How to Start Investing in Crypto – The Complete Guide

Our guide on how to start investing in crypto

Crypto is not a buzzword anymore; it’s the real deal. As of 2024, there were over 2m different coins listed on CoinMarketCap, and the total crypto market cap was USD$1.68T. This industry is projected to keep growing in the coming years.

Did the above numbers make you eager? Want to get your hands dirty in the world of Crypto? I’ll be your helping hand. 

Let’s start with the basics and learn how to start investing in Crypto starting from zero.

Chapter 1: Introduction to Cryptocurrencies

Crypto is a digital or virtual currency that uses blockchain technology for secure financial transactions. Blockchain is like a digital ledger where all the transactions are securely recorded and stored chronologically. This technology enables decentralization, meaning there is no central authority controlling the network. Simply put, there’s no bank or government in control of your funds; you are.

Some key concepts to understand before diving into the world of Crypto and figuring out how to start investing in Crypto:

• Decentralization: As mentioned earlier, there is no central authority controlling the network. All transactions are peer-to-peer (P2P) and verified by nodes (a technical term that essentially means computers) on the network.

• Mining: It refers to adding new blocks of transactions to the blockchain.

Key Concepts:

1. Consensus Mechanisms: It’s the process through which the nodes on the network reach an agreement on the validity of a transaction. Different cryptocurrencies use different consensus mechanisms, such as Proof-of-Work (PoW) or Proof-of-Stake (PoS). There are more consensus mechanisms, but these are the main ones.

2. Smart Contracts: These are self-executing contracts with the terms of the agreement between buyers and sellers being directly written into lines of code. They eliminate the need for intermediaries and are used in decentralized applications (dApps). However, not all coins use smart contracts – for example, Bitcoin does not. However, Ethereum does.

Real-World Use Cases:

Crypto is not just limited to buying and selling for investment purposes. It has real-world use cases in various industries, such as:

1. Remittances: Crypto allows for cheap and fast cross-border transactions.
2. Supply Chain Management: Blockchain technology can be implemented to track and verify the supply chain of products, ensuring transparency and authenticity.
3. Voting Systems: By using blockchain-based voting systems, we can eliminate voter fraud and ensure secure elections.
4. New tokens are being developed for all sorts of use cases, such as tokenizing real-world assets, financing video games, and even decentralized social networks. 

Chapter 2: Taking a Walk Into the Crypto Market

Let’s keep it fun and simple, there are three types of Crypto:

1. Coins: These are cryptocurrencies that act as a medium of exchange, like Bitcoin (BTC) and Litecoin (LTC).
2. Tokens are digital assets representing a utility or asset on a blockchain, such as Ethereum’s ERC-20 tokens.
3. Stablecoins: These are crypto assets pegged to a stable asset, such as the US Dollar, to minimize price volatility.

Market Dynamics:

Supply and demand play a crucial role in determining the price of any cryptocurrency. The more people buying a particular crypto, the higher its demand and vice versa. As with any market, this constant fluctuation in supply and demand results in price volatility.

Here’s an example: If there is a high demand for Bitcoin, but the supply remains the same, the price of Bitcoin will increase. However, if there is an increase in supply and no change in demand, the price will decrease.

Market Cycles:

The Crypto market is known for its extreme price fluctuations. It goes through cycles of bullish (increasing) and bearish (decreasing) trends. Several factors influence these cycles, such as regulatory changes, media coverage, and adoption.

Tip: Try buying in the bearish market and sell in the bullish market to maximize profits.

Technical Analysis:

As a beginner, it’s vital to understand basic technical analysis. It helps you make informed decisions while trading Crypto. Some essential tools for technical analysis are charts, trends, and indicators (optional).

1. Charts: These are graphical representations of price movements over time. They display patterns that can help predict the future. Recall your statistics classes; charts have two axes: the X-axis for time and the Y-axis for price.
2. Trends: These are patterns in the price movements of a cryptocurrency that can be used to make predictions about future price movements. There are three types of trends:

• Uptrend: When prices consistently increase over time.
• Downtrend: When prices consistently decrease over time.
• Sideways trend: When prices fluctuate between a specific range.

Tip: So, how do you pick up a trend? Look for support and resistance levels on the charts. And then there are indicators. These are additional tools that help identify trends, momentum, and market sentiment. Some commonly used indicators are Moving Averages (MA), Relative Strength Index (RSI), and Bollinger Bands.

Chapter 3: The Risks and Rewards of Crypto Trading

I won’t say that Crypto is all sunshine and rainbows. Like any investment, it comes with its own set of risks and rewards. Before investing in Crypto, it’s crucial to understand these factors:

Risks:

1. Volatility: As discussed earlier, the Crypto market is highly volatile, meaning prices can fluctuate rapidly and unpredictably. 
2. Hacking and Scams: Since Crypto is digital, there is always a risk of hacking or scams. In 2014, the infamous Mt. Gox hack resulted in the loss of around $460 million worth of Bitcoin. If we consider the past year, the Mixin Platform suffered a loss of $200 million due to a hack.
3. Regulatory Changes: The Crypto market is highly unregulated, and governments worldwide are deciding how to regulate it. Any significant changes in regulations can affect the value of cryptocurrencies significantly. So, staying cautious is advised.

Wondering why people are still knee-deep into Crypto, considering the risks? Simple – the rewards weigh far more than the risks.

Rewards:

Crypto has gained a reputation for providing high returns on investments, with some coins like Bitcoin seeing an increase of over 10,000% since its inception. Let me tell you an inspirational story of Erick Fineman. 

In 2011, when the value of a single Bitcoin was just $12, a remarkable story of entrepreneurial spirit and foresight unfolded. At the tender age of 11, Erik Fineman borrowed $1000 from his grandmother and, with the assistance of his brother, delved into the world of Bitcoin investment. By the end of 2013, as the value of Bitcoin soared to $1200, Fineman had already amassed a substantial fortune.

Fast forward to January 2015, and Fineman had established his own education company. When presented with the option of receiving either $100,000 or 300 Bitcoins for the sale of his education venture, he boldly chose the latter. 

This decision proved to be astoundingly prescient.

See, the rewards are indeed greater than the risks. But remember that Crypto is never a quick fix to your financial worries. Consider it as a long-term investment for better results.

Chapter 4: Security and Safe Practices in Crypto

If you want to learn how to start investing in Crypto, you must know about crypto security. The World of Crypto faces many security threats, from scams to hacks. As the popularity of Crypto grows, it becomes increasingly important for individuals to practice responsible ownership and ensure the safety of their assets..

Scams and Security Threats

One of the biggest risks for crypto owners is falling victim to scams. These can come in various forms, such as phishing attacks, rug pulls, and hacks.

Phishing attacks involve scammers posing as legitimate organizations or individuals to gain access to personal information. This can happen through emails, social media messages, or fake websites. Once they have obtained sensitive information like login credentials or private keys, scammers can access and steal an individual’s crypto assets.

Rug pulls, on the other hand, involve malicious developers creating fake projects or tokens to attract investors. 

Once a significant amount of money has been invested, the developers disappear with the funds, leaving investors with worthless tokens.

Hacks are another common threat in the crypto world. This involves cybercriminals exploiting vulnerabilities in exchanges, wallets, or other platforms to steal crypto assets. This can result in individuals losing all of their investments overnight.

Best Practices for Security and Safe Ownership

Crypto owners should follow best practices for wallet security, password management, and two-factor authentication (2FA) to protect themselves from these security threats.

When it comes to wallets, individuals should choose reputable and secure options that provide features like multi-signature support and cold storage (To learn more about this topic in detail, we will be releasing an article on multi-signature support and cold storage soon). Multi-signature wallets require multiple users to authorize a transaction, making it harder for hackers to access the funds. Cold storage involves storing crypto assets offline, reducing the risk of being hacked.

Password management is also crucial in protecting crypto assets. Individuals should avoid using the same password for different accounts and always opt for strong and unique passwords. It is also recommended to write your passwords on a piece of paper and store them in a safe place.

Enabling 2FA adds an extra layer of security to accounts, making it harder for hackers to gain access. This involves using a secondary device, such as a phone or authenticator app, to verify logins or transactions.

Responsible Ownership

Aside from taking precautions against scams and security threats, responsible ownership also involves educating oneself about the crypto market and understanding the risks. It is essential to research projects before investing and to never invest more than one can afford to lose.

You should regularly monitor their accounts for suspicious activity and keep your software up-to-date to prevent potential vulnerabilities. So, it is of utmost importance to practice responsible crypto ownership for a safe and secure experience in the world of Crypto. 

Chapter 5: Choosing a Cryptocurrency Exchange

Alright, now let’s choose a cryptocurrency exchange. Think of these exchanges as the marketplaces where you can buy, sell, and trade cryptocurrencies.

Why is this important? Each exchange has its own set of features, security measures, fees, and supported cryptocurrencies. So, let’s explore the options:

Centralized vs. Decentralized Exchanges (CEX vs. DEX)

Centralized Exchanges (CEX):

These could be compared to traditional banks – easy to use, with familiar interfaces. Examples include Coinbase, Binance, and Kraken. They provide a user-friendly experience, liquidity, and a wide range of supported coins. However, you’re trusting them with your assets, so security matters.

Decentralized Exchanges (DEX):

If you’re into the ethos of decentralization, DEX might be your jam. Examples include Uniswap and PancakeSwap. You retain control of your funds; however, DEXs might have a steeper learning curve, and liquidity can vary.

Choosing Your Exchange:

Consider factors like security, fees, supported coins, and user interface. It’s like picking your favorite grocery store – you want it to be trustworthy, reasonably priced, and have everything you need. I’ve thrown in some referral links for popular exchanges – they’re like discount coupons for your crypto shopping!

Recommended Crypto Exchanges You Can Consider

1. Binance: The All-Star Athlete of Crypto Exchanges

Binance has the biggest trading volume, with over $10 billion daily and almost 400 coins. Dive into advanced trading features like margin trading and staking, or stick to simple buys and sells. Binance rewards loyal users with its own token (BNB) that can lower fees and even unlock exclusive features.

Downsides: Binance can be overwhelming for newbies, and some features are restricted in certain regions. Apart from this, it has also recently been the subject of a regulatory crackdown in the USA.

Start your Binance journey with my link (this is a referral link) and unlock bonus rewards!

2. Coinbase: The Beginner’s Best Friend of Crypto

Simple as 1-2-3! Coinbase makes buying and selling Crypto a breeze, even for grandma. Connect your bank account, pick your currency, and you’re ready. The exchange has more than 8000 assets, ensuring stability and security. Coinbase also offers educational resources to help you navigate the crypto world.

Downsides: Higher fees than some competitors and limited trading features.

3. KuCoin: The Hidden Gem of Crypto Exchanges

KuCoin has over 700 coins, including exciting new projects often missed elsewhere. Enjoy low trading fees and unique features like margin trading and bots. You can even earn passive income by staking your Crypto. A User-friendly interface makes it accessible for most traders.

Downsides: Less beginner-friendly than Coinbase and Binance, and some legal restrictions apply in certain regions.

Unlock the treasures of KuCoin with my link (this is a referral link) and earn bonus trading discounts!

4. Kraken: The Security Fortress of Crypto Exchanges

Kraken prioritizes military-grade security for your Crypto, making it a favorite for serious investors. Advanced trading tools cater to experienced traders with margin trading, futures, and dark pool options. You can also earn interest on your holdings through staking and margin lending.

Downsides: A complex interface might daunt beginners, and limited customer support can be frustrating for newbies.

Fortify your Crypto with Kraken using my link and get bonus trading fees!

PLEASE NOTE: This article is not sponsored by any fomented exchanges. If you use any of the above reference links, you will get a sign-up reward, and I will get a referral bonus from the exchange.  

Chapter 6: Funding Your Crypto Account

Fueling your crypto journey starts with getting your cash into the exchange. Fortunately, you have several options, each with its unique flavor of fees and processing times:

1. Bank Transfers:

• Slow and steady: Bank transfers are the most reliable option, offering high security and guaranteed success. Think of it like sending a registered letter – it takes a while (1-3 business days) but it arrives safely.

• Fee-tastic or fee-free?: Costs vary depending on your bank and exchange. Some exchanges offer fee-free bank transfers, while others charge a flat fee or a percentage of the amount.

1. Debit/Credit Card Purchases:

• Instant gratification: Feeling impatient? Debit/credit card purchases are your magic beans, depositing funds almost instantly so you can start trading right away. Think of it like a pizza delivery – hot and fast, but with a little extra charge.

• Costly convenience: This speed comes at a price, with exchanges typically charging higher fees (up to 5%) for card transactions. Additionally, some banks might add their own processing fees. Please check the fees before doing this. 

1. Peer-to-Peer (P2P) Transactions:

• Cutting out the middleman: P2P transactions connect you directly with other crypto users, allowing you to buy and sell coins without involving the exchange. This can be cheaper than traditional methods, with fees often negotiated between users.

• DIY caution: It’s like setting up a lemonade stand – you handle everything yourself. P2P requires more research and caution, as there’s an increased risk of scams and technical issues. Ensure you follow the instructions of the crypto exchange when doing this. 

Choosing Your Option:

Ultimately, the best funding method depends on your priorities. If security and reliability are essential, bank transfers are your reliable steed. If you’re after speed, debit/credit cards offer a quick boost, but at a cost. And if you’re a budget-conscious adventurer, P2P might be your best bet, but navigate with caution.

Making Your First Cryptocurrency Purchase: 

Deep breaths, future crypto enthusiast! You’ve dipped your toes in the research and chosen your exchange, and now it’s time for the plunge – your first cryptocurrency purchase. Exciting, right? But it may be a little nerve-wracking, too. 

Choose Your Order Type: 

Exchanges offer different ways to buy, each with its own advantages and quirks. Here are the two main contenders:

Market Order: Consider this as the “buy now, ask questions later” option. You tell the exchange how much you want to spend (in your local currency or another crypto), and it snags the best available price at that moment. Simple and fast, but the price might not be ideal.

Limit Prices:You can set a limit price when buying or selling Crypto to ensure you get the desired price. It’s the maximum/minimum price you are willing to buy/sell a cryptocurrency.

Setting Buy Order: Suppose you want to buy a coin at $100, but the current market price is $105. You can set a limit order to buy at $100. If the price reaches or falls below $100, your purchase will automatically be made.

Setting Sell Order: Similarly, if you own a cryptocurrency worth $100 and want to sell it for no less than that amount (or more), you can set a limit order at $110. If the price reaches or exceeds $110, your sale will automatically be made.

Tip: Check the market trends and indicators before setting limit prices to increase your chances of getting the desired price.

Place Your Order – Embrace the Buy Button: 

With your order type chosen, head to the exchange’s “Buy” or “Trade” screen. Select the cryptocurrency you want to buy (Bitcoin, Ethereum, Dogecoin – the possibilities are endless!), enter your order details (amount, type), and hit that “Buy” button. Congratulations, you’re officially a crypto owner!

Befriend Your Portfolio – It’s Where Your Crypto Lives

Most exchanges will have a dedicated “Portfolio” section where you can track your crypto holdings. See those live prices fluctuate? Get used to it! This is where you’ll also monitor your gains (hopefully!) and losses (it happens, don’t panic). Another option is to create a free account on CoinGecko and add your portfolio there. This will help you keep track of your coins.

Bonus Info: Portfolio Management Tips for Newbies

• Start small: Don’t go all-in on your first purchase. Cryptocurrency is volatile, so treat it like an experiment and invest an amount you’re comfortable losing.

• Diversify: Don’t put all your eggs in one basket (or one coin, in this case). Spread your investment across different cryptocurrencies to minimize risk.

• HODL or not to HODL?: This is the age-old crypto question. HODL (hold on for dear life) means holding your crypto long-term, hoping for price appreciation. Trading involves buying and selling more frequently to capitalize on market movements. Both have their merits, but as a beginner, HODLing might be less stressful.

• Dollar Cost Averaging (DCA): Consider implementing a dollar-cost averaging strategy. Instead of investing a lump sum at once, break down your investment amount into smaller portions and regularly invest fixed amounts over time. This approach helps you navigate market volatility by spreading your purchases across different price points. As prices fluctuate, you may end up buying more units when prices are low and fewer when prices are high, ultimately reducing the impact of short-term market fluctuations on your overall investment. 

Remember, the crypto world is a marathon, not a sprint. Do your research, choose reputable exchanges, and don’t be afraid to ask for help. 

Chapter 7: Tools for Tracking the Price

Cryptocurrency Price Trackers:

Your journey into Crypto starts with knowing where to stand. CoinMarketCap and CoinGecko are your navigation maps, offering live prices, market caps, volume data, and historical charts for thousands of cryptocurrencies.

Watchlist Wisdom:

• Customize your watchlist: Focus on the coins you hold or are interested in. No need to get overwhelmed by the universe of Crypto!

• Set price alerts: Get notified when your favorite coins hit specific prices so you never miss a buying or selling opportunity.

• Compare and contrast: Use side-by-side comparisons to see how different coins stack up against each other regarding price, performance, and market dominance.

Mobile Apps:

Crypto never sleeps, and neither should your awareness. Mobile apps like Blockfolio and Delta bring the market to your pocket.

• Real-time price updates: Stay on top of the market fluctuations wherever you go.

• Portfolio tracking: Monitor your holdings’ performance and overall portfolio value at a glance.

• News and alerts: Get informed about industry news and events that might impact your investments.

Chapter 8: When to Sell

Remember, “buy low, sell high” is just the starting point. The real question is, “when”?

Setting Investment Goals:

Define your profit targets. Are you aiming for short-term gains, long-term wealth accumulation, or both? Knowing your goals will guide your selling decisions.

Monitoring Market Trends:

Don’t go it alone. Read the market like a seasoned detective.

• Identify market cycles: Learn to recognize bull and bear trends to avoid selling during potential upticks.

• Technical analysis: Explore tools like chart patterns and indicators to make informed decisions based on market data.

• Stay informed: Follow crypto news and analysis from reputable sources to understand broader market sentiment.

Risk Management Strategies:

Protect your hard-earned Crypto with these safety nets:

• Stop-loss orders: Set an automatic order to sell if the price dips below a certain point, limiting potential losses.

• Portfolio diversification: Don’t put all your eggs in one basket. Spread your investments across different coins and asset classes to minimize risk.

Emotional Discipline:

As you start investing in crypto, you will hear a lot about FOMO and FUD. These are your worst enemies. Here are some ways you can conquer them:

• Long-term thinking: Don’t let short-term fluctuations dictate your decisions. Stay focused on your long-term investment goals.

• Stick to your plan: Don’t panic sell based on sudden drops or get carried away by hype. Trust your research and analysis.

• Take breaks: Step away from the charts sometimes. A clear head makes sounder decisions.

Tax Implications:

As you start investing in crypto, you will also need to be aware of Taxes in your country of residence. Taxes are inevitable, but understanding them can save you headaches.

• Know your capital gains and losses: Calculate your tax liability based on your buying and selling prices.

• Consult with a tax professional: Seek expert advice to navigate the complexities of crypto taxation.

How to start investing in Crypto for Newbies: Navigate the Space with Confidence

1. Learn, Learn, Learn: Before diving in, understand the basics of blockchain technology, different cryptocurrencies, and market dynamics. Read credible sources, watch educational videos, join beginner-friendly communities, and read crypto whitepapers.

2. Start Small: Put in only what you can afford to lose. Consider Crypto an investment, not a gamble. Begin with a small amount, and gradually expand your knowledge and portfolio over time.

3. Choose a Secure Wallet: Your Crypto lives in a digital wallet. Research, compare, and choose a reputable wallet based on your needs and security preferences (hardware, software, custodial).

4. Dive into Diversification: Don’t put all your eggs in one basket. Spread your investment across different cryptocurrencies with diverse functionalities and potential.

5. Understand the Risks: Be realistic about the inherent volatility of crypto markets. Expect price fluctuations, potential scams, and technological challenges. Don’t invest money you need for essential expenses.

6. DYOR – Do your own research: Don’t blindly follow trends or hype. Analyze each project’s whitepaper, team, use case, and market potential before investing. If you need help with research, we encourage you to check out our research portal.  

7. Beware of Hype and Scams: Promises of guaranteed returns are usually red flags. Be wary of unsolicited “investment” advice, phishing scams, and pump-and-dump schemes.

8. Stay Informed: Keep up with crypto news and industry developments. Follow reliable sources, attend webinars, and engage with knowledgeable communities to stay ahead of the curve.

9. Secure Your Passwords and Keys: Treat your crypto passwords and private keys like precious gems. Use strong, unique passwords, enable two-factor authentication, and store keys securely (offline hardware wallets are recommended).

10. Backup Regularly: Protect yourself from hardware failures or loss. Always backup your wallet data and private keys in a secure location.

11. Use Reputable Exchanges: Trade on established, trustworthy exchanges with robust security measures and good user reviews. Avoid shady platforms with hidden fees or questionable practices.

12. Understand Taxes: Crypto transactions may be subject to capital gains taxes depending on your location. Consult a tax professional for guidance. If you would like some help with portfolio and tax reporting, we recommend Koinly. Get $25 off the price by using our referral link. 

13. Don’t Panic Sell: Market dips are inevitable. Stay calm, avoid emotional decisions, and stick to your long-term investment strategy.

14. Don’t Chase Pump and Dumps: Resist the temptation to jump on hyped-up coins promising skyrocketing returns. These often end in losses for inexperienced investors.

15. Be Aware of Regulations: Crypto regulations are constantly evolving. Stay informed about relevant laws and regulations in your region to ensure compliance.

16. Focus on Utility, Not Just Price: Evaluate projects based on their real-world use cases and potential for solving problems. Don’t solely chase the highest price or market cap.

17. Connect with the Community: Surround yourself with knowledgeable and supportive people in the crypto space. Engage in online forums, attend meetups, and learn from experienced investors.

18. Don’t Invest Based on Social Media: Social media buzz is not always reliable. Do your own research and fact-check before making any investment decisions based on social media information.

Our guide on how to start investing in crypto

And there you have it, your personalized guide on how to start investing in Crypto! Ready for this thrilling journey? What’s stopping you? 

Start today! If you have any questions about starting or are stuck somewhere, please get in touch with us – @info@altcoinanalyst.com.