Cryptocurrency Investing for Dummies
The entire notion of investing in a virtual currency might be daunting to many. Today we hope to educate you on where and how to invest in cryptocurrencies. We will go through methods of getting crypto, various trading platforms, and various ways of storing your digital currency to keep it safe.
P.S. If you already have crypto go to the next section. If not, please carry on!
For you to get your hands on crypto, there are various ways to do that. We have a whole article where we go into acquiring crypto. We recommend you check it out if you need more info. Some methods require you to give up your identity when buying crypto, while others do not. If you’re buying crypto to make anonymous transactions, be wary that crypto is traceable to some extent.
The first method to get crypto would be to find a crypto ATM. ATMs might be the easiest method for acquiring, but we do not recommend this method. ATMs have high fees and often have offset prices, which causes you to get a drastically worse rate than other methods.
Next, we have to purchase crypto from people in person. There are a few websites where you can find people and trade fiat for crypto. There is an enormous opportunity for scamming in this method of acquiring crypto that unless you’re sure you’re not getting scammed, we recommend you explore alternative ways of getting crypto.
Another one of these methods with high potential to be scammed is trading in gift cards for crypto. Not only are you getting a bad deal just like with ATMs, but there is the significant potential for getting scammed. As you can probably see, the methods where there is an opportunity to scam people are also the methods of getting crypto where you don’t have to give up your identity.
Lastly, we have one of the best methods because of the infrastructure setup. Most if not all exchanges require providing identity to interact with the exchange. Unless you already have crypto and are satisfied with using a decentralized exchange with high fees to keep yourself anonymous, it is probably best to use a regular exchange such as Binance or Kraken.
Overall we highly recommend you go with something along the lines of Binance if you wish to invest in crypto. Binance has been around for years and is currently the most prominent exchange with many features that beat the competition.
Now what you have crypto, we can move on to the next step. Let us figure out how and what to invest in! There are many ways to figure out what crypto to invest in. You can dive into charts and do day trading, which Binance allows you to do easily, or you can go for the long game and do speculative trading. We will dive into both of those aspects and show you how to do them correctly.
What Cryptocurrency do I buy?
As stated previously, there are many ways to figure out what crypto you should consider for investment. Let us start with “White Papers” most if not all cryptos have a white paper. The white paper is essentially their entire project and the philosophy behind it, so you can figure out if you believe in their technology, team, and philosophy before investing. You can get a lot of information about a crypto by reading their whitepaper, and then you will be able to make a more informed decision.
Reading the whitepaper is considered a long-term speculative investment since you could be waiting months for the investment to rise. One of these cryptos was Ethereum, and it wasn’t too long ago that it was less than $100. Ethereum has an excellent whitepaper and team, which made it an excellent investment for the long term. Now let us look at the shorter-term investment solutions.
One of the greatest tools you will be using for short-term investing is TradingView. They have beautiful graphs with lots of indicators and settings you can play around with. The free version offers you three indicator slots to fill, which is a decent amount, but you might want to upgrade to get more indicators in the future.
You want to set up your indicators to signal when to make an entry and exit. You will want to do your research into indicators and strategies. Indicators are a whole new world of investing in general. There is a lot to learn to build your system out of indicators, entry, and exit signals.
To start, the easiest way to learn about indicators would be to look into stocks and forex because they have been around for longer, which means more information is available. You can often apply the information you learn from forex and stocks to crypto. Understand that some indicators will have to be altered due to the volatility of the crypto market. For example, the famous Japanese trading strategy “Ichimoku Cloud” has to be adjusted to work with the crypto market.
TradingView allows you to backtest, which is an essential aspect before applying the strategy. We recommend going back to check if you would’ve won on the signals that you saw, thanks to your indicators. Not all strategies are a 100% win rate; none are even close to being 100%. Most strategies that work are usually between 50% to 70% win rate, which means seeing losses sometimes is normal and should be expected.
While looking through charts while searching for your next trade, you will notice that most cryptos have a similar graph. Most cryptos have a strong bond with Bitcoin price, so you can usually tell the market’s state by looking at Bitcoin. There are exceptions, though when Bitcoin is going down, you might find specific cryptos are going up independently of Bitcoin. The relationship between all cryptos and Bitcoin is that most cryptos are traded for Bitcoin, so when it goes down, the fiat value of other cryptos also goes down.
When making spot trades on Binance, be wary that you cannot have a spot sell order and a stop-loss order at the same time. This means that once you enter a position, you can only have one order. You can either create the safety parachute in case the coin falls, and it will sell it to avoid further losses, or you can create a sell order that will sell the coin whenever it reaches your goal price, but you can’t have both. So make sure to watch your positions regularly.
There are many ways to store crypto, some easy but not as safe vs. the slightly more tedious methods, which are drastically safer. If you’re planning to get into crypto as a long-term investment, it is wise to keep it off the exchanges because of the possibility of the cryptos getting stolen. There is a history of exchanges getting hacked so beware!
Previously in other articles, we’ve talked about Trust Wallet this is a pretty good middle ground between storing your money on an exchange and a ledger. If you want maximum security, a ledger is probably the best you can get nowadays. Look into them and see if this is the right purchase for you they are pricey.
We hope we have given you a good introduction to the world of investing in crypto. There is still a lot more research that needs to be done on your part. If you want to check our comparison on crypto vs. stocks, you can check it out here. Good luck investing!