Once upon a time, cryptocurrencies attracted a small audience made up of nerdy technophiles like the cypherpunks, developers and the occasional libertarian. They’d buy Bitcoin, followed closely by Ethereum, Litecoin and maybe EOS and sooner than later they started to be rewarded.
As we all know, these digital assets have exploded since then, and turned a novel technology into exciting investment opportunities for millions of people.
Unfortunately, many people struggle with how to get started with crypto. In fairness, the crypto industry can seem complicated, confusing and intimidating for the average person, investor or not.
Hopefully this guide will help you get started. Buying and storing crypto is easier than most people think.
This best and maybe the only way to get started in crypto is by jumping in with both feet. That doesn’t mean you need to sell everything else and go all in. Some people have but that seems pretty risky. You can get into crypto safely and securely by buying a small position in a few coins that you believe in.
Also, you don’t have to buy a whole entire Bitcoin or any other token – they are all divisible into tiny tiny parts. A single Bitcoin can be divided into 100 million equal units called “Satoshis” or “Sats”. So maybe start with a few hundred dollars and get everything set up properly.
Even if you have money burning a hole in your pocket, consider a dollar cost averaging strategy where you invest a set amount consistently over time. Don’t get emotional and try to time everything perfectly, it’s not possible.
Do your own research.
Don’t let your emotions lead you to do things on impulse.
Have a plan.
Decide on the cryptocurrencies you want to buy
You’re going to make a crypto portfolio. It comes down to your goals. Of course, almost everyone shares the common goal of investing in assets that they can watch go up quickly over time. Crypto investing, being the rollercoaster that it is, has this covered and then some. But even within the crypto space there are safer blue chip assets and there are highly speculative new projects. High risk versus high (potential) reward.
Currently, there are more than 2,300 cryptocurrencies. Maybe as high as 6,000. Most of these coins will never be a good investment while others will report incredible gains.
Bitcoin, the godfather of all cryptos, is still the most popular coin today and most people choose to start with bitcoin because it’s shown to be a safe bet and a store of value. Ethereum is not far behind. In fact it might be ahead in many ways depending on when youre reading this. In any case these two (BTC, ETH) are the largest and most popular and have shown their potential year after year. It would be hard to make a case against holding them in a crypto portfolio.
But beyond the basics, there are dozens of well-established and high-ranking coins to consider. In the top 25 are Avalanche, Cardano, Chainlink, Polkadot, Solana, Bitcoin Cash, Ripple, Stellar, Filecoin, Dai, Tron, VeChain, Etc. The list goins and on and on. All of the top altcoins according to www.coinmarketcap.com are worth at least looking into.
At the end of the day, your crypto portfolio will likely depend on your risk tolerance and your ability to do some research. Don’t risk more than you can afford to lose and think of your investment over a longer term than days or weeks. Zoom out to 30, 90 day or even a year to get a bigger picture.
These are a few tips that can guide you in making better choices:
Do Your Own Research
First, do your own research. Don’t just listen to the company reps and the ready opinions of other investors or YouTubers making bold claims and price predictions. Instead, look for experts (like DAN) to get more in-depth and up to date info on specific cryptos and the latest news. Look at price charts to gauge their popularity and market capitalization.
Is a coin experiencing steady growth, or does it tend to spike and then drop in price? (They kind of all do that btw) But coins that have a history of spikes in value and big drops in their market capitalization tend to show dying demand.
Scrutinize the company founder or team behind the coin
You need to know if the people offering are experienced and trustworthy. And whether they have a value proposition that appeals to you. Can you find a list of all the founders or team members behind the coin? A trustworthy team with nothing to hide would let you know who they are. Do the founders have a history of trustworthiness and have their past projects achieved any noteworthy success? A team with a good track record is more likely to help their cryptocurrency and project do well than one with no previous record.
Look for coins that have innovative technology behind them and strong backing of the idea. This will prevent you from falling for meme coins and scams. A good example of a coin with a strong idea behind it is Theta. A decentralized video streaming platform built on its own blockchain by the founders of YouTube and Twitch – sounds pretty good no?
Some cryptocurrencies are created as a copy of more successful coins but with improvements or differences in philosophy. Bitcoin vs Bitcoin Cash for example. Other coins like Doge do not serve any obvious purpose or solve a problem, they just exist as kind of a joke. It might still be worth being in on the joke if you’re early enough but don’t pin your hopes to a meme coin.
If you are ready to buy some crypto, you’ll need to sign up for an exchange account.
Choose a Cryptocurrency Exchange
The easiest way to buy or sell cryptocurrency is to use a cryptocurrency exchange. Crypto exchanges work like stock brokerages giving traders a platform and tools to sell crypto assets.
When choosing a cryptocurrency exchange, you must consider the following:
Security and authenticity – Thoroughly research any exchange you are considering to ensure it is secure and legitimate. If the exchange is not safe, your funds will not be safe. A safe exchange will have a legitimate team and will put up measures such as cold storage for most of their investor’s capital and secure logins to further protect their funds.
Methods of purchase – A good exchange should have at least one method of purchasing crypto with a fiat currency (like a us dollar) . Do they accept PayPal payments, bank transfers, debit or credit cards? Ask yourself if the payment methods they accept are convenient for you before you choose a crypto exchange.
Supported Coins and Tokens – Does the exchange support the coins that you want to purchase? If not, then it’s not a good fit.
Supported Countries – Some exchanges only operate in specific areas so you should double-check to ensure that the exchange you pick serves customers from your area of jurisdiction. Is possible, pick an exchange that operates in the same country you live in as this makes it easier to comply with regulations
Fee Structures – As a crypto investor, you should take keen notice of what different exchanges charge to buy and sell crypto on their platform. Exchange transaction fees can easily eat into your crypto investments, especially if you plan on becoming a day trader. Also, ensure that the platform you choose doesn’t have hidden fees and that their fees structures are flexible.
User Interface and Experience – An exchange with an easy-to-use and intuitive interface makes it easy to trade cryptocurrencies. An exchange with stellar customer care also makes it easy to find help when you are uncertain about some features of the exchange.
Transparency – An exchange with nothing to hide should reveal its owners, members of its team, and its headquarters. They should also publish their cold storage address so others can check their reserves to ensure they are not lying.
Top Cryptocurrency Exchanges
Here are some of the top cryptocurrency exchanges you can consider using:
Coinbase is one of the most secure and easiest cryptocurrency exchanges to use. The platform is also very transparent about its pricing as you can easily view it on their website. Coinbase also has another exchange, known as Coinbase pro which has a lower fee structure and more advanced trading tools.
Coinbase offers you a wide variety of cryptocurrencies to choose from. They also have an extremely simple user interface and high liquidity. Unfortunately, you will incur high fees if you are not using Coinbase pro and you will not have full control of your wallet keys. However, they carry insurance against data breaches, which ensures that in case of a breach or theft, you will get your funds back.
Cash app is a decentralized exchange that allows you to shop online at a supported retailer, split your food bill and even pay rent to your roommate. This exchange works like a bank account by allowing you to have a cash App debit card.
You can also use the exchange to invest in stocks, bitcoin, and ETFs.
Unfortunately, they only support bitcoin so if you are looking to diversify your portfolio, this exchange will not help you much. However, the user interface is very easy to understand even for complete beginners. Their debit card also makes it very convenient to use your cryptocurrency.
Bisq is a decentralized exchange that is also non-custodial. This means that you are the only one who is allowed to touch your crypto. The platform is also easy to access since they don’t require you to upload any documents or follow Know Your Customer (KYC) procedures to use the platform. This makes the platform ideal for crypto enthusiasts who live in areas with an authoritarian regime that won’t allow them to own crypto.
Unfortunately, because of its decentralized nature, Bisq has very low volumes which is a disadvantage if you want to be an active trader.
CEX.IO is a London-based cryptocurrency exchange that supports traders in almost all countries around the globe. The exchange also supports a wide variety of over 80 cryptocurrencies.
The exchange also has an instant buy feature that allows you to quickly purchase crypto using your credit or debit card. As you advance as a trader, you will find that their spot trading and margin trading features will come in handy.
CEX.IO uses a maker-taker fee schedule that depends on your trading volume for the last 30 days. They execute taker orders immediately but makers have to wait a little while.
Unfortunately, the exchange charges hefty fees for their debit and credit card purchases. But you might find it very convenient, especially since you can also access the exchange on your mobile device.
Next choose a crypto wallet
A wallet is a software program that you use to store the permissions associated with your digital currencies. Wallets do not actually store any crypto – they simply allow you to access a blockchain and to spend or send your cryptos. The permission required by ownership is called the private keys.
Obviously private keys need to be kept safe. Anyone who has access to them can access and withdraw the cryptocurrency that they unlock. It’s like your ATM pin or your bank account password.
There are three main types of cryptocurrency wallets to choose from: hardware, software, and paper wallets. Don’t spend any time worrying about paper wallets because they’re just not very useful or effective.
Hardware wallets allow you to store your funds in a physical device that you can connect to your computer. Since hardware wallets are not connected to the internet, they eliminate vulnerabilities and reduce the chance of someone hacking into your wallet. The best hardware wallets are Ledger Nano and Trezor.
Software wallets, on the other hand, store your funds in software that is connected to the internet. Software wallets can either be mobile, desktop, or web-based wallets. Although they are very convenient to use, these types of wallets are vulnerable to hacks and malware. Some of the top software wallets include Mycelium, Exodus wallet, Electrum, and Edge.
Consider moving some or all of your crypto to a private wallet
Security – As we mentioned earlier, your private keys are what allows you to use your cryptocurrencies. If you lose them, you lose your crypto.
No matter how secure the wallet, if someone finds your recovery phrase they will be able to take the contents from it.
Also, dont brag about your holdings or you might encourage someone to rob you. It’s harder to avoid losing funds in the face of a direct threat.
Hardware wallets are the most secure wallets because they are kept offline. If you’re using software wallets, do regular backups and upgrades.
Ensure you’re on official sites and only use HTTPS websites (look for the lock icon in the address bar)
Set up 2FA multifactor authentication.
Ownership vs Custodial – Some exchanges will offer you an exchange-based wallet that you can use to store your coins. However, many of these wallets are custodial, meaning that they do not give you full control of your private keys.
For example, neither Gemini nor Kraken allow you access to your private key. You may want total control, but it’s worth pointing out that this also means taking full responsibility for security as well. If you want to have the convenience of a custodial exchange, you will have to trust them. The larger crypto exchanges have been around for years, they’re regulated, and they are often insured, so even though the common sentiment “Not your keys, not your coins.” is true, it’s also worth noting that the chances of an exchange like coinbase or gemini getting hacked or making off with your crypto are pretty small at this point.
Custodial exchanges also offer their clients a way to earn interest.
That said, our opinion is still: Don’t leave much of your assets on a custodial exchange. Learn to use a private wallet like Exodus or Electrum. Transfer your funds there and keep your Private Keys and passwords secure using a password manager.
For the most part, you’re better off having full control over your assets.
Transparency – A transparent wallet provider should use an open-source code. This way, other developers can peer-review their code to ensure it’s safe and free of bugs. If the code is not open-source, there is no telling for sure if your crypto is safe. Electrum is a Bitcoin wallet that navigates the thin line between beginner user-friendliness and expert functionality. The open source wallet is released under the MIT License.
Ease of use – A good wallet will be easy to use. It should also be convenient and suit your needs. You might want to access some of your Bitcoin through your phone or make exchanges directly in the wallet.
You might want to use a hardware wallet that allows you to download the crypto client directly.
Don’t invest more than you can afford to lose
Although cryptocurrencies have been appreciating over the last decade, who knows what will happen in the short term. You don’t want to invest money that you need for something else because it may be worth less and you’ll be forced to sell at a loss instead of waiting for the prices to rebound.
Only use reputable services
Whether it’s an exchange, wallet, or payment platform, only use legitimate services that are known for their security and trustworthiness.
Consider cold storage wallets
Even if you prefer to have some of your cryptos on your phone, you should have most of your funds stored offline in a hardware wallet to ensure that they are 100% and your control (and safe).
Never reveal your password or seed phrase to anyone
Cybercriminals are lurking everywhere on the internet and they will not hesitate to try and trick you into revealing your passwords and seed phrases so they can access your crypto funds. You must be extra careful to avoid falling prey to their tricks.
Don’t download anything or click through from an email unless you are positive that it is legitimate. There were a bunch of emails that came from “Legder” not “Ledger” that looked extremely convincing.
Note: No one will ever ask for your seed phrase unless they are trying to gain access to your funds. Restoring or using your own private wallet is the only time it makes sense to enter it.
How to Sell or Cash Out Your Crypto
As a crypto investor, you will likely want to sell your coins from time to time. There are different ways you can do this.
First, you can sell from crypto back to fiat on an exchange (such as the ones we mentioned earlier) and withdraw the money through your bank account.
You can also cash out your crypto by spending it. Either through an approved crypto payment card or by buying from an online store that accepts crypto as a payment method.
You can also use a cryptocurrency ATM to sell your crypto. Crypto ATMs allow you to scan a wallet QR code and sell your cryptocurrency for cash. They are located all over the world and you can easily search for one near you through the internet.
Another option is to sell directly to a buyer, either using an online platform like LocalBitcoins or on a face-to-face basis.
Taxes and Regulations
A topic for a longer post but for now, let’s just say that anytime you dispose of, trade, sell or exchange any crypto you are very likely to be required to disclose it as a taxable event or capital gain. Crypto is not private (except for a few coins like XMR). Do your research on this for your country or state as these laws differ from place to place.
Cryptocurrencies are no longer just for tech insiders, they’re easily accessible to all who want to invest or trade them for a profit.
With great power comes great responsibility. If you own and trade cryptos, be prepared to learn and employ best practices for security as well.
Crypto can be highly profitable but as an asset class cryptocurrencies tend to have much higher volatility than traditional financial investments.
Do your own research.
Don’t invest or risk what you can’t afford to lose.