I had a discussion with a few friends last night over some beers, and the question of what a neophyte in crypto should do if he wants to get involved came up. I have spent a lot of time thinking this question over, because there is no simple answer (unless you're an accredited investor and can put some money into Polychain Capital or Blockchain Capital and have it managed by professionals) for most people. There is no generic answer. Even so, I thought I'd put a few words to paper on what a 20-40 year old person should do if they're interested in the crypto market. I expect steemit readers to know much of this already, but maybe you can share this with somebody who is new to the space and asking questions.
Preparation
First, make a plan. What draws you to crypto-is it the returns? The technology? Do you have a bit of a gambling habit in you, or are you more fascinated by the way crypto can change the world? Are you privacy focused, or do you appreciate the open nature of the blockchain?
Knowing what kind of investor you are is incredibly important, but if you are young and you don't know yet, that's ok...just realize, you're going to do some learning, and try to use this as an opportunity to better know yourself. The unexamined life is not worth living. Crypto will give you plenty of opportunities for self reflection when your portfolio is down 40% in a month.
Savings
At the minimum, the very absolute minimum, do not invest in crypto if you're swimming in debt, and don't have $1000 in savings for an emergency. You just absolutely need this. If an emergency comes up, and you decide to sell your crypto to cover for it, you're not going to be able to stick to your plan and exit the market when it's up.
While I did have emergency savings, I foolishly sold my 300 ETH this past January to cover Christmas bills. How foolish-I'd have seen it grow to over $120,000 this spring! I should have taken money from my emergency savings to pay for the bills (or planned better...). This is the lesson you need to remember when tempted to buy crypto before having savings.
Read, read, read
Hopefully reading Digital Gold by Nathaniel Popper
When I first began really reading about Bitcoin, I had a lot of time to read about it on r/bitcoin and r/btc. I also read about other cryptocurrencies, like Ripple, Doge, and a new one called Ethereum. Reading and understanding how they worked, while putting in a little extra money every paycheck, got me into crypto without too much risk. I never put more than 5% of my net worth into crypto, as I recognized it being extremely volatile. However, I became convinced that the technology seemed legitimate and that there was a significant opportunity to profit from it.
Reading also helped my confidence when my early purchases were followed by decreases in the price of Bitcoin and Ether. Since I was A, spending money I could afford to lose, and B, playing a longer term game, I could stomach a paper loss for a while as the very early Ethereum market dropped from $2.70 to under $1.00 (although looking back, I sure wish I had bought more!).
Now, Read More
Further opportunities were found by more reading. I found out about Digix, Slock.it, Augur, and more. Some of you may remember that when Ethereum was very young, there weren't too many ICOs available. Anyone remember Free My Vunk? I don't want to knock it, but while trading video game "junk" may be a perfect early blockchain use case, it doesn't particularly inspire one the way industry changing technology like the Basic Attention Token does. If I had stopped reading then about ethereum and given up on it as a novelty, I would have missed some huge ICOs in 2017. As it is, I missed SDTV and Golem's ICOs after tying up a little money in Plutus, which raised only a million (their ICO being immediately after the DAO fiasco).
Also, go check out r/personalfinance and learn about why you might want 3-6 months worth of expenses saved up, retirement accounts and how to use them (IRAs, 401ks, etc), and learn the basics of how money works. This will help immensely throughout your life, and these lessons are generally not taught in school.
Finally, determine what you feel comfortable with as a return. Do you want to see those 100x gains you've heard about? We all do! The biggest way to not see them is to throw caution to the wind and borrow money due to FOMO. Instead, realize that crypto is in a long term bull market and there will be many ups and downs. Read about the dot com bubble for some great examples of how a great bull market moves and you'll be less surprised, and less concerned, during those minor bear markets within.
Your First Buy
So, you've got your emergency fund, your retirement funds started, your financial life is in order and you've decided to make your first purchase!
Stay small. Stay very small.
If your income is $3000 per month, I'd recommend a very conservative $25 into Bitcoin or Ethereum. Currently, Bitcoin fees are extremely high, and will eat up any money you send at a low level like this-I recently sent a friend $5 of BTC to introduce him to crypto and it cost me $3 to send it. Those fees shouldn't last forever, but keep them in mind.
Also, download a few wallets onto your phone and try them out. Airbitz is good; Mycelium is also good. Coinbase will let you buy BTC, ETH, and Litecoin on their wallet. Before you download a wallet, check out user reviews and make sure it is legit. The ones I listed above I've used and been satisfied with.
Now, Use It!
Here's one of the most important things: use some cryptocurrency. Newegg allows you to pay in bitcoin, so does Steam, reddit, and some other sites as well. Give a friend a couple bucks worth of ETH. See how the currency works, find out what the pain points are, compare it to Venmo or Paypal or check writing. Do you like using crypto? Try to think about where it would be very useful, and where it would be useless. Do some more reading: find out where BTC is being used in place of fiat (hint: places like Venezuela).
Coinbase has a cool feature that allows you to repeat purchases daily, weekly, or monthly. I do small weekly purchases-it allows me to set it and forget it when it comes to buying crypto. I'm in it for the long run, and I can slowly build up my stack taking little bits out of my paycheck each time, rather than huge amounts. I can't imagine those who bought $1000 of ETH at $400. Breaking that up over a few months, though, would have made luck less important.
Save, Read, Buy, Use
Those four steps are really the only way I'd recommend anyone seriously get into crypto. Truly, I can't recommend the first two enough-both have helped me avoid a lot of mistakes and helped me navigate the quickly changing landscape of this developing space. If it sounds like a lot of work, there are plenty of investment opportunities in real estate, mutual funds, etc, and there's nothing wrong with sticking to what you know. It's better to make 15% off of something you're an expert at than go into something as volatile as crypto and knowing nothing-even if the returns are higher! It's also better to have emergency cash on hand than to have everything outside of your checking account in crypto.
Save. Read. Buy. Use. Repeat.
Best of luck!
Such a great post you have made some spot on recommendations.
From your reference to "Anyone remember Free My Vunk?" I can tell you been around. I remember it and recently I was wondering what ever happened to them?
Worthy of a resteem for sure!
Timing is one key factor too. I got in this just less than 3 weeks ago. And you can imagine how deep I am in now. Can only be patient and try to average my cost. Hopefully it works out from long term.
@susanli3769 This is a long play. You just got to stay in game.
You only lose when you sell.
Thanks. I will hold onto it for sure. Losing money is never my intention. Thanks
A better way is to earn it via mining/blogging.
Bingo!
I have followed these steps before having read this, 3 months ago already... Only now since a couple of weeks have I been able to let it go a bit to the point where I dont check the market every hour or so. Makes me feel much better!
That sounds like forward progress!
Great post! I'm very interested in crypto currency. Before joining Steemit I had only heard of Bitcoin and knew absolutely nothing about it. I'm trying to learn so I can put some money in and experiment a little. Your post helps a lot. Thanks!
Glad I can be of service!
great post. really educational and worth reading most specially for beginners like myself who is still learning how cryptos work since it's pretty much confusing with so many choices where to put your money.
There is so much information out there. Keep reading!
A very interesting post. Although I suppose the single most important thing is just to do your research before investing. Hurrying to make any single investment will probably mean that you just end up investing in what ever other people are investing in. And in my opinion those aren't good investments. Altough in the cryptocurrency world everything seems to go up currently.
I also agree that starting with a small amount will be good. Unless you're a seasoned investor, in which case you can probably figure out how to invest in cryptocurrencies as well. There are things you can analyze and by doing so figure out what are good investments.
Always hold your currency because the markets go up and down you have to learn the faith principle here
nice sharing bro! thanks for sharing i'm much interested in cryptocurrency!
Upvoted & RESTEEMED!
Thanks! Glad you liked it!
good subject man !!
continue you have s good post..
i support you @protegeaa..
I've had many similar conversations with friends and I always come back to RESEARCH. If they don't want to put in the time/effort to learn for themselves, then I don't think it's the right move, regardless of how much liquid cap they have or their risk tolerance. Thanks for a great post.
FOLLOWED!
Thanks-research has let me sleep soundly these last few days while a sizable portion of my portfolio was vaporized.
The tech is solid. I'm still bullish.
I really enjoyed your summarization of joining the crypto world with its high volatility and pitfalls. I've immersed myself in this for the past 6 weeks and have done my best to purchase Altcoins with Purpose and strong teams. I've lost and lost again but I'm starting to understand the exchanges and how to make small gains without quite as much risk. Is there anyone you recommend for daily advisory? I'm very interested in the future of Status Network, ReddCoin, Digibyte, AntShares...to name a few. I know very little about the intricate workings of the block chain and I would appreciate a little direction on good informational sources. Thank you for your input. I'll definitely be following you.
Thanks and welcome to this space!
Following the coinfund tag on steemit is a good start. Beyond that my recommendations above stand. Be conservative and use only money you can truly afford to lose. Better to learn enough about crypto that you can find a job opportunity or something rather than straight speculation.