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Crypto investing: The Beginner’s Guide

Cryptocurrency investing has become very popular in the 2020s. Any adult can start investing in crypto. Crypto investors can be divided into buy-and-hold investors, traders, and DeFi adventurers.

Crypto investing is done in crypto exchanges. It is worth investing in cryptos if you believe that their popularity will grow in the future. Investing in crypto is investing in the global adoption of new technology.

Crypto investing is growing in popularity

Cryptocurrency investing has become very popular in the 2020s. Most investors are men between the ages of 20 and 40, but the popularity of cryptos is growing in all age groups. Hundreds of millions of people are already involved in the crypto industry worldwide! There will be more than one billion crypto investors in the coming years.

Crypto investing started with Bitcoin in the early 2010s. Ethereum entered the market in 2015 and kick-started investing in altcoins (alternative cryptocurrencies). Tens of thousands of cryptocurrencies have been launched since that, and there are more opportunities for crypto investors today than ever.

Investing in cryptocurrencies is as easy as investing in stocks. Localized crypto services are available in most countries, making it easy for beginners to take the first steps. You can operate in your language, and the regulatory framework is improving, too.

Investing in cryptos is often seen as a high-risk form of investment because of their volatility, which is higher compared to traditional asset classes. Cryptocurrency prices rise and fall drastically, which can be mentally tricky even for experienced investors.

How do you start crypto investing?

Any adult can start investing in crypto. All you need is a smartphone with an internet connection. Of course, you also must have some money in your bank account to make purchases.

Every crypto investor goes through a different path. There is no one-size-fits-all advice that will make you an excellent crypto investor. Previous investing experience and tech knowledge give each beginner a different starting point.

invest in crypto

Next, I will discuss a few essential points that should be considered before starting crypto investing.

Be ready to learn a lot

Cryptocurrencies are a completely new technology and asset class. It’s crazy that crypto investing has only been popular for ten years! To put this into perspective, stocks have been traded for centuries, and people have invested in gold for three thousand years.

There is a lot of good literature and experienced mentors to guide new stock investors. Similar resources are not available in crypto. Even if you find literature, the information it contains is often outdated due to the rapid changes in the market. There is simply no one with 20 years of experience in crypto investing you could ask for guidance.

You should be prepared to learn a lot of things independently. You must know how to filter gems from trash on YouTube, online forums, and social media. You must be hungry and motivated to learn and find your paths. Remember that many charlatans in the crypto industry are pretending to give you good advice.

Find your strengths

Whether investing in cryptos or stocks, every investor should explore their strengths and weaknesses. Cryptos offer very unique opportunities to make money. The faster you find your edge, the quicker you will succeed as an investor.

crypto investor strengths

Below are some examples:

  • Information seeker: If your strength is finding information and understanding new technology, you can make money by investing in new projects before they become known to the general public.
  • Trends: Some investors are good at identifying trends before others. Cryptos have many different trends that change constantly.
  • Risk-taking ability: If you are good at tolerating risk, you can invest in projects that most investors deem too challenging.
  • Patience: Perhaps your strength is buying projects that have fallen drastically in a bear market and holding them patiently for many years.

Every investor profile is unique. The most important thing is to find your style and your strengths. Everyone is good at something!

Volatility

Investing in cryptocurrencies comes with a lot of volatility. The smaller cryptos you invest in, the sharper the ups and downs. Preparing for this is impossible because everyone’s emotional reactions are different. You can always make Excel sheets, but you will never know how a 90 % crypto crash feels until you have experienced it.

Be prepared to make many mistakes. It is worth starting with a minimal portfolio until you have gone through at least one bear and bull market. Almost everyone messes up the first bull and bear market. You will start to make better results in the following cycles.

If you have experience in stocks, trading, poker, or betting, it will significantly help you invest in crypto.

Safety

Unfortunately, the crypto industry is plagued with scams. It is essential to learn to avoid scams from the beginning. We have written an informative article that helps beginners avoid the most popular crypto scams.

In addition to this, it is vital to learn about safe storage options for your coins. You can familiarize yourself with them in the crypto wallet article. Ensure your cryptos are secure so your hard work doesn’t go to waste. Thousands and thousands of crypto investors lose their crypto assets every year.

The more time you spend mastering crypto basics, the better you will be at managing your cryptos.

Three different crypto investor profiles

Crypto investors can be divided into buy-and-hold investors, traders, and DeFi adventurers. You probably belong to one of these groups, too, sooner or later.

Buy-and-hold investors

Buy-and-hold investors are probably the largest group of crypto investors. For this group, investing in crypto is similar to investing in equities. Investing has a long time horizon and can also be done with DCA, i.e., monthly purchases. Buy-and-hold investors are not after quick gains.

This group includes many beginners and small investors. Many hedge funds and institutions also fall into this category.

institutions

A buy-and-hold investor also makes sales but does not actively try to time the market. Profits are usually taken out during the euphoric phase of the market, during the bull runs.

Many buy-and-hold investors also use ETFs and do not necessarily buy “genuine cryptocurrencies.” This is typical for stock investors who want to easily invest a few percent of their portfolio in cryptos.

Traders

Cryptocurrency trading has grown explosively in the 2020s. This is because crypto exchanges have started to offer futures and leverage everywhere.

Traders are the opposite of buy-and-hold investors. Whereas buy-and-hold investors buy infrequently and look at the market over the horizon of years, traders look at price movements in a time window of days, hours, or even minutes.

Traders are not the largest group in numbers, but they handle the most significant amounts of money and move the price. Derivatives trading volumes have been much higher than spot trading for years.

Trading requires very different skills than buy-and-hold investing. Mastering technical analysis is essential. It’s also important to remember that traders lose money. Few can be profitable in trading cryptos in the long run.

DeFi adventurers

DeFi adventurers are the third distinct group of crypto investors. This group includes all investors chasing new technology and new DeFi apps. They dare to invest in unknown cryptos and apps that offer exceptional returns.

DeFi is an abbreviation for the word decentralized finance. DeFi services include decentralized exchanges (DEX), liquidity protocols (lending), and liquid staking services. Below is a picture of the front page of Aave, which is the most popular decentralized lending app.

aave

Almost all DeFi adventurers are also airdrop hunters. Airdrops are free cryptos distributed as rewards to users of new services and blockchains. By “farming” airdrops, you can earn tens of thousands of euros annually.

A DeFi adventurer is required to have the ability to take risks and learn new technology quickly. In addition, you must be an excellent social media user and spend a lot of time on Telegram and Discord.

Where to invest in cryptos?

Crypto investing is done in crypto exchanges. There are hundreds of different options on the market. If you are a beginner, don’t worry. We have done the work for you and found the best cryptocurrency exchanges.

Cryptocurrency exchanges can be divided into three main categories:

  • Local exchanges
  • Global exchanges
  • Decentralized exchanges

If you want to invest in cryptos safely on local exchanges, open an account with Coinmotion or Northcrypto. We recommend these services for making your first crypto purchase because of the following advantages:

  1. Language: You can use the exchange in your own language
  2. KYC: Account verification is straightforward
  3. Fiat: Fiat rails are safe and easy to use
  4. Support: If you have problems, support is available in your own language

Below is a picture of Coinmotion’s homepage.

coinmotion

Global crypto exchanges operate in English (and the most common languages). Their advantage is a massive supply of cryptos and lower fees than domestic operators. If you know English and want to trade rarer cryptos, you must go to global exchanges.

You can find reviews of the most popular exchanges by clicking Reviews on the main menu.

Decentralized exchanges, or DEXs, are apps operating in the DeFi world. They are an option for users who want to trade independently without intermediaries. DEXes also contain cryptocurrencies that are not found in traditional crypto exchanges.

In this article, we will not discuss the actual buying process in more detail, as there is a separate guide on how to buy crypto. There, you will find step-by-step instructions for buying cryptos.

Is it worth investing in cryptos?

It is worth investing in cryptos if you believe that their popularity will grow in the future. It is that simple. Cryptocurrencies are, above all, technological innovations. They are about the digital money revolution. Cryptos can be compared to the development of the Internet and mobile devices.

Nowadays, almost every European under 60 has a mobile phone and the Internet. In 20 years, nearly every European under 60 will also have a crypto wallet.

The problem with cryptos is that valuations are complicated to estimate. You cannot use P/E estimations and other popular methods in stock investing. Imagine if you could have bought a small slice of TCP/IP or 5G technologies. How would you estimate the future value of that investment?

It is also good to separate short-term speculation from investing. If you’re looking to make quick profits, I can’t answer the question, “Is it worth investing in cryptos?” No one knows what will happen to the courses in the next day, week, month, or year.

Summary

Investing in crypto is investing in the global adoption of new technology. Cryptos are the most challenging, enjoyable, and best-performing investments. However, they are not for everyone.

The volatility of cryptos has driven many investors away from the market. A brutal bear market follows every bull market. That is when thousands of investors throw in the towel. In addition, the sector is plagued by scammers.

It is essential to understand that many risks exist in addition to the high return potential. Investing in cryptos is more demanding mentally than investing in any other asset class.

You will succeed if you start with small stakes and find your edge. Be active on social media and learn something new every day. Remember that you will make mistakes and lose money, but that’s part of the point. New investment opportunities will arise every day.

Cryptocurrency investing experiences

Finally, I will write a little about my own experiences. I have experience in crypto investing since 2017. Here are a few points I wish someone told me when I started.

I have followed the market since 2010 and invested in stocks and precious metals. This background has helped a lot in crypto investing. If you have also experience in betting or poker, you have learned to tolerate volatility and nasty swings. These skills are beneficial for a crypto investor.

I’ve also been looking for information online since the 1990s. I’ve been active on social media and recognize the most typical fraudsters and scammers. If you have a similar background, you can be a good fit as a crypto investor!

I think cryptocurrencies are a unique investment opportunity. Such opportunities only come along once in a lifetime. For once, regular people like you and me are ahead of Wall Street! Usually, the Wall Street insiders are the investors who make the most money. Crypto is a game where anyone can win.

Studying cryptocurrencies opens up a vast number of other opportunities. You can start your blog, YouTube channel, crypto mining business, or even code your DeFi app. You can invest in cryptos other than by buying the currencies themselves. For example, I have set up this site, which is one way to invest in the industry.

My advice for getting started is to play this game with tiny amounts until you have gone through at least one long bear market. Before this, I would not invest over 10 percent of my assets in cryptos.

Also, find out how crypto taxation works and record all your transactions. Learn how to use a crypto tax app and report your capital gains yearly.

Antti Hyppänen

Antti Hyppänen is the founder and editor-in-chief of AboutBitcoin.io. Antti has written articles about cryptos since 2017. He follows the crypto market every day of the year and is responsible for the daily operations of AboutBitcoin. Antti is not a maximalist regarding any cryptocurrency but looks at the industry objectively. Antti’s investment profile is “buy & hold,” i.e., he does not trade or use leverage. His crypto portfolio consists of mainly Bitcoin and Ethereum. Antti also follows macroeconomic events. In addition to cryptos, his interests include gold, silver, and the US stock market.