After starting my first steps in crypto investments at the start of 2021, I’ve picked up a tip or two from the space. Here are some of the lessons I’ve learnt.
I Love Crypto
I love reading about crypto. I love talking about crypto. I love hearing people talk about crypto. I love buying crypto. Heck, I even have a Spotify playlist dedicated to crypto. But this is a far cry from the first time I got into crypto at the start of the year.
I’ll admit, the initial reason I got into cryptocurrency was to make a quick buck. At the start of 2021, GameStop stocks were being bought up left, right, and centre by WallStreetBets Reddit members. Being a latecomer to the stocks game, I was wondering what else could I invest for a quick perk-me-up to my bank account? And that’s when the term Dogecoin came up.
‘Dogecoin? You mean someone made a coin on the meme?’ Yes I was that clueless. I didn’t even know where to start purchasing Dogecoin, and soon gave up on the idea. But luckily, my reservist mates came to my rescue and promptly got me set up with my first account on Coinhako, where I purchased my first small bag of Zilliqa and XRP tokens. It felt surreal owning these digital coins where you knew you owned it but you couldn’t hold it like a real coin.
One thing led to another, and what became a curious venture into the world of crypto soon became a full-blown obsession. I was soon voraciously reading and digesting the ins and outs of cryptocurrencies and blockchains and investing in the asset as well. There’s an unspoken rule about one learning faster if they have to pay for the lesson, and I’ve definitely learnt a lot from the ‘school fees’ that I’ve had to fork out during my time in the crypto space. Here’s some valuable tips I’ve picked up so far.
Read and educate yourself on the basics
Read, read, and read. Did I say read? It’s easy to throw money at an asset that you don’t understand and hope it somehow makes you rich, but as Warren Buffett said “you’ve got to learn what you know and what you don’t know.” Yes, the investment mogul is severely overquoted but you can’t deny they are sound advice.
With cryptocurrency, you are investing into a new and rising technology that has not been implemented before, and there’s no better way to learn about it than to Google about it and click the first link that says ‘What is cryptocurrency?’ or ‘What is blockchain?’. With a deeper understanding on the underlying technology, you’ll be able to better appreciate the digital assets you own.
Stay updated by reading the news regularly
The only constant is change, and that’s especially true for the crypto space. Every day brings forth new developments and events that could sway market opinions. One day it could be institutional investors jumping on the Bitcoin bandwagon, another day it could be another country looking to regulate cryptocurrency within their jurisdiction. By keeping up with the news via media sites or social media, you are able to keep the pulse on the crypto space and track new buzzwords that enter the conversation.
Keeping up on the news can also introduce you to new exciting projects that you can explore, or you can hop onto Twitter or Discord channels to interact with other crypto natives that are creating waves in the scene.
Not every market movement needs action
When the market becomes more volatile with constant ups and downs, crypto investors become more skittish on the price action. To that I say, chill out! You don’t have to react on every single dip and sell off right away to cut your losses, nor do you have to jump in with more funds to buy the dip all the time.
If you’ve done your fundamental analysis of the project such as its utility, team, and tokenomics, you should stay confident of your project assessment despite market movements. A great use case for the project and a supportive community behind it means it’s more likely to rebound when the market is performing well again, and that also leads to my next point.
Do Your Own Research (DYOR) on the project
A certain crypto exchange may claim that Fortune favours the brave, but I say Fortune favours the prepared. With over 16,000 coins on the market at the time of writing, doing a fundamental analysis on the project is crucial to sifting out the grains from the chaff.
The first step to analysing a project is to read up on its function. Go to the project’s ‘About’ section and read what problems are they trying to resolve. If the explanation is a little too jargonistic for your taste, head on over to the blog pages of exchanges like Kraken or Gemini where there is a large curated list of content that breaks down the what and whys of each project. We are also building our own curated content here on CoinPasar, so remember to subscribe to our socials for regular updates!
The next step is to cross-check what you have read with the team behind the project. Listen to the founders’ interviews, sit through their Ask-Me-Anything (AMA) sessions, and read about other comments on the project to see if it is able to answer the questions posed by participants or commentators.
Lastly, ask yourself this question: What problem does this project solve? At its core, new blockchain and decentralised apps are just products looking to resolve a problem, and this fundamental truth has not changed since the idea of bartering and trading was invented. If the project is looking to resolve key issues that no other projects have addressed yet, great!
The next step is to check if it is standing out from its competition.
Let’s say the project is a fork of a DeFi idea that is in the market, that would mean there are other similar ‘clones’ as well. How is the project distinguishing itself from the original and the rest of the ‘clones’? Find its unique point, check that its team and community are legit, and perhaps you have a great project on your hands that you got in early into.
Create a plan that works for you
Whether you are swing trading or investing for the long term, you need to create a plan that suits your portfolio. I’m talking about when you should enter a position, when you should exit, and when you should take profits if your investments are working out for you.
To be honest, even I am still learning how to take profits or when I should cut my losses on an asset if needed. I take a long-term approach when it comes to investing in crypto by dollar-cost averaging into projects I believe in, while keeping a small budget to buy the dips when needed.
But the most important thing is, learn how to take profits. Some say it’s harder to HODL when you are in the red, but from my experience it’s even harder to learn the game of taking profits and re-investing during dips. That’s because the greed of wanting to maximise our gains as the price increases kicks in when everything is going up, and our carefully planned profit-taking strategies go to bits. That’s fine and all until the graph goes the other way, and we kick ourselves for not capitalising on the gains earlier.
TL:DR, HODL-ing is great, but learn to take profits and re-invest them during dips to make your money work for you.
Understand the different ways of making money in crypto, and stick to one that suits you
Thanks to the flexibility of cryptocurrencies and other digital assets like NFTs, there are so many ways you can go about making profits on them than just buying and selling it. Some other ways include:
- Providing liquidity to liquidity pools
- Loaning your assets on centralised exchanges or decentralised finance protocols
- Going into Yield Farming by tapping on high APYs
- Staking your cryptocurrencies or even NFTs
- Getting rewarded on Play-To-Earn games
Of course, it goes without saying that each of them carries their own risk, and you should definitely do your homework before jumping in. As the space continues to grow, there are more ways you can tap into to generate earnings. Find a method that works best for you instead of trying to do everything.
Get into a community
Another thing that I’m slowly realising is that you’ll need to get into communities when it comes to learning about cryptocurrencies. While you can read about the basics of crypto and blockchain online, it can’t beat an online discussion with others about the latest projects and strategies they are using.
Get started by jumping into communities like the Seedly cryptocurrency forum or join discord groups of projects that you are interested in to find out more about the space in general. When it comes to social media, Twitter is the de facto mouthpiece used by the crypto community. You can follow top leaders and influencers in the social space or interact with other like-minded crypto fans.
Lastly, Crypto isn’t everything
The crypto space is a great space to be in, but always remember that it should not consume your daily activities to the point of you neglecting your social relations.
Always remember that personal relationships with family, friends and partners are much more important than digital assets, and you should place priority on your health and fitness too.
My first year with crypto has been a rollercoaster of ups and downs. Will I continue to ride it? Hell yeah. The blockchain and crypto space definitely has a lot more potential for growth, and I aim to be a part of that growth.
I hope my experience gave you some insights to what you can expect when stepping into the crypto space. What was your experience with crypto? Share it with us in the comments.