Before you start investing in the cryptocurrency space, there’s a lot of little things you should know. I’ve collected up these little nuggets of information into a quick little post.
Remember: I’m not a financial advisor and this isn’t investment advice. Check out my full disclaimer here.
- You can buy less than 1 Bitcoin (BTC). The smallest unit is 0.00000001 BTC (i.e., 1 Satoshi).
- It’s not a good idea to borrow money (via credit cards or loans) to buy cryptocurrency.
- Don’t invest funds you need to pay living costs (e.g., rent, bills, food).
- Only invest what you can afford to lose. When you buy a cryptocurrency, imagine that the money is already lost. If you can’t handle that, you’re probably over-exposing yourself.
- Do your own research (DYOR). No one is going to bail you out if you make a bad move.
- Similar to #5, don’t trust anyone.
- Judge the value of a cryptocurrency by its market capitalisation (unit price x circulating supply) and volume, not the unit value.
- Most (90%+) cryptocurrencies will NOT survive in the long-term.
- If I was holding just one cryptocurrency for the rest of my life, I’d make sure it was BTC.
- Consider limiting your investment to just 4 or 5 cryptocurrencies (inside the top 100) when you’re just getting started.
- Want to buy a cryptocurrency not available through Coinbase? Check out this post.
- Unless you have previous experience, don’t waste your time trying to day-trade. Do yourself a favour and just think about the long-term potential of the projects you’re throwing your money at.
- Similar to #12, don’t start panicking when cryptocurrencies lose 50% or more of their value. If anything, these are valuable buying opportunities for projects you stand behind – not reasons to sell.
- Avoid investing in cloud mining services (like Genesis Mining). Look into these services, or mining yourself, at a later date.
- Enable 2-factor authentication (Google Authenticator) on exchanges (e.g., Coinbase) that you use.
- Store your cryptocurrency in your own wallet. Do NOT leave substantial amounts on exchanges. Hardware wallets (like the Ledger Nano S) are strongly recommended by the community.
- Track your cryptocurrency purchases and sales. Lots of (free and paid) tools are available.
- Don’t be afraid to take some profits when you’ve experienced large gains. It might help you sleep easier.
- Consider the tax implications when you take profits (it might be worthwhile to just hodl). If you’re from the UK, check out this great post.
- Be aware of the cognitive heuristics and biases you’re susceptible too.
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