Some people have asked me about some basic “how to” advice about getting into investing into Cryptocurrencies. I’ve previously written another post, called “Crypto-Currencies Are Here to Stay“, which gives some insight into the importance and significance of cryptocurrencies.
In this post, however, I wanted to give you some quick, easy tips on how to get started.
WHAT TO BUY
There are many different cryptocurrencies out there, each with strengths and weaknesses (and purposes). All are based on a form of blockchain technology and have electronic ledgers on which financial transactions (trades, buys, sells, transfers, etc.) are recorded.
The most popular, most prominent coin is the BITCOIN (“BTC”). This is the coin that most laypersons have probably heard of, if any. There are also other significant coins, like ETHEREUM (“ETH”), BITCOIN CASH (“BCH”), LITECOIN (“LTC”), RIPPLE (“XRP”), or MONERO (“XMR”), just to name some other major ones.
You may wish to consider purchasing several different coins based on their current market capitalization and value. Keep in mind, being very volatile, the given value of a coin changes constantly and rapidly, much more so than what you might be used to in other asset classes, like stocks, bonds, precious metals or real estate, etc.
Based on various “crypto-experts” out there, a good sample allocation for your cryptocurrency holdings might look something like this:
- 50% in Bitcoin
- 25%-30% in Large-cap coins (top 10 or top 20)
- 20%-25% in Mid-cap or “other” coins (selection from top 50-100)
Do your research, check out different coins, their purposes/uses, the projects and teams behind the coins, ….just as you would when you check out a stock or bond or ETF to invest in.
HOW AND WHERE TO BUY
Presently, in most parts of the world, you cannot buy cryptocurrency directly as there is no “issuing bank” per se. Some stock exchanges are preparing to offer investment-products (e.g. ETN’s or ETF’s) in the near future, in an effort to further ‘legitimize’ cryptocurrencies and attract large-scale institutional investors.
In most cases, you will need to sign up with a cryptocurrency exchange, establish an account (under “Know Your Customer” / KYC guidelines), and transfer some regular money (USD/CAD, British Pounds, Euro, etc.) from your ‘normal bank’ into this exchange platform, with which you can then purchase certain cryptocurrencies of your choosing.
Some of the most popular exchanges include:
(yes, there are others not listed here)
- Coinbase — good entry point for buying BTC, ETH, LTC and others
- Gemini — good entry point for buying BTC, ETH and LTC
Not all exchanges offer all types of cryptocurrencies or currency-pairs. Check on their offerings, which will also differ based on your location. Different reg’s apply for customers from different countries.
(NOTE: U.S. citizens would probably have the easiest entry with COINBASE and GEMINI).
Check the exchanges out, compare, check their fees and what methods of funding they offer, etc. pick 2 or 3 exchanges for best coverage.
(NOTE: you need at least 1 exchange through which you can buy cryptocurrency with “fiat”-currency in your bank.)
Think of exchanges as places to trade “normal money” (referred to as “fiat currency”) for cryptocurrency and vice versa.
Many exchanges only ‘swap’ cryptocurrency pairs, but do NOT support “fiat currency” (which could always change in the future).
These cryptocurrency exchanges are best for: (1) converting fiat-currency (“regular money”) into cryptocurrency, and (2) for buying/selling (ie. “trading”) different cryptocurrency coins.
They are generally NOT well-suited for “long-term” storage of your holdings. Your cryptocurrency holdings should be kept in off-exchange “wallets” for long-term and more secure storage (see below).
IMPORTANT!!! — when you create an account on an exchange, BE SURE to enable the “2-Factor Authentication” (“2FA”) on your sign-ins and transactions, as an extra security measure to help prevent unauthorized access. (you have to enter and confirm a numeric PIN that is sent to your mobile phone)
WHERE AND HOW TO STORE YOUR COINS
Once you have some coins on crypto-exchange(s), you should transfer them off the exchange into a “WALLET”, as soon as feasible or possible. Each exchange has their own rules as to how long your assets are on-hold, or withheld, from outbound transfers.
A crypto-Wallet is either:
(1) a program on your computer/device (“soft”), or
(2) an actual paper wallet (which you store in a safe/secure place), or (3) best yet, a hardware wallet (“cold-storage”), which is the most secure and most reliable against hacking, theft or loss.
A hardware wallet is a tangible piece of equipment, from as small as a USB thumb-drive to something as large as a small tablet device. This type of wallet securely stores your private keys and balance information of your cryptocurrency assets.
(DO NOT BUY USED OR FROM UNKNOWN SOURCES,
OTHER THAN THE MANUFACTURER DIRECTLY!!)
A good example of a an app-based / software-based crypto-wallet is “EXODUS“. There are different soft-wallets out there, and each have a different combination of supported coins.
ONGOING LEARNING AND INFORMATION-GATHERING
As with any other type of investment or asset class, you want to keep up on related news, headlines, info, editorials and opinions. Ultimately, YOU must decide what to make of all the information out there.
There are many different websites, blogs, YouTube channels, etc. where to get cryptocurrency-related content from, for example:
- CryptoCurrencyNews (“CCN”)
- CryptoPanic — news aggregator
- Cryptowatch — trading charts
- Coincodex News
- Coincierge.de — Cryptocurrency Blog/News in GERMAN
- TradingView — more trading charts and news
- etc. etc. etc.
HOW NOT TO INVEST!
- DO NOT ever over-extend yourself when investing in cryptocurrency.
- DO NOT ever take out loans or borrow money otherwise to fund cryptocurrency.
- DO NOT take on any kind of additional debt or financial obligation to fund your cryptocurrency purchases.
- DO NOT just randomly act on anyone’s advice regarding cryptocurrency without doing your own “due diligence”. If it sounds too good to be true, it probably is.
- DO NOT think that cryptocurrency is immune from possible loss of value or volatility! There is no “100% safe” investment, not even your own money in the bank! You CAN and are likely to experience some financial losses.
- DO NOT invest any money in cryptocurrency that you or others rely on for living expenses and other necessary obligations!
To learn these things and more in detail, you may want to consider my ebook (Kindle) on Amazon.com
If you have “how to” or “where do I” questions that I can possibly help you with, shoot me an email.
I WILL NOT answer “which coins should I”-type of questions, as I cannot advise you on WHAT to invest in or HOW to spend your money.
Good luck! Have fun!
DISCLAIMER: I am NOT a financial planner or investment advisor. I am simply giving my own personal opinion for informational purposes. Nothing on this page is to be construed as investment advice. This page and its contents do not constitute an offer to sell or trade, a solicitation to buy, or recommendation for any security, cryptocurrency, ICO, or related product, nor does it constitute an offer to provide investment advice or other related services. I may have a financial investment with the cryptocurrencies discussed on this page or site. In preparing this page, no individual financial or investment needs of the viewer/reader have been taken into account nor is any financial or investment advice being offered. Any views expressed on this page were prepared based upon the information available at the time such views were written. Changed or additional information could cause such views to change.