I wanted to write this post for those who are just now getting into cryptocurrencies. I'm still relatively new in this space, but thought I might offer three really entry-level tips.
Cryptocurrency, specifically Bitcoin was something I had heard about around 2015 but never gave much attention to it. In 2017, I saw the massive bull run that catapulted Bitcoin and other coins into the spotlight but still didn't get involved. To me, it was a completely new market and I was just overwhelmed by it all.
Fast forward to 2019, I had a good friend who kept talking to me about bitcoin, ethereum, XRP and several other coins but I never understood it. I finally decided I would join in and so my journey with cryptocurrencies began.
Very quickly, I realized that there is a lot of different things going on. There were 100's of coins and I didn't know where to get started. Some could be earned through mining, others generated a return by staking. I constantly saw coins described as Proof-of-work or Proof-of-stake. There were numerous exchanges and probably over a hundred different wallets. Before I spent any money I had to get some general knowledge.
What I want to do is provide some basic tips, based off my own personal experience. These are entry-level but very important.
#1 - Cryptocurrency is VERY volatile
If you're used to trading on a traditional stock market, like I was, I was used to trading hours and once the market closed nothing happened until the next morning. Well these markets never close and even while you're sleeping the value of your coins is changing. You might see a coin shoot up 150% in a matter of hours and then fall 100% in a matter of minutes. Don't risk more money than you are willing to loose. Also, start out with some small trades and really get a feel for how things work.
#2 - Keep your coins in a secure wallet
There is a frequent phrase used in cryptocurrency, "Not your keys, not your coins". When you create a wallet, you are given a "private key" or "recovery phrase" that allows you to restore the wallet in the event something happens. These "keys" should be written down on paper, not electronically and stored in a secure place. If something happens to your wallet and you don't have these keys the coins are lost.
Keeping your coins in a wallet also protects them from hackers. When you open an account through an exchange, you are not given your private keys. Instead, the coins are held by the exchange until you decide to withdrawal them. When an exchange gets hacked (which doesn't happen often) your coins can be taken. Most of the time, exchanges will work to compensate the affected customers but it's not guaranteed.
#3 - Watch out for scams
If it too good to be true, 99.99% of the time it's a scam. There is no website that can generate 100% APR a week, no matter how legit it looks. Also, never send your coins to a site that promises to double them. This is a ponzi scheme and you may get paid once but if you try and do it again the result may not be as pretty.
Before investing in a company, read the "Whitepaper" which will provide every detail you may wonder. Ensure that the employees are real by performing a quick search on LinkedIn. You may even reach out to the company if you are still suspicious. I came across many opportunities that looked legit yet ended up being a scam. I always used the motto, better safe than sorry.
If you are somebody just getting started I hope you take my advice and protect your assets. In additional posts, I will discuss some of the strategies I took to build a portfolio, getting started with staking and DeFi protocols.