First of all we want to begin by saying thank you to all those who support us via our website, Facebook and Twitter. Specially when the so called faces in India (eg: Amit Bhardwaj who runs a scam, Sanjeev Goenka who runs a popular Indian exchange Zebpay, and countless so called Blockchain and Cryptocurrency leaders as mentioned below in photo) are there to manipulate gullible Indians and newbies for their own vested interests [think about it: if you a service/product provider would you say your service is not good or isn’t the best out there?!?]. Cryptocurrency is one realm where there is no one particular educator, book, pdf, Youtube video or a friendly neighborhood Spiderman who can help us out with the basics of it.
Add to the fact that Indians have been habituated to passive investing big time for more than 30 years now : government issued bonds, Kisan Vikas Patra, Mutual Funds, Fixed Deposits, etc. which has made us really lazy in attempting to think in an innovative fashion when it comes to money. We are collectively really good in losing it instead of making it wisely. That explains the many frauds where people are entrapped in buying up insurance as investment vehicles basis consultation by their investment advisors (refer Moneylife for more info). So let’s get to learn the fundamentals of investing in cryptocurrencies:
We know many feel they have missed their opportunity to profit from the crypto market, but the opposite is true. Cryptocurrency is a baby and still has a lot more room to grow. However, before you begin throwing your money into this market it’s important to do the proper research. Ask yourself the following questions:
1) Do I understand what Bitcoin is?
2) What problems is Bitcoin trying to solve?
3) Do I understand what Blockchain is?
4) What are miners?
The more you understand what bitcoin is the more you’ll understand how other coins, such as Ethereum, work. You can research all this yourself through Reddit, Google and Youtube.
Make no mistake, Cryptocurrency is a market and it behaves like any other market. The stock market, real estate market, tulip bulb market and now the Crypto Market all behave the same and the basic principles can be applied. It’s important you understand this and don’t believe that this is “different” and the rules don’t apply here. The more you understand how markets work, the smarter you’ll be with your investment. Here are some good books about investing:
A Random Walk Down Wall Street
The Bogleheads’ Guide to Investing
Not everyone will agree with us here, but we highly believe the best and SAFEST way to make money is long-term holding. Below are the strategies for long-term investing.
1) You can’t time the market. No one has ever successfully timed the market consistently over multiple stocks and the crypto market is no different. Stay away from being a day trader and avoid trying to “guess” the highs and lows. Sure, some people have better luck than others but the risk/reward is high in doing this.
2) Don’t sell/buy on emotions. A quick search in this community and you’ll find story after story of people panic selling when the price drops or buying high because they are afraid of missing out. Don’t make this mistake! If you truly believe in what your investing and you are holding for the long-term then it doesn’t matter what happens from day to day. When the price drops, that is a perfect opportunity to buy more, not sell. If you can’t handle the ups and down of the Crypto Market then you probably shouldn’t invest. Don’t be one of those guys who buys high, sells low.
3) Invest only what you’re willing to lose. This seems like common sense, but it needs to be said nonetheless. You don’t throw all your retirement money, savings, etc. into the Crypto Market (really, any market) no matter how much you believe in it. If you have so much invested that it’s causing you to have restless nights, affect your health or mood then you’re investing more than what you should. An ideal scenario could be to invest 10% of income, 20% if you have no debt. If you are young with no family responsibilities you may be able to invest more. Use your best judgement!
4) Diversify your Portfolio. We all heard the saying “Don’t put all your eggs in one basket” and that applies here too. If you want to make it simple, just invest in your top 10 and put a bigger percentage in the safer coins such as Bitcoin and Ethereum. By diversifying your portfolio, you decrease your risk, and that is what we’re all trying to achieve.
5) Understand the coins you’re investing in. You’d be surprised how many people go to Youtube or Reddit and see a highly voted comment saying “Buy XYZ” and they listen and buy it without doing any research. If you see a coin that is popular take that as the first step in researching the coin and then make an informed decision. What problems is the company trying to solve? How active are the developers [do they communicate frequently via slack or telegram]? Do they have a community online? How active is it? These are just the basic questions you should be asking. We will do a detailed post on this front soon.
6) Stay away from ICO’s The book “A Random Walk Down Wall Street” goes into detail about IPO (Initial Public Offering) and how there is substantial evidence to stay clear from them. ICO’s (Initial Coin Offering) are like IPO’s but much riskier. There are many “Coins” who are taking advantage of this and are making some easy money. Here is a quote from username Nic3up from his post on Reddit:
Anyone can make a whitepaper, build a bootstrap website and then fill it with pseudo technological jargon terminology; and it’ll seem legit enough for a community to follow it and give them millions of dollars in mere seconds.
Wallets & Exchanges
Okay, you did all the research, you know what coins you want to invest in and are ready for the next steps. We would recommend going HERE to learn all about this. After that, you’re on your own but hopefully you are much more prepared.
Thank you for reading this far! We know there are a lot more details we could cover but this is meant to be a basic beginners guide. If we missed anything or would you want to discuss about any details please reach us via our email and we will ensure to cover that topic very soon.
8 Replies to “Basics to Investing in Cryptocurrency”
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