How To Get Started in Crypto - 2021 Guide
Cryptocurrency is prevalent now more than ever!
From Tesla buying $1.5bn of Bitcoin, to big players such as JP Morgan and BlackRock ready to "dabble" in the space.
This guide aims to provide a generic guide for the average person on how to get into cryptocurrencies and choose your investments wisely. Crypto has been widely heralded as gambling and speculation driven, with no real market history to base investments on. Personally I disagree with this, as long as you have done your research and the projects you choose have strong utility and potential, it is not gambling.
After all, what market isn't speculation driven?
Bitcoin and Ethereum:
When talking about cryptocurrencies, we have to talk about Bitcoin (BTC) and Ethereum (ETH). They have been the two biggest players in the space, together amassing 75% of the total market cap of the entire cryptocurrency space. The best place to start first is to take a look at the Bitcoin Whitepaper attached below - the genesis of how the peer-to-peer electronic cash system now turned store of value first began. Ethereum is different however, it provides the platform for decentralised applications such as decentralised finance protocols. Many of the Top 100 coins are projects built upon the Ethereum blockchain, called ERC-20 tokens. Although Ethereum is technically classed as an alternate coin (alt-coin), this guide will consider it as an equal to Bitcoin. All other coins bar these two are classed as alt-coins, which are much more volatile.
Bitcoin Whitepaper - https://bitcoin.org/bitcoin.pdf
Ethereum Whitepaper - https://ethereum.org/en/whitepaper/
Choosing your Investments:
Research is very important when it comes to choosing your crypto investments.
There is a general checklist:
Tokenomics - Is the project's token/coin inflationary or deflationary. Does a specific entity control a significant portion of the circulating supply? Anything above 50% may be a red flag. Are there are staking/voting rewards?
Development - Check the GitHub repos of the project. Are there developers actively improving and working on the project? If not, why not?
Team - Is the core team behind the project legit? Someone who has been part of previous successful projects is akin to gold dust.
Partnerships - Is the project collaborating with any other big projects or corporate firms? This enhances the authenticity of the project if it's been vetted by a big player.
Use Case - Does the token/project actually solve any real world issues? If you cannot explain to someone why you're investing in something, chances are you shouldn't be investing in it.
Competition - Are there multiple projects aiming to do the same thing? You may wish to hedge your investments by diversifying. A known example is the likes of Cardano (ADA), Tezos (XTZ), Polkadot (DOT) and Cosmos (ATOM) who are attempting to be the heirs to Ethereum's throne.
You may also wish to buy some stablecoins such as Tether (USDT), USD Coin (USDC) or Dai (DAI). These stablecoins are pegged to the US Dollar and do not fluctuate in price. The way the price is kept in check makes for some very interesting reading! I advise reading up on the work MakerDAO are doing to ensure DAI remains pegged to the Dollar, and how they use their native token Maker (MKR) to achieve this.
Now that you've done your research, it's time to buy your crypto. It's advisable to start off with Bitcoin and Ethereum until you have found your feet and are ready to invest in more risky projects. A good beginner portfolio would be 60:40 split between BTC and ETH respectively. Once more experienced, this may change to a 50:30:20 split between BTC, ETH and alt-coins. The 20% portion of alt-coins may be then split into 4-5 projects you are keen on and have high hopes for.
In order to buy crypto with fiat (cash), you'll need to use a centralised exchange. These include Coinbase, Kraken, Binance and Gemini. The best way is to deposit your fiat onto the exchange using a bank transfer, and then buying your crypto once the funds have cleared.
Be aware of fees!
Buying directly on the Coinbase app will cost you up to 4% in fees if you buy with a debit card, hence I advise using Coinbase Pro and doing bank deposits.
A brief comparison between the different exchanges: https://thecollegeinvestor.com/21245/top-10-bitcoin-crypto-investing-sites/
Now that you've made a purchase, you need to know about the most said phrase in crypto, "not your keys not your coins". This means that unless you hold the private keys for your crypto, then technically you do not own it. To avoid any dodgy business by exchanges, it's recommended to store your coins in your own wallet, hard or soft. A hard wallet is a physical wallet such as a Ledger or Trezor, which is the safest option to use. A soft wallet is an online based wallet such as Exodus, Trust Wallet or Electrum. These wallets are also very safe, but due to them being connected to the internet, there's always a risk of them being hacked.
Alternatively, you can stake/lend your coins and earn passive income on them, i.e interest. Platforms such as BlockFi, Celsius and Nexo are centralised platforms where you can send your crypto and earn a tidy APY for holding your crypto on them. DeFi platforms such as Aave, Compound and Yearn Finance are decentralised protocols not controlled by anyone who offer a more handsome APY for depositing your crypto on them, but with a greater risk.
BlockFi - https://blockfi.com/
Celsius - https://celsius.network/
Nexo - https://nexo.io/
If you're new to crypto, please be careful when sending and transferring crypto! Send a tiny amount as a test payment before sending a larger amount when starting out!
Research, research, research. There's a lot of free content out there on YouTube and Google for you not to be clued up on what you're investing in. Ask questions and don't be lazy.
Don't trust everything you watch or read either, the Coin Bureau is a good place to start on YouTube and Google if you're unsure.
Do not invest more than you can afford to lose.
Buy the dips.
HODL for life.