What is the safest way to invest in cryptocurrency for beginners?
When it comes to the world of crypto, both beginners and seasoned investors alike have the same opportunities for wealth generation in front of them. Yet both are vulnerable to the same dangers, risks, and scams that lurk in the shadows. And shadows are everywhere.
Consider what might be wrong with the following paragraph:
If I only knew about Bitcoin back then. It was pennies! It was a single dollar! I could have bought $100 worth and been a mega millionaire by now. I could have spent $1000 back then and become a billionaire by now depending on when I bought in. Bitcoin has become one of the most valuable assets in the market, shooting up from US$0.08 in 2010 to more than US$68,000 in 2021. That’s nuts!
So what’s the problem with hearing that? Quite a bit. I mean gosh…that’s enough to drive almost anyone bananas thinking about what they missed out on. And the fact that we often hear about the big financial wins of some individuals along with seeing the shameless displays of crypto wealth flaunted makes one even more bananas. It also does three things:
- Creates a public perception that owning crypto will make you hugely rich.
- Drives even the most sensible humans to take financial risks they otherwise would never take because they fear missing out.
- Makes otherwise savvy investors trip over their emotions leaving them vulnerable to chaotic investment decisions.
All the news of huge profits and chatter on what might be the next big crypto like Bitcoin ignites emotions that drive people to make reckless investments that are akin to jumping out of an airplane hoping to locate a parachute on the way down.
I’m human. I get it. I wish I had the foresight to buy Bitcoin in the early days. And I definitely don’t want to miss out on the next big coin that shoots to the moon. But nobody knows which will be the next big coins. It’s all speculative. The good news? One can certainly learn to safely invest in cryptocurrencies while appropriately managing risk.
The point of this article is to inform you of the crucial things you absolutely must know in order to be as safe as possible so you don’t end up making the huge mistakes that so many people make in today’s crypto-crazed markets.
The key concept here is: Sensible
It’s exciting to have so many opportunities for making money in this emerging crypto industry, but it’s also a high risk space, especially during the early days of one’s investing journey. Even the pros mess up and lose money. We are all human and need to have a clear understanding of key things and be able to manage our emotions. This article covers both.
You want your memoir to include the story of how you were smart, and dove into cryptocurrencies with your brain screwed on correctly, and made a nice fat chuck of change rather than it being a story titled: How I Ruined My Life Trading Crypto.
Having the right mindset and understanding is crucial to minimize failure
You may be a beginner or you may have some experience buying and selling cryptocurrency. Either way, when it comes to the world of cryptocurrencies, you are vulnerable to an increased level of danger verses the traditional investing world we’ve known of for decades.
You want to avoid financial ruin. You want to minimize loss. How are both possible? A proper mindset is required.
While on your journey to get rich by investing in cryptocurrency, it’d be a smart idea to make sure your financial bases are covered prior to jumping in. Consider something like a well-stocked emergency fund or a conventional retirement savings strategy in place. Just in case.
To be clear, no one can claim that any investment of any type in this world is 100% safe. No one knows the future. If you come across an influencer claiming to know the future, turn around and run far. Anyone with integrity will be upfront and tell you they don’t know the future and that there is risk involved.
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Is crypto a safe asset and technology to invest in?
One crucial thing to understand when getting involved in crypto is the outlook of the industry as a whole. Understanding how its underlying infrastructure will likely affect the world positions you to make better investment decisions. Although this industry is still an infant in many ways, it seems destined to grow and flourish.
Consider: Can you image life without this amazing technology called the internet? I can’t.
What’s my point here? At one point the internet itself was considered a fad for tech enthusiasts and computer “nerds.” Many people laughed at it in the late 1990s. But wow—look what happened.
When it comes to cryptocurrencies, and especially NFTs, naysayers are everywhere. But many naysayers don’t care to understand a single thing about how mainstream cryptocurrency will likely become in our world. It’s not just about the money-getting possibilities of some coins or NFTs though.
The underlying blockchain technology seems destined to become the next major technological infrastructure that shapes our world in massive ways. Many of the world’s digital systems that we all interact with on a daily basis today will be altered by blockchain technology.
Although this tech stuff is boring gibberish to most people who just want to quickly hop in and grab big bucks, understanding the bigger picture of the world of cryptocurrencies is crucial in order to make proper investment choices.
Some consider the crypto industry to be the fourth industrial revolution. We had the steam engine, then electricity, then the microchip, and now crypto and blockchain can be considered the fourth.
Corporate adoption of blockchain is increasing
There’s just too many amazing uses for the technology itself to be a fad or a bubble. It will replace or augment many industries, and is already seeing huge corporate players adopting and preparing.
To simplify, when it comes to the potential for investing, it’s good to know that one seemingly secure attribute of blockchain technology is that it allows digital information to be recorded and distributed but not edited. One of the major innovations behind cryptocurrencies is the use of blockchain as a ledger technology used to track transactions that can’t be changed once new information (a block) is written to the existing chain.
Blockchain technology can be used for various computerized and internet-based applications. Really, more uses for it are being discovered every day. This sector will likely become huge.
Both the underlying tech and the “stuff” happening on the surface in public view go hand in hand and influence one another’s creation and evolution. I see the tech itself as a solid but growing foundation that’s here to stay.
The different currencies, projects, protocols, social movements, trends, weird cartoon-like characters, and flaunting of wealth is what makes up the most volatile parts—that will all be worked out over time. Yet this is what most people are busy talking about and putting their money into hoping their assessments are correct and will lead them to riches.
There’s no guarantee that it all won’t collapse completely but it does seem destined to stay. Yet we can only speculate on which currency or protocol or any other thing in this industry will become the dominant player. Hence, we need to make sensible decisions when putting our own time and money into it.
Take any particular coin: realize that its future is uncertain. But the potential for a whole world of practical blockchain applications is just beginning. And…
Paper money is likely going away.
What crypto has the best future & how to understand market trends?
No one knows exactly which cryptocurrencies have the most potential to be the big winners in the end. But understanding the psychology of market trends will help you see the bigger picture and make wiser, safer investing decisions throughout the process.
Human emotions influence the trading impulses that we see on charts, the ups and downs that bounce all over. When larger swings or trends occur, then the news covers it. Thisis the opposite of news itself being the driver of the trading frenzies. Yet that of course happens as well.
Now that we’re clear that this technology is likely here to stay, we need to know how to safely invest without a reckless gambling mindset. A lot of trading is based on the cyclical nature of human emotions. If we don’t take the time to understand these typical emotions related to investing, we are setting ourselves up for failure.
Don’t be reckless. And don’t be a lazy investor who just wings it while only having very limited understanding and insight.
Elliot wave principle
One of the most excellent tools discovered to predict investor behavior is The Wave Principle by Ralph Nelson Elliott. In his book, The Wave Principle, Elliott shared his observation that a typical pattern emerges because of trader psychology & human behavior. Understanding this will give you an edge as a trader or holder of crypto for a short or long-term approach.
A simple takeaway from the principle: An upward or downward price action displays the direction of a trend, while corrections will always move against the trend. The trend is called an impulse/motive wave, and the correction is called a corrective wave. I recommend educating yourself about this so you have insight before getting involved in the crypto world.
While the Elliot Wave Theory is a great tool, it’s important to remember that the fractal-pattern behavior of the market does not make it 100% predictable. Your own research will always be required before buying into the market.
What are the safest ways for beginners to trade crypto short term?
Buying crypto to hold for less than a year is generally considered short-term investing. Day trading might be called an extremely short-term strategy. Some people hold assets for a day, or buy and sell many times a day. Whether you hold for a day, a week, or months, buying and selling in such a volatile market like crypto leaves you vulnerable to both emotional and financial risks as the market jumps all over the place so quickly.
And gosh…there are over 10,000 different cryptocurrencies, so that’s just a wee bit overwhelming. So many options. There you are, feeling jolts of thoughts and emotions, wondering if you should quickly sell one and buy the other—day after day, week after week, on and on.
Don’t forget to breathe.
Many investors consider short-term trading to be the highest risk method. This means a lot of chart watching and anxiety. Yes, a big win may be achieved but huge losses will also happen very quickly. Note that I said “will” and not “could.” You will lose money here and there when trading, likely more often than you think. Having hope is great but being realistic is even better. And safer.
In fact you might even go so far as to assume you will lose your entire investment. I know that sounds odd to hear but it’s a way to manage expectations so you don’t get all swept up in the emotions and make dumb investment choices.
Are short-term trading methods too dangerous?
Beginner or not, going for quick wins in a volatile crypto market isn’t a smart strategy for some people. I get the temptation for sure. Who doesn’t want to buy an asset and see it quickly shoot to the moon, then sell and get out, retire, book a vacation, drive to the airport, end up on a beach, order a piña colada, and do the supposed rich person stuff.
Having a solid understanding of crypto investing psychology and what criteria must be met before an asset can be considered a “safe” investment will position you for the most gains and the least amount of danger. We discuss how to arrive at such insights in a few minutes.
If you have the time and proper mindset to engage in short-term trading—and are only spending money that you can afford to lose—then you might be well suited to shorter types of trades. Or, if you are truly disciplined and stick to only investing a very small amount of money and no more into a few cheap crypto assets and hope for the best, then you only lose a little if it doesn’t work out.
Issues with the gambling approach
Gambling is what most people do in crypto. And most lose. We hear about the few who make it big but this is similar to hearing about a jet crash even though such an event is very rare. Yet, unfortunately, automobile crashes happen every day but rarely make the news. The millions of people that lose money in crypto isn’t what we hear about so much in the headlines.
Trading with hope as your only strategy isn’t a good idea unless you’re an expert or have money to lose—and have plenty of time to glance at charts all the time. Do you want to nervously jolt awake in the middle of the night to glance at the charts to see if you lost your retirement funds while you dozed off? How long can you do this? Your health will plummet. It may even lead to divorce.
Constant gambling? How on earth does one ever get any peace of mind this way? Just something to consider. Trading can be a decent approach but not for everyone. Again, just don’t make big investments you can’t afford to lose.
A warning about making too many trades
Amistake that many new cryptocurrency investors make is doing too many trades each day. This is dangerous. Day trading or short-term trading usually means incurring transaction fees. This cuts into profits. And when people make bad trades or lose out from fees, they often feel the urge to trade even more to recover losses. This is a bad situation.
Important considerations about risk takers
Trading strategies and advice is influenced by the personality of the person making the recommendations. Some people are huge risk takers in most areas of their life. They love that rush of chart watching and waiting with caffeine in hand, pushing it right to the edge before they think it might dip. Maybe they win. Maybe they lose. It’s a smart idea to consider the personality type of those providing crypto tips.
Is it safe for beginners to invest in cryptocurrency for long term?
Some people prefer the hands-off approach of buying and holding for years while assuming that the overall market will continue to rise over the years despite crashes that may last for months or even a year or more. Even though the cryptocurrency industry as a whole will likely keep growing, we know that dips will occur but we don’t know how long any particular one will last. And as solid as some currencies seem to be, we don’t know who the big winners will be in the end. This is why diversification is the best approach to any type of investment.
Long-term cryptocurrency strategies can be profitable and relatively simple, and once set up, there’s not much to do except wait and maybe peel off some profits here and there to spend. However, if you want those incredible returns, then you must be patient and learn how to recognize what qualifies as a sensible decision, not just doing what someone else advises. The right asset stored for the long haul can produce a lot of money over time.
That being said, beginners can have a hard time buying and holding for the long term because they hear all the hype and stories of big wins. Understandably, they also want to experience a big win, but when their assets are situated for long-term holding, then it’s easy to feel the urge to move them into a shorter-term strategy. Careful consideration here is required.
Some people prefer smarter crypto investing methods that focus on holding for the long term while making small profits along the way. This is a way to capitalize on the volatile nature of this asset class. Ideally, if using such methods, you might buy a tiny amount of a handful of different coins that look like sensible options so that if one of them happens to shoot up, you are well-positioned because you already own a little. This is more sensible than the risky fast buying and selling approach I mentioned earlier.
Advantages with long-term investing:
- If you’re in it for the long term, then you don’t need to worry as much about all the swings that occur in the short term.
- You get to avoid the anxiety of the quick spikes and drops that drive some people mad.
- Long-term investing works historically.
Is long term a low-risk solution for owning cryptocurrency?
Generally speaking, holding crypto assets for long term (a year or several) is likely the best chance to see bigger gains, and is the safest. Solid projects on stable, widely accepted technology that offers a beneficial role and utility in some established industry are great options to consider. Because blockchain technology can streamline and improve the functionality of existing infrastructure in society, the projects that are best suited to and have mass adoption potential are worth considering to hold over time. [link them to some examples page on my site or Wiki]…..
Several financial advisors say they advise their clients who are set on crypto to buy Bitcoin or Ethereum but maybe pass on the more volatile, lesser known altcoins. The lesser known altcoins, and coins in general, are lower down on coin lists you will see on websites like coinmarketcap.com.
Bitcoin and Ethereum have the longest track records of increasing value over time but the downside for most people is their cost, especially Bitcoin. Some of the big altcoins are presumed to be the best to hold for long term. The term “altcoin” simply means cryptocurrencies other than Bitcoin.
Keep in mind that many coin projects don’t often make it into the big news headlines so they remain lesser known. But that doesn’t mean they’re a bad investment. Some of the emerging coins are going to be huge. But which ones? This is why it’s crucial to do research and NOT fall into the common emotional traps we’ll discuss in about one minute
The long term approach might be the lowest risk for many people, especially for those who will likely have trouble staying cool in the chaotic realm of day-trading.
Sticking to an investing strategy helps protect you
Diving into the crypto world without a good strategy is like jumping out of that airplane without a parachute that I mentioned earlier. You won’t survive the fall.
Before you buy crypto it is crucial to clarify your goals and expectations before talking action and exchanging money. A lot of professional financial advisors recommend sticking to the 5% rule. Consider starting with or even sticking to a small percentage of your assets like maybe 2%, and only once you feel calmly confident on what you’re doing. Never investing more than 5% of your assets in crypto sounds wise. Work with a licensed financial professional to help you decide.
Don’t strategy hop unless you know what you’re doing
Before investing even a single penny, you must understand what you are getting involved in. Gather information about how it works so that you can act wisely in any unfortunate situation that occurs. Not having clear understanding before buying crypto is the dumbest mistake one can make.
Coin hopping is risky
Simply jumping into a handful of coin projects is not a real strategy. Getting desperate and jumping from coin to coin may not be the best method either. You might end up reducing the overall value of your portfolio this way. Quickly selling and jumping to another coin that you believe is about to rise will likely put you into an emotional state where you will be most vulnerable and at the highest risk. You are more likely to click the wrong buttons or fall for scams when in a frantic state.
When there’s several thousand coins along with seemingly endless NFTs available to purchase, where do we put our money? The answer is never put your entire pool of funds into only one asset. Placing all your eggs in one basket is a bad idea.
Learn more about the different cryptocurrencies and projects to find opportunities that interest you and fit your investing style.
Be mindful of the math
And remember to pay attention to the math. Paying attention to the numbers will tell you whether you’re making a profit or not. Remember to note any transaction fees and consider how those fees may deduct from your earnings when trading.
Proper crypto psychology and mindsets to avoid reckless behavior
Introducing… HODL, FOMO, and FUD!
That sounds like three cartoon characters to me. HODL, FOMO and FUD walk into the bank and ask for some crypto. “We don’t do that here,” says the teller. “We only offer you a place to store your money, and in exchange we give you returns so tiny you can hardly see them.”
Welcome to the three common acronyms you’ll hear in crypto world that represent strategy but are emotion-driven at the same time.
HODL means to Hold On for Dear Life to your investment no matter how volatile the market is. HODL may apply to a long-term or short-term strategy.
FOMO or Fear Of Missing Out means possibly buying when you are frantic after some potential mega win hype floats around online or in the news and infiltrates your brain making you feel like you must act right now or you will miss out on a fortune. This is the most dangerous one because it can leave you vulnerable to dumb projects going nowhere or outright scams.
FOMO makes us feel like we will miss out on the only big opportunity to buy at the optimal time. Because Bitcoin soared to heights that no one ever dreamed of when it first came out, millions of people have been left feeling both in awe and dismay that they didn’t buy BTC earlier. This fear of having to experience such a lost opportunity again triggers us when the price of a coin goes up. This often making people buy at the wrong time (when the price is high) fearing it won’t ever go back down again and missing their chance.
And FUD stands for Fear, Uncertainty, and Doubt. FUD may sound harmless but it can also prevent you from investing in crypto even if the research stats or market sentiments are in your favor and tell you to invest.
Don’t make investment decisions based on emotions
You need the right mindset and demeanor to safely invest in crypto. And be okay that you might miss out on the latest opportunity if you aren’t in a position to make an immediate buy. There’s always going to be way more opportunities than any one person could ever take advantage of so get over that one right now. Be okay with that. Don’t get yourself in a tizzy.
Because cryptocurrency is an emerging industry and will likely be growing for a long time, plenty of opportunities will come and go. This is good news because there’s no use in fretting over missing out. Because another coin or asset will be there when you are ready to safely jump in.
Emotional investing is unsafe in general but especially in crypto. Having strategies that remove yourself from the emotions is crucial.
Embrace the volatility of this market
Investing in the proper crypto at the right time not only involves a bit of luck, but more importantly, insight. Only those who improve their investment practices every day excel at investing in cryptocurrencies. But the unflattering reality is that most don’t get super lucky and land the huge win. But I don’t want to put out your fire here. Do have hope, just be wise and learn from the mistakes that most new cryptocurrency investors make. This brings us to volatility. Volatility is like a trap that waits for those who act in reckless ways.
Crypto will jump up and down, always a little at a time at the micro level, and sometimes in huge eye-watering spikes. The latter will be followed by tons of hype and news, then often followed by huge drops and more hype and news. Then the market will eventually correct and it all slowly goes back up again. There’s no escaping this volatility so do try and avoid becoming an emotional puddle when it goes down a little. Remember, typical market fluctuations are very tied to human behavior and emotions.
This is one reason that human emotions are such a topic of focus here.
People sell out of fear they will lose everything when the market starts to drop. They figure they should take their losses now and get out before they lose more. But if they held, it would likely go back up eventually unless they chose a bad currency to begin with. But if they selected a good coin to begin with, then the value will likely increase as the overall market goes up, and up, and up, maybe not immediately but eventually.
When the market goes up, people tend to buy right before the wave is going to break for that period and they don’t end up making any money. Then the pattern repeats and the market drops and they sell and break even or just lose money. This is why many people just hold for the long term and don’t bother with all the short-term chaos.
If you can’t handle volatility then you may not want to invest in crypto or you may just need to focus on a long-term approach. The safest strategy is usually to know a coin is solid and hold it for years. But since nobody knows for sure what will happen, that’s the risk. Crypto is still in its infancy; a lot can and will happen.
If you can’t handle the volatility or struggle with gambling issues, you should probably avoid buying crypto yourself and instead acquire some traditional stocks in a company that focuses on cryptocurrencies. That way you still have a hand in the market but in a less vulnerable position. Gambling mentalities and cryptocurrencies don’t go well together. At all.
It’s not just beginners who need to be mindful and understand the psychology of investing and how to be as safe as possible. Experienced investors are also human. No one is totally resistant to their emotions.
The most dangerous crypto mistakes that beginners (and seasoned investors) make
I don’t know of a way outside the crypto sector to make a 100x or even a 1000x ROI on investment. It’s understandable why so many people get involved. Yet life can be wrecked in an instant when investing more than one can afford to lose. Worth repeating: Allocate only what you are comfortable losing when buying cryptocurrency, especially for the first time.
Risking more than you can afford to lose is one of the biggest mistakes that people make.
Personally, I like the concept of investing a small percentage of funds that I can afford to lose in a cryptocurrency that produces a fast return, even if only a little bit. And then taking that profit out of crypto world (keeping exchange fees in mind) until I’ve made back my initial money. That leaves me only investing with “play” money. My initial spend is back in the bank and I’m now free to take bigger gambles with my earned play money. This or a similar approach is about the safest way I know of that minimizes dangerous risks. No, it likely won’t produce vast wealth in a month but at least I haven’t bet the farm on it and lost. Any method that results in making the original funds back plus some extra to play with seems like a fair strategy.
If you choose to go for that big win, then how do you know which cryptos might explode? Or maybe you choose the conservative path and go for long-term gains. Let’s say that you know which path you’d like to follow. But which coins or NFTs should you buy?
Time to listen to what the experts suggest, right? Sounds obvious yet how can we know who and what to trust? And are these “experts” legitimate experts with solid advice or just tricksters?
How to avoid the worst crypto investing tips online
Where do we find solid crypto-investing advice to stay as safe as possible? Beginners are especially vulnerable to falling prey to bad advice from questionable sources. That includes you seasoned investors reading this. We are all human.
Don’t make the following dumb choices that many people make when jumping into crypto:
- Only doing a tiny amount of research
- Finding one influencer online and following their tips
- Letting their emotions guide them
- Making bad decisions based on bad advice
- Just winging it and hoping for the best
Here’s why you should be weary of self-proclaimed “gurus” in this field.
Too many well-intentioned people start following crypto influencers on YouTube, blogs, and social media platforms. They become “inspired” by these gurus to rapidly throw money into a new coin that’s “just about to shoot to the moon,” so they’ve been told. “Do it right now before you miss out,” they tell their followers.
Social media platforms have almost rendered traditional media obsolete in many cases. Traditional media outlets have stricter publishing guidelines. Content has to meet certain professional criteria in order to qualify for publication. Most traditional media outlets insist on only publishing accurate content, content that is absent of marketing fluff and tactics meant to persuade readers or listeners to go buy something that only benefits the media outlet. Such is not always the case when it comes to content published on social media and Web 2.0 platforms like YouTube. Bloggers? That’s a wild card; some have integrity and others not so much.
Why does this matter? Because integrity matters. Because some influencers lead crypto newbies into danger out of their own selfish jerk-like greed.
Social media influencers lead new investors towards danger
Some self-proclaimed crypto “experts” take advantage of newbies by creating buzz for a coin project they know will likely go nowhere just so they can make a quick buck before the project implodes. They win and you lose. Meh.
Anyone can claim that their own coin project or the one they partnered in will explode and that you might want to get some right now before it gains widespread attention and blows up in price. They say that there’s no guarantees but that it’s going to be huge so you better get in before you miss out on this rare opportunity. Whatever, dude.
Why is this a bad thing?
Isn’t creating buzz just a normal thing to do for any business venture? Consider an important distinction: Creating buzz for a crypto project or a traditional business venture is not a bad thing at all. This is what all businesses should do to let the world know about their brand, services, or products. Creating buzz and getting exposure is a normal best practice.
But if some random crypto coin project out there likely has no chance at being successful anyway—and those who promote it know this—then we have a scam in the works. Some influencers recommend coins they’ve been paid to promote even when knowing it’s a dud. These naughty influencers hype some random crypto up that’s destined for disaster. That’s a huge difference compared to simply starting or growing a business and getting the word out.
I intensely disagree with this willingness to take advantage of newbies with every ounce of my being. It’s sad how so many scams and disingenuous behavior exists in this world, especially in the crypto space where enthusiastic people come in hoping to make some money and maybe even change their life. The spam phone calls and text messages I get every day are pretty irritating, and amazingly stupid, but still relatively harmless compared to some of the crypto scams going on.
Am I suggesting that most crypto influencers are bad actors out to get you? Of course not. I’m just saying that you’ll be exposed to some very questionable behavior in addition to outright scams, and that if you don’t have your head and emotions screwed on correctly, you’re leaving yourself really vulnerable. We know scams are everywhere; nothing new here. But since crypto is an emerging and often confusing industry, scammers leverage the confusion people have.
Another thing to be mindful of is that some influencers are definitely not out to take advantage of you in any way, but still end up offering dangerous investing tips even though they genuinely mean well. An influencer might truly believe in a coin project or an NFT collection but know little about it or just let their own beliefs about the coin’s future color their views. They are human too, and are subject to their own emotions, risk tolerances, personalities, investing styles, sources of information, goals, and so on.
One can believe a cryptocurrency will be the next big deal, and they might be right, but their belief might also influence their followers towards investing in a coin that’s more like playing a risky game better suited to Vegas than to proper business practices. Their investing style may be very different from yours. Their budget may be different from yours. Their mentality and mindfulness may be very different from yours. Lots of variables here to consider.
Find reputable news and sources of investing info so you avoid danger
Some people have integrity and offer solid investing education. Other people have integrity yet unknowingly offer dangerous advice, but they do so in good faith with a genuine interest in helping people. And then there’s of course the sad bunch who don’t care and are delighted to scam you. What a world, huh?
It’s important to understand how to maintain a sensible perspective when observing and interacting with all the hype, happenings and conversations in the crypto world. Always do enough of your own research since you’ll be spending your own money. Use caution on social media and online in general when it comes to crypto. Draw from different sources of information, then consider what makes sense for you while keeping yourself calm and clear-minded.
There will always be plenty of opposing opinions on cryptocurrencies, and opinions on the people who think about or own them. Some people think crypto is just a fad and warn everyone to avoid it. Others love it but make reckless decisions and advise others to follow their lead.
Stick to sources you can trust, avoid the noise of the non-believers, and stick with verified facts.
Use caution when buying cheap coins
People just want to get in the game quickly. This is understandable. Yet many people are lazy when it comes to research. So what do they often do? They just buy the cheaper coins or NFTs that the influencers told them were likely to explode. They put their money into an asset they understand little about hoping for the best.
There they are with their gambling mindset jumping in head first. But most of these currencies don’t explode, rather, it’s more like they implode. Poof! Gone in the cyber wind. Along with the money they invested. Yikes!
Never forget that the price of a coin does not affect its potential growth. Do not chase cheap coins with dreams of making millions. Many uneducated investors in the crypto space buy low-priced cryptocurrencies because they think there’s a higher chance of significant returns. A better factor to consider when looking for gems is market capitalization for the coin.
Be patient and do enough research. Some projects die and that’s that. Some tokens are scams. It may not be a true project to begin with. Don’t be lazy or impulsive when it comes to your hard-earned cash. It’s critical to do background research into the cryptocurrencies and underlying technology that you might buy, and not just on the coin itself. Access the general market interest in that type of coin as well.
Whether a coin is a newer project or an established force in the industry, look for coin projects that have solid teams and momentum behind them, complete with Twitter following, website, and whitepaper. See if they have a blog, and make sure to read it. What other projects in this space do they have partnerships with? These are not the only criteria to go by, but they usually indicate that a project has potential assuming other research on the project looks solid.
Look for cryptocurrencies backed by good technology and an active community.
Questions to ask:
- Who is the team behind it?
- Are they experienced?
- Is the team active on their website and social media channels?
- Have they demonstrated consistent momentum?
- Do they have any professional investors involved?
- Is the team experienced in this sector or at least in business in general?
- Do they have a roadmap that seems reasonable?
Helpful tips to keep you and your crypto protected:
- Though crypto can be used to purchase items, it is entirely digital.
- You can use it anywhere across different countries and borders, and you can pay it to others without exchanging it for local currency.
- There are no central banks or financial institutions involved, so you have to keep track of your own assets.
- You can buy and sell it anonymously. All transactions are recorded, but nobody will get to know your account number unless you tell them. It is encrypted.
- Make sure you understand how to safely divert fiat currency like dollars into crypto.
- Crypto exchanges do have security measures in place, but you might not want to leave your crypto coins in exchanges for long periods because you can become an eventual target of hackers.
- Utilize safety measures like two-factor authentication to make it more difficult for nefarious actors to gain access to your assets online.
- Keep any codes or keys to yourself because they can use them without your knowledge once somebody gets the keys.
- Limit your initial risk especially when first investing. This helps you avoid danger.
- Never risk your life savings on any investment, even when you feel certain the coin you favor is about to explode.
- Decide what percent of your savings to use and stick with this decision.
- Don’t borrow money to invest in crypto. This includes borrowing on your credit card, or any credit line for that matter.
- Learn how to protect your assets from scammers and human errors.
- Learn how to protect yourself from your emotions.
- Building a better financial future requires discipline, not reckless behavior.
Be careful when using exchanges
Crypto exchanges are still largely unregulated, so you must be cautious where you choose to store or move your assets. Experts generally advise sticking with mainstream, high-volume cryptocurrency exchanges that comply with federal and state regulators.
Encryption doesn’t automatically mean security
Cryptocurrencies are encrypted, but that is only to make them confidential, which does not mean they cannot be hacked or stolen. These assets are decentralized, so keeping them safe is your sole responsibility.
Learn to use both hot and cold wallets
While crypto exists digitally, you can still have a way of storing them online and offline through hot wallets and cold wallets. If you are a beginner, easy access to hot wallets might prove more valuable and versatile.
Cold wallets, however, do offer more protection from hackers and other jerks. As part of your journey into diversifying your assets, learn to use both types of wallets. Choose a digital wallet from a company that you can trust to store your crypto coins in. Before choosing a cryptocurrency wallet company, you must check the company’s features, credibility, performance, and reputation.
If you want to trade or own large amounts of crypto in your mobile or other wallets, you must be prepared against the risks and vulnerabilities. Learn the different ways of handling your newfound assets. Manage your money responsibly.
Important: Make sure any wallets you set up are the legitimate version. Some scammers create look a likes.
How to stay safe from crypto scams
Cryptocurrency itself is booming, but unfortunately, so are the number of scams. This is terrible and disheartening. It’s like we can’t go and do much of anything in this world without someone trying to scam us. The rush of everyday investors into crypto has created a wealth of new targets. The easiest target is someone new to cryptocurrencies: a beginner.
Sophisticated scams are a real issue. Links you see might seem legitimate but could just be cleverly designed to pose as the real company or protocol. These can be especially dangerous when you’re not familiar with the industry and feel pressure to act quickly because you fear missing out on the next big opportunity. Or maybe you just don’t feel like doing the work of learning how to safely navigate the software or platform. Don’t go clicking around hoping for the best. The wrong click can make your money disappear forever. All gone.
Once your assets are sent to another wallet, it’s gone. There’s no bank to reverse it like we have today with fiat currencies. According to the research firm, Chainalysis, $14 billion worth of cryptocurrencies was sent to “illicit” wallet addresses last year. Yikes!
Consider that assets can be exchanged in unregulated platforms. This opens up plenty of possible opportunities for scammers. Con artists exploit the lack of safeguards in crypto infrastructure, often coaching victims through the process of giving away their codes or other info that allows access to their assets.
Several ways that crooks try to fool us
In order to protect yourself from crooks, make sure to be mindful of the following:
- Note the URLs you interact with to make sure they are legit and not some altered version of the authentic one that looks similar or identical.
- Only purchase crypto from reliable companies.
- Ignore any messages that ask you to send assets or provide any personal or crypto-related information.
- Pause before clicking or tapping on any links. If they look odd or confusing, then don’t click.
- Beware of fake websites.
- Don’t interact with texts or emails asking for information.
- Review and clearly understand the specific communication methods companies (e.g., crypto exchanges or wallets) use.
- Be careful on social media and don’t send anyone sensitive information.
- Don’t fall for the “crypto giveaways” going around that are just scams. If it sounds too good to be true, it probably deserves to be ignored.
- Never give your personal information to anyone asking for it.
- If you need help with any software or platform you use, ask customer support directly.
- Be weary of investing in newly launched cryptocurrencies. Some may just be a scam.
- Do your research and focus on coins and platforms that are established and trusted.
Be very weary of trusting people you develop friendships with online that you’ve never met in person. I like to always give my fellow humans the benefit of the doubt and not assume the worst, but there are professional crooks that have sophisticated ways of scamming people in the crypto world. You can chat all you want, but don’t send anyone assets unless you know them personally or can verify they are legitimate and that there’s no chance of getting scammed. Don’t send crypto to your new online love that you’ve never met in person. They might tell you that they “love” you and that sending them money is the only way they can afford to visit you.
Welcome to the “crypto romance” scam. Interesting, isn’t it?
General cryptocurrency tips for having success and avoiding disaster
I emphasize emotions and mindfulness so much simply because when we feel the excitement, urgency, or even just when riding the wave of buzz from the online crypto community, we are way more likely to overlook a scam link, make errors with software tied to our assets, or make reckless buying and selling choices. Even when one isn’t a total basket case, they are still more vulnerable to scams and bad decisions than if they were calm and clear-minded.
Remember that human emotions are a major contributor to the ups and downs we see on charts. And recall that the emotionally driven market swings are what causes news and hype in reaction to the swings. And then the market further reacts to the news. It goes both ways, but at times what appears to be obvious is far from it when one tries to predict the next swing.
Learn with a demo account when possible
Demo accounts help you stay safe because you are not trading with real money. When learning a new platform of whatever type in the crypto world, if you have the option to do something in a demo mode, do so. Never make any transactions or purchases until you are 100% sure you know how to use the software and platforms and understand any involved risks.
For example, if you were doing automated crypto trading bots, you should always start with a demo running so you aren’t risking even one penny of your real money. Only use real money when you are fully comfortable.
The other reason to diversify
Diversifying your investments is more than just a wise strategy. It also helps you stay safer from losses incurred by scams or mistakes. Better to do something wrong and only lose a tiny percentage of your assets than the whole pile at once.
Education makes you less vulnerable
I know all the mundane tech stuff isn’t very exciting. I know that reading this thing and that thing during your learning phases can be tiring. But it’s worth it in order to successfully make money, avoid disasters from bad investments made in haste, or becoming a scam victim.
And really, is one ever completely done with learning? I suggest that you always see yourself as a student. That way, you won’t become one of those supposedly savvy investors that end up losing a fortune simply because they thought they were too smart to fail and overlooked something crucial.
Don’t be impatient and wing it and skip the foundational or educational phases. Again, cryptocurrency is an emerging industry, and therefore new techniques and skills are required to learn software, tech, and systems that we have never seen before. Like any skill, it takes time, practice, and constant learning to discover how you can maximize the potential of your virtual assets, whether you want to use them for short-term trading or hold them for the long term.
People are taking risks they normally would never take because of FOMO. They make foolish choices right now because they assume there won’t be another opportunity. Nobody wants to be left out. This is understandable. Just don’t take risks that you can’t afford to take.
Mastering the world of cryptocurrencies will take time, so don’t pressure yourself to become a whiz in a week. Treat it like a business in that it requires thought, consideration, discipline, analysis, patients, and a grounded, mindful state of being. Even experienced crypto traders and owners still have no luck mastering the trends of these virtual coins, so do not be shocked if you find yourself in the same boat.
Get advice from both a licensed financial professional and a certified public accountant to help you make informed investment decisions.
Disclaimer: The information provided on this page does not constitute investment advice, financial advice, trading advice, or any other sort of advice and it should not be trusted as such. This content is the opinion of a third party and this site does not recommend that any specific cryptocurrency should be bought, sold, or held, or that any crypto investment should be made. The crypto market is high-risk, with high-risk and unproven projects. Readers should do their own research and consult professional financial adviser before making any investment decisions.
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