Crypto-investing — 5 rules for beginners
Alex Kurbatov, CBDO at EnCata Soft, talks about tokens, wallets, exchanges and the most promising crypto investments
Though even these odd adventures of my hamsters can’t compete with real investors’ madness, who buys useless coins of no-name companies for astronomical sums. As a rule, these investments depreciate in the very first months, especially after another short-term scum project runs away with millions of Fiat money.
Let’s be honest you can’t be 100% safe in the cryptocurrency market. Whatever famous a project, whatever the reputation it has, there is always a chance that your tokens will collapse in a moment. To minimize risks you’d better follow some simple, at first glance, rules:
1. Understand basics
Before showing up on an exchange with a heavy wallet, look at simple terms of cryptotrading.
Bitcoin — the first digital currency. Everything after is mainstream.
Fiat — common currency: euros, dollars, rubbles, yens.
ICO — Initial Coin Offering During the ICO the project team sells digital tokens for cryptocurrency or fiat (real) money among investors.
Tokens — cryptocurrency issued by a private company in the blockchain system. A digital asset is a record in a register that is distributed over the net.
There are two types of Tokens:
‘Utility’ ( useful) token — a coin, company’s internal digital currency. After purchasing you are provided with certain benefits when using products of the company. Thus, tokens are needed to simplify the use of the service or to get a discount on goods. These are the coins that occupy the most of crypto market.
‘Security’ (investment) token — a digital asset that is purchased for future profit. Pay your attention that States are very protective of such type of tokens. There is a special Commission — SEC. Back in 2017, it ruled that Security tokens went under the regulation, valid for standard shares. Thus, since then the issue of tokens must have been registered. That is why there are few officially registered ICO at SEC. So, in the first place, a crypto-investing beginner should take a closer look at them.
Other terms of crypto trading are as similar as possible to trading stocks, currencies, precious metal and natural resources. If you ever have had to deal with similar markets are familiar with principles of trading on the exchange, the only thing you might be surprised with is hyper volatility. One can write a book about high volatility of the rate or any cryptocurrency and discuss the solution of an urgent problem with foam at the mouth.
For now, just face the fact that you in a moment you can become either crypto millionaire or a real bankrupt. Or you can follow simple rules that tell you not to put into cryptocurrency a sum more than you are ready to lose.
2. Get yourself a wallet
To start with, choose a wallet to which you will transfer your first assets. There are many of them, but the choice always comes down to the estimation of three indicators:
It is the main indicator. Ledger and Trezor are market leaders. The devices are similar to a memory stick, compact and safe. However, they are easy to lose and you should always carry them with you if you need fast Internet access.
If cryptocurrency is the next generation of money, it should be easy to use. Here Jaxx goes first: desktop version, mobile app and Chrome extension. Besides, the concept of “multiplatformity” includes the fact of how many blockchains your wallet supports.
The purchase of a reliable hardware crypto wallet will save you from losing or electronic media with passwords and allow you literally to touch your income. Though, they still have a drawback — the price ($50 per device). In addition, there are fees for money transfer and protocols that require you to pay for wallet activation.
As a result, prices reach a level that is difficult for a beginner to overcome. You can certainly find a cheap wallet, but the first two indicators will likely to be as low as the cost. The choice is yours. Still, it’s worth getting a wallet. A hardware wallet.
3. Choose only trusted exchanges
Again all in order: there are two main types of crypto exchanges:
1) Decentralized. You have an address — you can start trading and anonymously. However, the main scandals about hacking are connected with decentralized crypto-exchanges.
2) Centralized exchanges are the most common. Large companies manage and own them, but this does not protect crypto-exchanges from hacking. And if this happens to the centralized, then everyone suffers.
The most popular exchanges among decentralized are Binance, Okiks, Huobi, HitBTC (check)
How to choose an exchange? This question is a little more complicated. For example, coinmarcetcap identifies the following characteristics when rating exchanges — the volumes, the number of pairs and the date of creation. Recently the platform has started to monitor the integrity of exchanges.
Over the past couple of years, an impressive number of scandals have been associated with the work of crypto-exchanges. So, many exchanges were frankly scam projects. Thus I listed here the most reliable exchanges so far:
Binance — new but already popular cryptocurrency exchange. It was founded in 2017 and is in the TOP 5 exchanges by trading volume.
Kraken is one of the oldest cryptocurrency exchanges. It was opened in 2011 in San Francisco.
Bitfinex is a foreign cryptocurrency exchange, with the ability to deposit and withdraw (dollars only) Fiat funds. You can use it on the phone. However, an account will cost you $10,000. It was founded in Hong Kong in 2011.
Poloniex has been operating since 2014. It has a large number of cryptocurrencies, but with no Fiat money withdrawal.
4. Invest wisely
The investment potential of the coins, that are known worldwide, is gradually decreasing. And one can hardly make money from them. Thus, you should pay your attention to new tokens from teams with a world-acclaimed reputation. Let’s be honest, there are a few of them (Kodak, Telegram).
Or you can go the other way. Cryptocurrency is just a means to buy something: commitments, empty promises, or, maybe, something really valuable. Some young exchanges offer new ways to use cryptocurrency. Thus, for example, currency.com offers to acquire right on shares of world-known companies and invest in precious materials and natural resources. All this you can do almost today, almost now.
5. Withdraw money
Let’s say, you earned a couple or even a few dozens dollars on money rates of increased cryptocurrency. In this case, l can hardly see any reason to withdraw cryptocurrency. Most of this money you’ll lose on the exchanges service fees, exchangers and other financial instruments of cryptotrading. So reread point 4 and continue investing.
But don’t be too sure of safety of several thousand dollars in the equivalent. The reason for it is the same volatility which can deprive you of savings within few hours. So it’s worth spending a part of them on service fees.
In addition to these simple rules, anyone can find lots of useful and even crazier tips on how to make money on cryptocurrency. You can even create your own exchange and cryptocurrency, turning for help at some abstract IT company, let us say, EnCata Soft.
But sometimes it’s just enough not to do impulsive and stupid things so that not to draw in your one water bowl.
Hamsters — credulous and easily manipulated people, who often surf the Internet and in every way support popular bloggers they like