Getting Started In Crypto: What Every Newbie Should Know (1)
For every mistake made, you pay with your portfolio.
In this short article, I explained in detail what you should know as a newbie in the cryptocurrency space. Arming yourself with the knowledge shared gives you an edge and enables you to navigate the murky waters whilst steering clear of the obvious pitfalls people encounter while investing in the crypto market. In the crypto market, what you don’t know will cost you your portfolio. In other words, you pay for your ignorance.
#1 Crypto is a numbers game
Life is a numbers game. Crypto is a numbers game. Before you invest anything in the crypto market, you need a solid grasp of your numbers. Failure to do this will most likely resort to losses and unmet unrealistic expectations. Start by asking yourself an honest question: How much can I invest in the crypto market that won’t put my current lifestyle at risk? In answering this question, you have to be brutally honest with yourself. Based on your response, you’ll be able to determine the strategy you’ll need for profitability as well as your risk tolerance level.
To put this into context, the risk level of an investor with $100 and another with $10000 differs; ditto for their profit and loss. While a 5x rise in a token turns an investment of $100 to $500, it turns an investment of $10,000 to $50,000. What if the token is 5x down?
Now to the numbers:
$10 x 1000x token = $10,000
$100 x 1000x token = $100,000
$1000 x 1000x token= $1,000,000
It looks easy. The reality, however, is that most people don’t see it this way. As easy as it looks, people still miss out on life-changing gains. This is due to factors like: selling early, panic selling, lack of proper understanding of the risk involved, failure to properly research, etc. Some people are lucky. They buy based on recommendations from friends or family members or a random influencer on CT (Crypto Twitter) thereby turning their small investment into life-changing gains. We don’t get to see that every day! You can’t base your strategy on luck.
As a newbie in this space, therefore, don’t get carried away by the big figures flying around. Keep it simple.
- Determine the amount you want to invest in the crypto market.
- Do your own research on coins/tokens before making a purchase.
- Set your buy and sell targets before making any purchase.
In the end, make sure you aren’t putting your current lifestyle at risk because crypto is not a get rich quick scheme. Do note that cryptocurrency isn’t just about getting rich; it’s about attaining financial freedom. While there are opportunities to profit in the short term, remember that it wouldn’t last forever.
#2 The Crypto Space have good and bad actors
Every industry has its good and bad sides. So long as humans exist, we will always have bad and good actors. The crypto space is littered with rugs. In the case of a rug or rug pull, investors lose money when liquidity is taken away from a token. It is important to note that rugs are not limited to this simplistic definition. I’ll talk more about rugs in another article.
Beyond rug pulls, solid projects fail. Solid projects fail for different reasons ranging from he indiscretion and greed of founders or team of developers, lack of funding, loss of interest in the project, lack of exposure, to lack of community. The FTX debacle in 2022 is an example of the indiscretion and greed of founders. Investors lost money due to the indiscretion of Sam Bank-Man Fried. There were videos flying on CT of people committing suicide. It was an insane moment. I have had my fair share of this just like any crypto investor. Merlin Dex, a liquidity platform on the Zksync network was rugpulled by team of developers who stole $2.1 million.
Hacks happen frequently in this space. Hackers work round the clock looking for ways to exploit protocols. For example, in 2022 alone, there were more than nine (9) crypto hacks. Hackers don’t just hack protocols, they target you too. They want to hack your wallet and take away all your money. It’s for this reason that every newbie should begin with a lesson on security!
#3 Security is key
People keep their funds in banks because of trust and the guarantee that their funds are secure. In crypto, trust is in the blockchain. You either self-custody your cryptocurrencies or you store them on a centralized exchange. If you self-custody your coins, you are responsible for the security of your coins. As such, you have to be careful of the links you click, the DApps you interact with and the transactions you sign. If you click on a phishing link that wipes your wallet, you’ll most likely not be able to recover your stolen funds from the hacker. On the other hand, if you leave your coins on centralized exchanges, you are no longer in charge of securing your funds. You might wake up one day, just like some people did in 2022 during the FTX debacle, and realise that you cannot withdraw your funds again.
As a newbie, the best option is to self-custody your coins in a cold wallet. Personally, I use a cold wallet provided by Safepal. I can go anywhere with my coins in my pocket with no fear of hacks or loss of access to my hard earned funds.
In conclusion, you alone have your best interest at heart in this space. Don’t get carried away. Stick to the fundamentals and you’re gonna make it one day. This article is just a snapshot of what you should know as you begin your journey in this space. I’ll write the second part of this article at a later time.
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