best, great information, but never a promise, so you can still get burned.
FOMO stands for Fear Of Missing Out. Never do anything based on FOMO. In the world of crypto, learn to relax with the thought of Joy Of Missing Out. Quite often, when a coin is surging in price or making a bull run, it’s tempting to want to buy in and catch the wave. Avoiding rushing in to buy a trade, as most likely, by the time you buy in, the price will start to correct and you’ll be stuck holding tokens at a loss. There are some historical patterns in crypto activities that often is surprisingly accurate; ‘Buy the rumor, sell the news’
ALWAYS double-check the ticker
A ticker symbol is the acronym of capitalized letters (usually 3–5 letters) characterizing a certain cryptocurrency. As most of you surely know, the ticker for Ethereum is ETH. Ticker symbols are not always universal, however, and may vary from exchange to exchange in rare cases. For example, Bitcoin Cash trades on some top crypto exchanges as BCH, while it trades on others as BCC. BCC is also the ticker symbol for BitConnect, which has been outed as a Ponzi Scheme. If you bought BCC under the impression that it was Bitcoin Cash, you would’ve lost a lot of money. Accordingly, ALWAYS double-check the ticker.
Don’t make a habit of trying to time the market
Trying to time the market is difficult. Within general portfolio management theory, it is argued that a good way to avoid timing the market is to utilize time diversification. Let’s say that you have USD 10,000, and you want to invest it. You think that the market is at a dip and you want to go in. What you should not do is to deposit all of the USD 10,000 at once, and hope that you have hit a dip. A clever idea in a cryptocurrency investment strategy would rather be to invest USD 1,000 a month. By doing that, it is less likely that you buy high, as the market goes up and down during the relevant 10-month period.
When it comes to trading cryptocurrencies, not only is the market much more volatile than traditional markets (where 20%-50% swings in a day is commonplace), but it’s also much more unpredictable. This makes it even more impossible to sell at the top and buy at the bottom. Time diversification could thus be a useful strategy. In other words, you could say that it’s a safer and more profitable cryptocurrency investment strategy to put time in the market, instead of trying to time the market.
Set stop losses for short-term trading
For any coins that you are not intending to hold medium-term or long-term, always set stop losses. This is an important part of any cryptocurrency investment strategy for several reasons — the most obvious is mitigating your losses. But more importantly, you force yourself to decide on a point of acceptable loss, and because you now have a reference point, you are able to measure your effectiveness to keep or adjust for future trades.
Try to learn from your mistakes
We know. This is hard. To try to learn lessons from losses. But trust us on this one, always evaluate the situation and try to figure out why something happened as it happened. Don’t sit in front of a fire place and ask yourself “should I invest in cryptocurrency, at all”? Rather, take that experience as an asset for your next move, which will be better because you know more now than you knew before.
HODL stands for Hold On for Dear Life and means that you should not sell in a bear market, rather you should hold on and wait for the market turn that (according to the HODLers), will eventually come. The acronym HODL is a sensible advice. Simply hold onto your investments throughout the highs and the lows, and avoid day trading. As the markets grow over time, so will your investments, don’t get greedy and try to make multiples of your investments too quickly.
There are of course thousands of other lessons to learn when starting investing or trading crypto, but the above are the items Cryptowisser.com — as your number one trading cryptocurrency guide — think is most important for you to remember.