So you've seen the 5 general rules and advice for General Investing and you're curious about Cryptocurrency specifically. Look no further (okay, I'm lying, PLEASE continue to look further after reading these) here are 5 guidelines for Cryptocurrency Investing:
Risk it for the biscuit!
With Cryptocurrency comes unique risks in their daily, rapid fluctuations and volatility. Cryptocurrency is a much faster paced investment than any other investment, and that means it's much easier to make a lot of gains but it's also much easier to lose. It's also got more complex, faster paced models for bull runs and bear runs. You NEED to have a tolerance for risk to invest in Cryptocurrency. The ONLY Cryptocurrencies that are 'safe' or low risk are Bitcoin, ETH, and Stablecoins (Such as BUSD, USDT, etc). Even still, these coins are generally as risky, or even riskier than your typical stock on the stock market. Stocks are a widely accepted, easily sold item, whereas cryptocurrency (while currently on an uptrend) is less widely accepted, with who knows what kind of government regulations and other crap headed its way that could change the game.
The benefit though? Significantly higher potential rates on return. Some crypto have increased nearly 7000% in the space of a month. Look for a stock that does that, you won't find one. That explosive growth is rare to come by in stocks, and that is the reason you're here, for the chance for your micro-investments, or your investments, or your macro-investments to triple, quadruple, quintuple, in a month or less. Just remember, that return is because of the risk. You are 100% risking losing everything, and significantly more so than other investments. Cryptocurrency is a psuedocurrency and that means its value is essentially established by supply and demand between the people. We decide its power, and that means your friend decides its power, your family does, everybody who interacts with it is devaluing or valuing it. Remember that.
This specific piece of advice is made all the more intense by our current situation. Do not forget it going forward with your investments into crypto.
DYOR. No silly quotes here. Just DYOR.
You've heard it before, DYOR. That stands for Do Your Own Research and this is so, so, SO important for any and all investing, however, I believe it is the MOST important for Cryptocurrency. Cryptocurrency is NOT anywhere near as well regulated as stocks. They aren't as well accepted. They aren't FDIC insured. There's a lot of risk here.
You will absolutely fail, unless you get lucky, if you skip DYOR. You will lose money. You will find a coin that is a scam. You will likely get your wallet compromised or stolen. You will find a project that sounds great but fails because you didn't look at the team and see they were basically a rich kid college graduate in a non-financial field 'trying it out'. You can EASILY avoid these by just googling, by just looking into the coin.
You HAVE to do your due diligence in the cryptocurrency space, first because it currently is a huge hype, meaning there's lots of people jumping on board trying to make a quick buck without the foundations or expertise needed to actually succeed. Second, this hype means there's tons of scams coming out to attempt to get a piece of that pie, and you need to be careful of those. Finally, there is very little regulation currently in cryptocurrency, and this can lead to highly risky plays, reminiscent of penny stocks.
Look up their White Paper. See their timeline. Try to find their team. Look at their year. Look at their 30 day, their 7 day. Be skeptical.
Avoid trends unless you actually know how to read graphs and predict financial movements. You WILL very likely lose money if you don't pay attention here. There is no easy investment, there's just being in the right place at the right time and seeing it sooner rather than later. Most times, by the time you've heard of a current trend in investing it is too late. Don't be surprised if you ignore that and lose money. (Though I hope you DO end up making money off trends!)
Make that money.
Always take profits. Basically, if you put in $20, and your initial investment doubles to $40, don't get greedy, secure your $20, and then either reinvest into something else, or add it back into your account. This will protect you against the volatility mentioned earlier, and make any further gains, OR LOSSES, inconsequential because you now can't lose. You already beat the game you were playing. It's done. That is a pretty great feeling, and you can now decide between Staking, Swapping, HODLING, etc. etc. to make more money.
And the higher that example number gets, the more important that becomes. If you have 2000 and you now have 4000, you should be 100% certain it won't drop, and even then I would still suggest at least taking out SOME to secure some profit.
It's easy to go, well, I could make MORE right? Sure, but you could also make WAY LESS the minute you go to sleep and wake back up.
This advice is more important for anybody who is planning to trade short term and try to rake in profits on say, bull runs. If you are a long-term investor, then that 6 month dip where it goes back down to your initial investment you can likely just wait out for the next bull run. Even still, as a long-term investor, combine this with DYOR and know when to take profits.
Not your keys, not your coins.
This one I said before, and I will say it again.
Don't. Imagine if you gave your friend your bank account, now make that person a stranger on the internet instead. Don't.
Protect your codes, keep them in physical copies, and keep them safe. You CANNOT get back a lost seed phrase, 9 times out of 10. If you lose it, everything you own in that wallet is gone, there's no insurance or calling and complaining enough to get it back. You put your money in a safe and dropped it randomly into the ocean and then burned the coordinates.
You will also hear this a lot, but remember the phrase: Not your keys, not your coins. Own your crypto!
& hold your currency on a wallet over an exchange. See above.
You should choose a reliable exchange or wallet. This has a number of factors:
Is your Wallet, or Exchange Insured? This could be the difference between some minor financial damage and a total loss. It's definitely worth looking at your options.
Picking between a large and small exchange is another choice: Having a Large Exchange means higher trade volumes, potentially more coins, and possibly better fees. The downside is that it also means there might be higher withdraws, and slower verification processes and customer service. Likewise, a smaller exchange means it might not be as well protected, it might have less coins, and it might have smaller trade volumes. You should choose an exchange that fits best for you, for instance, a swing trader would almost certainly need a larger exchange which could handle constant trades. If you're a small time investor, you might need a smaller exchange with lower withdraw costs and minimums.
You also want to pay attention to if these exchanges ever block sales or have down times.
This all of course, would require its own more in-depth article for Crypto 101 which will be coming soon and linked here when it is available!
I hope these little bits of advice help, as they are the core of many investors and serve as something to protect you from mistakes & scams. I will admit that I am on the more cautious side as an investor, so keep this in mind with my advice. Some may find that it's not aggressive enough for their investing strategy, I try to keep this focused on new, or inexperienced investors when I give advice.
If you'd like to see a more in-depth article, or have questions, be sure to leave them in the comments!
Want more advice? Check out these articles coming soon:
5 Rules & Advice for Investing in Collectibles (Coming SOON)
5 Rules & Advice for Investing in Precious Metals (Coming SOON)
Interested in more Crypto advice, check out my upcoming series: Crypto 101
Crypto 101: What can you DO with Crypto (Coming SOON)