This quote is one of the Gems by Warren Buffet and pretty much applies to all investments and across all the times. Without understanding what you are getting into don’t risk your hard-earned money. Get to know the pros and cons of investing in cryptocurrencies. Only after your understanding the risks and rewards fully you should consider looking at dos and don’ts of investing. Once you know the dos and don’ts then finally start investing. Do read this article completely before investing. I am sharing the relevant links at the bottom of this article, so that at-least you scroll down to the bottom of this article.
Research, Research and Research
If you are planning to invest in cryptocurrencies make sure to spend at-least 24 hours of effective reading time understanding what is blockchain, what are cryptocurrencies, security measures you should take before investing in cryptocurrencies and so on. Please remember that no research is enough and you need to keep updating yourself constantly. What could have been true a couple of months ago might be completely wrong now. Technology, Finance, Investment strategies, Regulation and every other thing about cryptos is changing at such a fast pace that you need to update yourself on a daily basis. In crypto lingo it is called DYOR : Do Your Own Research
Get your hands Dirty
A lot of people suggest to spend a lot of time understanding blockchain, cryptocurrencies and trading. I would suggest an alternate approach where you play around with a small amount so that you get your hands dirty and learn to play with real money and real exchanges. My suggestion is to play around with a small amount that you consider meagre. Create accounts, buy bitcoin, buy altcoins, do some trading, participate in a good ICO and so on. You can do all these with a small amount and once you are comfortable then you can bring in the big money.
Know what FUD & FOMO means; Make sure not to be influenced by either of them
These will be the two words that you will hear most frequently in the crypto markets. You resolve not to be influenced by either of these is what will give you peace of mind.
FOMO: Fear of Missing Out.
There were hordes of people who joined cryptocurrencies between November 2017 and Jan 2018. Most of this crowd driven by FOMO. It was such a bull market that none of the new entrants had enough time to know the market before investing. It was one crazy bull run where some people doubled and tripled their money in less than a week’s time. Hearing such stories people didn’t want to miss out the opportunity. Today many of them will be wrecked as Bitcoin is at $7995 as of writing this article. Compared to the BTC all time high of $20089 this is 40% correction which most of them were not ready for. If they had done enough research either they would not have entered at such high levels or if they had decided to enter at such high levels they would have been prepared for the lows. But this doesn’t seem to be the case as many people are selling at losses and exiting the cryptocurrencies
FUD : Fear, Uncertainty and Disinformation.
This is one of the banes of social media and internet in general. Most of the time you will keep coming across fake news, manipulated images, tweets from fake accounts and likes. There will be interested parties who will spread Fear, Uncertainty and Disinformation to dump some coins. Learn to separate the fake news from the real. Trust but verify is the mantra to counter the FUD. If you hear something on these lines discuss it in the groups that you are part of so that you can verify the sources and intentions of any news item. Please be advised that even big institutions, new organizations, investment funds and governments can also be perpetuating FUD.
It is not just Bitcoin there are a lot of others interesting cryptocurrencies.
Bitcoin generally gets most of the press. The share of exposure that Bitcoin is so huge that Bitcoin is almost synonymous with Cryptocurrencies for the general public who are not exposed to cryptocurrencies. I invest only in coins that are backed by good projects. I generally keep referring to them as projects because that is what I am investing in. There are many good projects which can change the nature of the world we live. Things that were unimaginable just a couple of years ago could be reality thanks to the advancements in technology and the frictionless, trustless, automated communities/markets that are propping up all thanks to blockchains fueled by cryptocurrencies.
Join a couple of good Facebook Groups
It can be very difficult to keep up to date with all the happenings in the Cryptosphere. There are way too many Facebook and telegram groups. It is very difficult to identify the good ones unless you have subscribed to them. I would suggest against joining telegram groups initially as there will be a lot of chatter and can get irritating at times. I would suggest sticking to two Facebook groups until you get a sense of things and you are ready for opening the gates for data flood.
1. CryptoCoinTrader Facebook Group: https://www.facebook.com/groups/218612071968287/
2. Cryptocurrency for Beginners Facebook Group: https://www.facebook.com/groups/CryptoCurrencyCollectorsClubPublicForum/
Do not join Pump and Dump Groups
P&D groups as they are called and marketed can burn you very quickly. They generally promote their groups by promising 2x to 5x returns in day. You might get lucky with a few P&D and might make money as well. Though this can be very enticing don’t fall into the trap.
I would suggest against joining this group for two reasons.
One, it’s wrong. They are trying to manipulate the markets and you are helping them in doing that.
Two, you will get wrecked. P&D groups are market manipulators and scams. If you want to know how P&D groups work and how they can wreck you check out this article https://bitfalls.com/2018/01/12/anatomy-pump-dump-group/
Learn to Track your Funds
Unlike stock exchanges you will have to create accounts in multiple websites where you can buy Bitcoin and a multitude of other exchanges where you can trade your bitcoins or ethereum with a multitude of coins. As of today, CoinmarketCap lists 1514 currencies on its site. It is difficult to keep track of these assets which will be distributed across different exchanges without a proper tool. Consider checkout a few portfolio trackers. Cointracking is my favorite tool for tracking all my investments. It lets you auto-import your trades from multitude of exchanges and have some decent reports which lets you track your investments. You can read the complete manual I wrote on https://steemit.com/cryptocurrency/@gokulnk/best-cryptocurrency-portfolio-manager
Better safe than sorry
I can’t over stress the importance of this. Make sure that take all the precautions necessary. Cryptocurrency is full of scams, hacks, phishing attacks, impostors and fraudsters. Always be careful before entering your passwords/private keys or transferring money to any accounts. Make sure to use a Linux/Mac OS, disable unnecessary extensions, always double check the URLs (better to bookmark), never click on links from google search if you want to open an exchange website. The list goes on and on. I will create a separate post with the precautions that needs to be taken.
Invest only what you can afford to lose
You will keep hearing this as your start investing in Cryptos. This advice is like the “Terms and Conditions” that you find on the websites. With “Terms and Conditions” everybody signs it but nobody reads it. With respect to the advice “Invest only what you can afford to lose” everybody knows it but nobody follows it. There are multiple cases of people who lost all their savings, had taken loans for investing & lost most of it and are not able to pay the EMIs. I am nobody to decide on your risk appetite and your approach but remember that when you have not much to lose you can be much more confident about the projects that you have researched about.
I have lost the count and I am not sure if I have already listed down all the ten things. But I will still go ahead and mention this as I don’t see many people stating this. Irrespective of whether we lose or make money, every investor in cryptocurrency should be proud. If you have researched enough and if you have invested in worthy projects you should be proud as you are investing in the future of technology. I strongly believe that over the time “Smart money moves towards Good Projects”. If we can educate enough people about good projects we have an opportunity in-front of us which is unprecedented and can become a major catalyst in the history/future of Mankind. If we play our cards right I think we can reach Singularity (or at-least Utopia) before 2100.