I was recently talking to a friend. He's an admin in a large cryptocurrency Facebook group so we regularly discuss things that we come across in the crypto industry. It made me realize a few things about the perceived low barrier to entry in crypto investing. While this is true financially, with most exchanges allowing trades as small as .001 BTC (or about $9 currently), there is a large learning curve to entering the crypto world. Most of the required knowledge is about tech and research, but some of the things you need to know before investing are principles and processes from general education in fields like economics and mathematics. Cryppick aims to shorten the learning curve in the tech, research, and trading areas with our courses.
Crypto Investors Should Know:
1. How To Calculate Return on Investment (ROI)
The idea is to profit in crypto. If you can't calculate ROI, how will you know when you've profited?
2. How To Use Decimals
Because most cryptocurrencies are divisible to 8 or more decimal places, it's important to be comfortable using decimals. I've found that many people are comfortable when it comes to adding or subtracting decimals but when you get into multiplication or division it gets a bit harder. Bitcoin (BTC) is divisible to .00000001 BTC which means 100,000,000 pieces make up each Bitcoin.
3. How To Compound Returns
Understanding the impact compounding returns can have and knowing how to calculate them is one of the best ways to ensure your long term investment strategy pays off.
4. What Trading Pairs Are
A trading pair has two assets in it. They are traded relative to each other. This is important to understand in cryptocurrency because many markets don't include U.S Dollar (USD) pairs and you trade between Bitcoin and another cryptocurrency.
5. How To Multiply Decimals/ Percents
Being able to determine the price you need to exit is dependent on you being able to use decimals and percents together. It can get confusing for some when these two are combined.
6. How To Calculate Profit with Fees
In addition to being able to multiply decimals and percents, you need to know where to add fees in to include them in your costs. Fees can quickly eat up your profit if you're not careful to include them in your cost calculations.
7. What Crypto Wallets Store
This is one of many misconceptions I see about storing crypto safely. Coins do not leave the blockchain. Your address is your virtual locker on the blockchain and your private key is your combination to access it. Because the private key is the only way to access the holdings, it is important to keep it safe. Wallets store your private key. This is crucial to understand because it is central to the way the tech works
8. Bitcoin Doesn’t Have a CEO
Thinking that someone is the CEO of Bitcoin has opened many people up to scams. There is no CEO of Bitcoin. I see this a lot from people in non-English speaking countries and with people who are less tech savvy. Bitcoin was created by a/a group of pseudonymous developer(s) known as Satoshi Nakamoto. Satoshi Nakamoto is not any of the people claiming to be them, as they have all been debunked. Other popular figures claiming to be the CEO of Bitcoin are people profiting off of the brand recognition to launch their own similar projects. Due to the decentralized nature of Bitcoin, there is no CEO.
9. How To Do Due Diligence
Due diligence is the process of investigating in financial markets. It is the key piece to keeping yourself safe in crypto. When you learn to look into things before jumping in blindly, you're much less likely to get screwed over or scammed.
10. How Opportunity Cost Can Impact Decisions
Opportunity cost is what you're sacrificing with a particular decision, the next best option. In calculating risks and reward ratios, "hodl"-ing at a loss, or staying in a trade, it's important to consider what else you could be putting your satoshis towards. (1 satoshi = .00000001 BTC). Another trade could be less rewarding but have a better risk/reward ratio.
Be Willing To Learn Daily
There are many things that you learn in the crypto industry but it's important to have a solid grasp on the basic math and economic principles behind financial markets. It's crucial to get an understanding of the tech and to get comfortable with recognizing red flags through due diligence. In crypto, you are your own bank. You have all of the responsibilities that come with managing your own bank, including accounting and security.