Buying crypto for the first time? Here are 5 tips to get started
These are the things newcomers should keep in mind when diving headfirst into crypto trading.
Sponsored by AAX Crypto Exchange – trusted by 2 million investors worldwide. Buy, trade and grow your digital assets with 100+ spot pairs, crypto futures and DeFi yield. Get 50 USDT when you sign up through Finder, make US$10k+ trades and deposit US$500 worth of crypto. T&Cs apply.
Sponsored by AAX Crypto Exchange – trusted by 2 million investors worldwide. Buy, trade and grow digital assets with 100+ spot pairs, crypto futures and DeFi yield. Get 50 USDT when you sign up through Finder, make US$10k+ trades & deposit US$500 of crypto. T&Cs apply.
Make no mistake, crypto operates in a world of its own.
Going from obscure magic Internet money to the balance sheet of Fortune 500 companies in little over a decade, this new asset class is shaking up the finance industry.
Some might be calling for the bubble to burst, but with nation-states adopting Bitcoin as legal tender and some of the world's most renowned traders saying it's now a necessary part of every portfolio, whichever way you look at it, crypto has become impossible to ignore.
But the playground is still wild. Parts of it have become a hotbed for scams, retail hopium, and (pipe)dreams of financial freedom. So here are some tips to help you start out on the right track.
1. Only buy what you can afford to lose
The first rule of any investing is to only put in money you are willing to go without for an extended period – or to even lose altogether.
There is no more volatile market than crypto. It is common to come across days of red where we see 50% drops in prices, or year-long bear markets where transformational protocols lose up to 95% of their value.
Calculate your purchases based on your risk profile and only allocate a small percentage of your portfolio to crypto, at least while you're getting started.
2. Take a long-term view
We are in the midst of a financial and technological revolution.
By disintermediating transactions and building the new blocks for the Internet, the entire finance industry is undergoing an overhaul of its business model. These transformations take time. Decades even.
The status quo won't change without resistance, and those involved in the crypto space are experimenting and learning on the go.
Your safest option is to buy and forget. Taking a long-term approach will help assuage the stress of everyday volatility and give you some peace of mind while the market recalibrates against some of its own uncertainty.
Just look at some of the most important investors in the world. They're seldom worried about daily price action or trading. They research, buy for the long haul and wait for their thesis to play out. To quote one of the most notable investors of all time, Warren Buffet: "Nobody wants to get rich slow."
And despite what others might say, we are still very, very early.
3. Do your own research
One of the most common adages in the crypto world is: "Don't trust, verify."
Nowadays it's extremely easy to get involved in the digital economy. You simply download a wallet, load it with funds and start buying, selling and swapping digital tokens like it's Disneyland.
But the market is chock full of scams and scammers hard at work cooking up the latest convoluted schemes to part you from your money.
Fake Twitter accounts, back-alley Telegram groups, dodgy YouTube influencers; it pays to be alert. When you read "coin to 100X" or "10,000% yield on staking", take the time to closely understand what is really being offered and how it works.
Learn about the protocol, the founders and team creating it, tokenomics and whether the code lives up to its promises. Many times it won't and you'll be happy you were cautious and took the time to thoroughly investigate.
In the crypto world, scepticism is healthy. Consume every bit of information within reach, interrogate it and only then make a decision.
4. Keep your emotions in check
Fear of missing out, also known as FOMO, is rife within the crypto community.
We're bombarded with grandiose headlines of coins pulling 100X or warning that you're late to the party and don't want to miss out on the next big thing.
Buying assets when your adrenaline is pumping is a sure way to lose your money. Keep your head cool, remember that the most important thing is education and take time calling your shots.
The most common mistake for retail investors is buying the top after believing the illusion that people all around them are getting rich. It's almost certainly not true, otherwise everyone would be smug behind the wheel of a Lambo.
Don't give in to peer pressure. Take your time, remove emotion from the equation and make rational, data-backed decisions.
5. Weigh up where to hold your coins
There are 2 main ways to store your crypto once you've got it. Non-custodial platforms and wallets, where you hold your own private keys and are in complete command of your capital at all times; and centralised exchanges that serve as custodians but offer a wider breadth of services and products.
Let's start with holding your own keys. Put simply, private keys are the cryptographic access to your crypto holdings. They live on your wallet device and can't be accessed by a third party as long as proper security measures are taken.
It's generally recommended that you keep the bulk of your crypto in cold storage – a hardware device that holds those keys offline – or on your own private mobile device.
On the other hand, lots of traders opt to entrust the custody of a portion of their funds to a reputable centralised exchange. Doing this means you can tap into frictionless trading between digital assets without the need for complicated wallet addresses. Many of these platforms also provide a place for you to double down and put your crypto to work (more on that below).
It all comes down to personal preference. Both storage approaches come with their own pros and cons. Ultimately, it depends on which serves your objectives best.
🔥 Bonus tip: Put your crypto to work
Once you've bought and safely stored your crypto, you might want to consider putting it to work as a passive income stream. Lending and staking crypto is becoming increasingly popular, with platforms like AAX offering variable APY earnings on over 300 coins. Again, it's not without risk, but can provide another avenue for compounding your crypto purchases.
Crypto is the exciting new frontier of finance. It's creating opportunities for the unbanked, unbanking the banked and spearheading a new movement.
If you're just getting started on your crypto trading journey, it's common to feel overwhelmed. Keep these 5 tips in mind and you'll have a solid foundation for making your first moves and setting yourself up for success.
Disclosure: The author owns a range of cryptocurrencies at the time of writing
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