It would help you to learn about investing in cryptocurrency because paying attention to crypto trading today is more important than ever. I’m also going to explain the basics of investing in stocks and crypto and all the key terms, such as blockchain, proof of stake versus proof of work, and the benefits of what crypto was created for.
I’ll then discuss all the different ways you can make money from a crypto IRA and look at what is the best today. We’ll also discuss all the risks of crypto and how you can protect yourself from scams or malicious activity because crypto is the wild. There’s a lot of crazy stuff happening, but there are ways to protect yourself so it doesn’t happen to you.
From there, you will learn how to get into cryptocurrency. I’ll go over all the different types of stock market investments and all the most used terminology. So, if someone asks you about price action, fundamentals, and DeFi products, you’ll know exactly what they’re talking about and how to respond. We will then discuss how you can buy, trade, and store your crypto investments safely using different cold and hot storage wallets.
After that, I’ll also be going over how to research cryptocurrencies properly so that you can set yourself up for the best chances of success as an investor. Next, I’ll go over how you can build your balanced crypto portfolio depending on the risk level of your choice. Then, I’ll properly review everything you need about investment one-on-one because this year is another complicated topic.
Why You Should Investing in Cryptocurrency
If you learn and understand how to invest in Bitcoin and make money, you can make life-changing money if you’re patient enough and put in the work. Start investing in Crypto has the power to do that, to transfer wealth from the ultra-wealthy to everyday people like you and me, and it just starts with taking some time to learn the basics.
On top of that, the overall crypto market cap is down significantly, meaning cryptocurrencies are still at a discount. It’d be a different story if I told you, let’s invest while Bitcoin was still at $69,000.
Even now, the narrative of cryptocurrency continues to expand and is still rising. Buy Crypto is also still in its infancy. Right now, you can be at the forefront of a potentially transformative wave between technology and finance. Many people forget that Bitcoin was only created about 14 years ago, and there’s so much room for improvement, adoption, and even more positive outlooks. In the last 14 years, Bitcoin has grown tremendously.
Crypto Investing for Beginners
If you learn & understand how to pick which stocks to invest in and how the crypto markets move, you can make life-changing money if you are patient enough and put in the work.
The overall crypto market cap is down significantly, which means that cryptocurrencies are still discounted considerably from their previous all-time highs.
Crypto is Still in its Infancy
You have the chance of being at the forefront of a potentially transformative wave in finance and technology.
Crypto Trading for Beginners
Governments are looking into crypto laws, regulations, CBDCs (Central Bank Digital Currency), etc.
Companies and institutions are learning, crypto investing, and implementing blockchain technology into their businesses.
Countries are making certain cryptocurrencies legal tenders. Many universities are now offering blockchain and cryptocurrency courses.
How to Understand Individual Stocks
If you’re watching your favorite football team, you’ll see crypto exchange people at work or people you go to school with talking about different cryptocurrencies. Suppose you were to invest in cryptocurrency an average of just $10 in the markets since 2020 between gold, Bitcoin, the S&P 500, treasury bonds, and the NASDAQ; according to this graph, your Bitcoin would be up over 100%, while the NASDAQ is up only 28%.
In that case, the S&P 500 up only 18%, gold up 16%, and the U.S. treasury bonds, you’d be down 20%, accounting for inflation as well. Now, it’s clear, from even the past few years, that Bitcoin has been a strong contender as a crypto investment. Let me show you the exact numbers. So, as an example, say you bought Bitcoin for $1,000 in 2010. If I were to calculate this, that would be worth over $215 million.
2010 was a long time ago, but say we did something else. Let’s do January of 2020 and say I’d invested $10,000. Now, 2020 was a while ago. If I had bought in at that time, Bitcoin’s price would have been at $8,600, with the current price of it being at over $43,000. I would have made a profit of over 400%, and have had brought up my capital to 50,515 bucks.
To provide some evidence, Bitcoin was under a dollar before 2010. A year later, It hit $5. A year after that, it went up to $100. The next year, it was at $457. In 2014, It drew back down to $244. Since then, we’ve seen Bitcoin grow at a pretty astronomical rate.
Over the last few years, I’ve seen many investors seeking investment direction come and go within the crypto space. I’ve realized that people want to make quick money. I’m sure 90% of you out here have heard about things like Dogecoin, PepeCoin, and all these other memes.
Now, we’ll go over exactly why that came about and why they performed the way they did later. However, the main focus I want to reiterate is the importance of proper, basic investing and having a long-term vision on the horizon. Now, I might be getting ahead of myself already talking about investing and how much money you can make. Let’s back up by talking about what cryptocurrency is as a beginning to invest.
What is cryptocurrency?
Investing in cryptocurrency for beginners is generally used in various applications, such as buying goods and services, trading, and peer-to-peer transactions. Now, if that went over your head, that’s completely okay because the literal definition of this can be daunting for anyone new to the market. But the way I like to explain it, and what I think is the easiest to understand, is to think of crypto as if it’s PayPal, Venmo, or Zelle, where there is no company in the middle between that exchange. So, say you’re going out to dinner with six friends and get a giant food bill.
Normally, you would split that bill with all these different credit cards, but sometimes there’s a restaurant that could say, sorry, we’re only going to accept just one credit card. If that’s the case, you would put it down on your card and tell all your friends to Venmo you or Zelle you.
In this case, where someone can just input your username, phone number, or email address and send you money in that capacity, that is very similar to the basic understanding of crypto, more specifically, even with the creation of Bitcoin. Now, when you’re using Venmo, your money gets sent to Venmo, and then Venmo has sent it to you. Regarding crypto, you’re taking out that middleman and the transaction goes directly to you—now, sending someone money through crypto is very simple.
Why is Crypto so Important Today?
Well, cryptocurrency investing has gained popularity today because it has so much potential to solve complex and large issues in our financial economy and government-controlled society. One of the narratives behind crypto is that this is a strong hedge against inflation. No matter where you live right now, most countries have gone through extreme amounts of inflation because of the pandemic and the amount of money printing that we saw happen on the government level.
Even in the US, we reached a 40-year high inflation rate last year when we peaked at 9.1% in June. The federal government or any large entity can’t come in and just be like, okay, let’s start printing trillions and trillions of dollars. Because crypto is also not considered fiat. Instead, it’s a different self-regulated currency; people often see it as an alternative to a modern-day currency like the dollar.
Now, all the money printing led to a higher inflation rate, combated by the higher interest rate that the government started pushing out. The interest rate has now led to borrowing money being much more expensive. So, I was getting a mortgage on my house, and back then, when I was looking during the pandemic, the interest rate was like 3%. My mortgage at that time was $6,000 a month.
By the time my house was finished being built, I had looked at the interest rate again, which was over 5%. So, my monthly mortgage, which was at $6,000 a month, had increased to about $8,000 to $9,000 a month. Even auto loans right now, back then, you could get some cars with 0% interest on your auto loan, but now I’m seeing even rates of anywhere from 5% to 7% if you decide to go ahead and buy a vehicle and finance it.
What is Bitcoin?
Bitcoin was also initially created as an electronic peer-to-peer cash system, but it attracted many investors as a store of value. Bitcoin is still the largest cryptocurrency; it makes up roughly 50% of the entire crypto market cap.
How Does Bitcoin Work? Blockchain Explained
This means that even with something like Bitcoin, where many TV shows portray Bitcoin as this anonymous crypto thing, people are like, oh, you want to go ahead and buy these drugs using Bitcoin? It often doesn’t make sense because everything is recorded onto the blockchain, which is made public, and then if you can find someone’s wallet address, you can see all of their different history and spending.
Now, blockchain is truly fascinating, and it is real. If you go on something like blockchain.com, you can search for the latest transactions. As an example here, I can see the Bitcoin Memolo. I can see details of different transactions and the cost of it because the price goes up and down when demand starts rising for the use case of Bitcoin.
But all of these unconfirmed Bitcoin transactions that are still actively coming in are real people from all over the world who send transactions from one wallet to another. So if I click on a random transaction, I can see who sent it, who received it, and all the details, including the fee and how much money it currently costs to send that Bitcoin.
Going back to the example we used earlier in Venmo and Zelle, where you send someone money, usually, that’s free, but when you’re using Bitcoin, you do need to pay a small flat fee. This can range from a couple of bucks up to 20 or even 30 dollars, depending on how much Bitcoin you send to someone.
Bitcoin Mining
You pay this amount, and it goes to the people mining the Bitcoin, which allows the transaction to get processed. Now, the transaction and the creation of Bitcoin are done through a process called Bitcoin mining, which is almost like a digital version of mining for gold, where instead of physical mining, you have computers that solve complex math problems that validate and then secure those transactions that we saw on the blockchain.
This method of validating transactions, securing the network, and creating new tokens through these math computations is proof of work. If you’ve ever heard complaints about crypto from the environmental enthusiast crowd and people concerned about global warming, the evidence of work method is essentially what they’re protesting. To mine Bitcoin, you need computers; you need computers that require a high amount of electricity and power.
Electricity is not free unless you’re going completely solar, which is not the case for many people worldwide. The proof of work is so energy intensive because all these Bitcoin miners are also competing with one another, trying to solve the computations first and validate the transactions before others.
For example, at any given time, there isn’t just one Bitcoin miner in the world that’s working; there may be hundreds, if not thousands, of different Bitcoin miners working on the same math problem. Now, every miner here will be using a ton of power and energy, but only one of them will win and get rewarded a Bitcoin, which means the other nine miners wasted all that energy for nothing in return. Now, this process seems inefficient. The more competition there is in the Bitcoin mining space, the more energy will be used.
Proof-of-Stake
This year, the system functions more like a lottery system. Instead of using computing power to solve complex puzzles, like in the Proof of Work system, users who own some of the network’s cryptocurrencies can stake their coins, which means locking them up as a security deposit.
The system then randomly chooses these stakes to check and add new transactions to the blockchain. The most notable Proof of stake example occurred with Ethereum, the world’s second-largest cryptocurrency. In 2022, Ethereum used to be Proof of work, but it decided to move to evidence of stake.
Once that had gone into effect, Ethereum tokens were considered 99.9% more energy efficient, among several other positive benefits to the Ethereum project and ecosystem. Still, the roadblock to getting started is much lower than with Proof of Work cryptocurrencies. We’ll discuss how you can make some additional passive income with staking. I’ll show you how much money I’ve made from staking my crypto, but it is an alternative way for you to earn what I consider to be additional interest on your investment that you have.
3 Ways you can Make Money from Investing in Cryptocurrency
Crypto Trading & Value Appreciation
The first and most obvious way to make money with crypto is by using it as an investment vehicle, similar to a beginner stock. In this case, you would buy the crypto, and over time, the value appreciates, and you can go ahead and lock in profits. An example of this is putting $100 into Bitcoin when its price is $10,000.
By the way, you can always buy fractions of Bitcoin. If you held that amount and Bitcoin had hit $69,000 as it did in the previous bull run, then whatever the amount was at that time where you sold your Bitcoin would be the amount of US dollars you get back.
Crypto Mining
The third way you can make money through crypto is through crypto mining. Here, you go ahead and buy computer gear. You turn on crypto mining software, and your computer tries to capitalize on the proof-of-stake consensus model we just discussed.
Crypto DeFi
DeFi, otherwise known as decentralized finance, is short for allowing you to do various things, such as earning interest or allowing someone to borrow your crypto and pay you some money. You can even lend out your crypto.
More Ways to Make Money With Crypto
There will be two more ways, and these are yield farming and airdrops.
Yield Farming: Yield farming has a much higher risk, but there is a higher potential in return. I’ve seen some yield farming sites offering you 2000% interest back on your crypto, but the downside is that crypto is so volatile. There’s no value behind it, and you lose your money anyway because the currency’s value drops so much.
Airdrops are another cool way to make money. This year, they are completely free, and usually, if a crypto project is starting up, some of these newer projects will reward their investors or people who are just supporters of the token by airdropping a fixed amount into their wallet address. Now, some people love taking advantage of airdrops just because you do not have to put up any money. All it requires is time to communicate, engage, and spend in communities and Discord chats.
What is The Risks of Cryptocurrency
Out of all of those ways, though, that we’ve mentioned, everything has its own risk. The biggest risk when it comes to crypto trading is that if you buy it at an all-time high price and decide to sell when it goes down, you’ll be losing money. There’s also going to be thousands of different coins.
There are going to be thousands more popping up. Sometimes, they are considered to be something called a rug pull. Essentially, like the owner of that crypto, they code it up, copy and paste it from another credible project, and go ahead. They get people to buy in, and then they sell all their positions, leaving people holding the token.
The term rug pull is just the fact that if someone buys in and you take the money out from underneath their feet, that’s what rug pull is. It sounds like what it is. There are additional associated risks, such as staking your crypto. Some cryptos, if you go ahead and stake it, you can only unstack it once a certain amount of time has passed.
For the most part, I’ve seen fewer and fewer cryptos that require a certain holding time, but I have seen that if you want to earn even more interest, lock it up. I never like locking up my tokens if I need to liquidate them quickly. So, anything I stake, I’d make sure I read the conditions to see if I can unstake it within at least a day.
I just talked about soft staking; essentially, you’re allowed to unstake your crypto at any time. We spoke about crypto mining earlier, and if any of you guys have considered doing that, it’s pretty easy to get started, but profit margins will be thin. Most people cannot make money because equipment and electricity costs are still rising, and there’s more competition, so the payouts are getting harder for you to win.
How to Invest Properly & Buy Crypto
We’ll also go over how you can buy crypto properly, transfer your funds, set up reoccurring buys, and do it where you’re not spending additional costs in those transaction fees. To begin, if you want to buy, store, trade, invest, or do any transaction regarding crypto, you need to utilize generally a crypto exchange first, which will be a centralized exchange.
These exchanges function similarly to a traditional stock exchange but deal specifically with digital currencies instead of stocks. When you use a centralized exchange, you trust their service and security measures to manage your funds. From there, you can transfer your crypto to a crypto wallet.
This is where you’ll have more flexibility in buying different things like NFTs, putting your money into DeFi protocols, or even purchasing certain altcoins that may not be available on certain exchanges. Now, many of these centralized exchanges have to go through more heavy regulation than those decentralized exchanges where they can hold any cryptocurrency.
To transfer money from a centralized exchange to a decentralized exchange, you usually place it in a custodial wallet, which then transfers it to whatever you want it to go.
What is a Crypto Wallet?
Well, it is exactly what it sounds like; imagine having a wallet, but this will give you a digital address, and you can have your wallet stored on different browsers, your phone, or certain devices. Now, a crypto wallet will consist of a pair of keys. The second is going to be your private keys.
Public Key: Similar to your bank account number, you can use your public key to receive and send crypto. If I were to Venmo you right now, I would need your phone number or email address to send that money. In this case, if you want to send crypto to someone else, you must ask them for their public key address.
Private Key: The private key address should be kept secret and never shared. Here you go; we’re going to use two different devices. So, for example, I have my MetaMask, and it’s only on this browser on this computer. If I wanted to log into my MetaMask from a different location, I would need to know its private keys and password.
You have a hot wallet, which is like MetaMask or any wallet that exists digitally. So, if I set up an account, for example, with Coinbase, and they give me access to the Coinbase wallet, this is classified as a custodial wallet. Next, we have hot wallets. This is what I just went over with the MetaMask example.
These will be wallets you can sign up for very easily online, add to your browser, or if you go on the App Store, sometimes you’ll see hot wallets listed there. So, when you create an account with a certain exchange, you can send that crypto over to those different accounts. Where it’s being held is going to be the custodial wallet. Now, you don’t have to set these custodial wto set. You’ll have more ownership because a company isn’t managing it.
And with a hot wallet, it’s like the MetaMask wallet that I just went over. Now, hot wallets are connected to the internet, and they’re actively used for managing and transacting with other cryptocurrencies. These here are convenient. It’s user-friendly. It’s easy to set up. It is completely free to get one as well.
The one disadvantage of a hot wallet is that it isiteisacked. After this, we have cold storage wallets. These here will be physical devices that look similar to USB drives. I have various cold storage wallets, and usually, these companies have different tiers. If you want the one with the brightest LED screen and the most capability, it will usually be a couple hundred bucks versus the most basic one.
It’s not going to feel as good. Sometimes, it’s a little plastic and flimsy, but they still do the job. Now, the advantage of a cold storage wallet is that, as I said, it’s the most secure option for your crypto, and you are in full control of your private crypto keys. The disadvantage with this is that if you’re making everyday transactions, you must punch in your code every single time, and you need to have your device on hand.
If you’re day trading, you want to do something other than that from a cold storage wallet because you’re paying that additional fee every time you send and transact crypto from that exchange. The main times you want to use a cold storage wallet is if you have a large sum of crypto that you know you’re not moving, and you’re holding on to for dear life and want to tuck it away.
Just like with a cold storage wallet, whenever you purchase one of these devices, you’ll receive a full tutorial and pamphlet on how to get started. Generally, they are very easy. You connect it, and you get a wallet address. Wherever you’re currently holding your crypto, say it’s on an exchange like Coinbase, you’ll receive a wallet address.
Then, copy the wallet address you get on the cold storage device. All you do is send it over from your exchange into the device, and it will be chilling there. Now, that leads to the definition of a crypto exchange, and this is straight up, guys. A crypto exchange is used to buy, sell, and trade cryptocurrencies, but more particularly, there will be two main exchanges.
Crypto Exchange
Exchanges are a crucial part of the crypto ecosystem because they provide the marketplace for trading various types of tokens.
There are Two Types of Crypto Exchanges
Centralized Exchange (CEXs)
Decentralized Exchange (DEXs)
Now, centralized exchanges will operate under the authority of being a real company. So examples of this are Coinbase and Binance. There will be a few more that I’m not mentioning here because they went under in the last bear market, but you guys will have the idea here.
Anytime you use a centralized exchange, you do have to go through a mandatory KYC process. You also have to do this when working with a stock exchange. This is just a law that’s been around for as long as I can remember, where you’re inputting your personal information so that there will be fewer instances of money laundering happening worldwide.
Decentralized exchanges will operate without a central authority, allowing users to trade directly from their crypto wallets. Decentralized exchanges rely solely on smart contracts on the blockchain to facilitate peer-to-peer trading between users. A decentralized exchange is usually meant for people who have been into crypto forearms and already know what altcoins are. They’ve been here within the space.
Often, you don’t see many new users who hear about crypto automatically start trading into DEXs, but that’s also because most people don’t know about them; they don’t know how easy it is. Now, centralized exchanges will be the easiest and the most user-friendly out of everything. This will be a teardown because of the connection aspect, but once you’re on there, it’d be hard to get lost and navigate through some of these DEXs.
How I Maximize my Wallet and Crypto Exchange
Long-term holdings: I put it in a cold storage wallet.
If you have high-value NFTs or other altcoins, you can move that to your cold storage wallet.
I put on a centralized exchange for my remaining crypto but ensure I implement maximum security protocols.
Set up 2FA -> Utilize physical security keys for login I keep as little on my hot wallet as possible.
These tend to get hacked more frequently than other resources.
Why Coinbase is My Top Choice
Coinbase was the first crypto exchange i started off with and i have stuck with them for several reasons.
Coinbase Advantages & Features:
Easy under interface for crypto and NFT Beginners
Supports a Wide verity of cryptocurrencies.
Currently one of the largest & most reputable exchange in the US.
Coinbase offers extensive learning resources for crypto basics & trading.
Provides a detailed history of your trading activity.
Coinbase makes crypto taxes Easy for customers through issuing 1099 forms.
Competitive fees when using Coinbase Pro or the free Advanced Trading feature.
Coinbase contains everything I need for crypto, Trading, Stacking, NFTs, Charting Software, etc.
Fundamental Analysis in Crypto
So, if you’ve ever traded any money within the stock market, you’ve heard a fundamental and even technical analysis before. These will be two primary ways that investors or traders make buying decisions. Now, fundamental crypto analysis is slightly different than what you would expect from the world of stocks.
This method evaluates an asset’s intrinsic value by examining financial performance, industry conditions, and economic indicators to assess its investment potential. Now, the key difference between stocks and crypto is that with stocks, you’re looking at the finance report, the financial health, the earning reports, the market share, the market cap, and the company’s plan for growth. With crypto, it’s a little different.
You will be analyzing the blockchain technology, the network, the security, the adoption, the community support, the tokenomics, and the utility of the specific crypto. Tokenomics refers to the economics of a cryptocurrency and encompasses everything related to the token’s creation, management, and overall economic model.
If you want to go ahead and perform a thorough fundamental analysis in your research on a cryptocurrency, go ahead and first read the white paper to understand the purpose and use case of that crypto. See if you can follow different team members on social media, see what they’re posting, see what they’re following, and see how many followers they have.
From here, you want to analyze the team’s track record and ability to deliver on goals. Now, Twitter is going to be huge. Twitter is where crypto lives, and you can find a lot of what they call alpha there. Alpha is just like the inside scoop, the inside tee.
It’s like data points that you’d get. Twitter is really important, too, because you can see how much engagement a certain project is getting, and you can see some of the people who may be following that project that have credibility from different wins or different analyses that they’ve posted that allowed them to blow up on that platform.
Now, from there, you want to go ahead and research a project’s market position and see if there are different competitors and how they would differentiate themselves from them. Last but not least, you want to evaluate the community’s strength and activity. That’s always going to be huge behind any project.
This type of analysis usually takes a lot of time; sometimes, you can get very in-depth information. When you’re going through things like the white paper, and then it goes into the technicalities of the actual crypto, it can go over many people’s heads. So shortly, I’ll go over a lot more easier processes that you can still find good potential bangers in.
Technical Analysis in Crypto
Technical analysis, or TA, studies charts and trading volumes to predict future price movements and identify potential buying or selling opportunities in financial markets. If you ever see people with all the charts, lines, and candlesticks, that’s what TA is all about. Generally, people who trade off of TA are more short-term traders than investors.
I’m someone who likes to go long in my positions. I prefer the fundamentals behind crypto, but I’ve also realized the importance of still using a hybrid method where you use technical analysis to get a better entry in the short term. Suppose you want to start with technical analysis as a complete beginner.
In that case, you will need to learn about the basic, different technical indicators, understand support and resistance levels, and the basics of a TA chart. One of the best ways to learn TA is through a community. There are a lot of free resources online, but nothing beats being in live streams or just seeing the potential benefit of doing something along these lines.
How To Find Emerging Projects
So, first, you want to start using a crypto-tracking website. The most popular options are CoinMarketCap and CoinGecko because you can filter through hundreds of thousands of different coins based on the criteria you’re looking for. And they also provide plenty of information about the project to begin your research. So, to do this, hop on one of their sites. I’m on CoinMarketCap.com right now. And you could even see different categories.
So, if you want to invest in AI or BRC20, which we’ll talk about later, or even gaming, you’ll see different cryptocurrencies within this niche. Now, if you want one that’s new and has a smaller market cap, you can organize it and sort it by descending within this category. CoinMarketCap also has different categories here. So, if I want to click on the top gainers and losers, you can use that to do your research or even things like new cryptos that have recently been added.
And with many of these more established cryptocurrencies, you’ll see social media followings. You’ll also be able to see different news articles coming up. And you can see other data points regarding their market cap or even how their price has been trending on the charts. Now, the next method in being able to start your research is monitoring the portfolio of top crypto venture capitalist firms.
You can start this by going to Google, searching for top crypto VC firms, and then seeing what they want to invest in. So, to do this, it was just a simple Google search. I see Coinbase Ventures, AU21 Capital, and Pantera Capital are on here. Pantera is solid. You would then want to go ahead, find their website, and look into what they’re investing in. From here, you can see things like their early-stage tokens. You can invest with them. You can also get investor reports.
You can also even see their portfolio. Here’s a list of these different cryptocurrencies you could also buy as an investor. Now, I like this research method because VC firms will have some of the best people with some of the most experience and an unfair advantage because of all the connections and what they know.
You may not even have to do all the research we talked about. You can pick up a few of their crumbs here and there, but that could still lead to tremendous wins. The third way to find emerging projects is through on-chain analytic firms.
So, on-chain analysis allows you to use the data you would get from a blockchain because everything is transparent. You could see all the transactions happening. You could see all the money coming in. This is very valuable data to get a head start on knowing what crypto you want to buy. A Glassnode will be one of the biggest leading on-chain analysis platforms.
I would not recommend this for a complete beginner, but this will also be another valuable tool if you ever want to expand the way you research some of these emerging tokens. The fourth method of doing additional research is taking advantage of something called total value locked or knowing how much money is on some of these projects and just doing a simple comparison using tools like DeFi Llama.
We have used this tool a lot in the last bull run, and we get an overview of how much money is locked within some of these different altcoins. As you can see, Lido has $21 billion locked, and these DeFi protocols will have money for lending or collateral, whatever it is.
Building Your Crypto Portfolio
As a disclaimer, investing in any early-stage crypto project will always be risky. So, approach it with extra caution. In this next chapter, let’s talk about building your crypto portfolio. So, this is a quick disclaimer: before we build out a crypto portfolio, crypto should not be a majority of your entire investment portfolio.
Even for me, I like spreading it out between real estate, stocks, and other safer investments. This is because crypto is still a lot more volatile than what most investors are used to. And if you’ve gone through both a crypto bull and bear market cycle, you’ll know firsthand that it’s possible to see your portfolio drop by 60 to 80% or more.
But on the off chance, you can see even higher upsides of two to five X in returns. Now, none of that, by the way, is promised. How much you make in this market depends on how you move as an investor. I always want to make that disclaimer that you should never invest all your money and put all your eggs in just one basket because diversification will still be key if we see another downside.
If you are going long on crypto, I’m still bullish over the long term. My horizon is not just one year, two years, or three years of holding. It’s five-year holdings. It’s ten-year holdings.
Low Risk Cryptocurrencies
Now, if your goal is to find the next 100X crypto project, you might be looking at more high-risk, low-cap projects with higher chances of failure but more room to grow. Regardless of that risk tolerance, I still recommend having a diversified portfolio with just a mix of these assets. If you’re considered more of a low-investor, you’re looking at Bitcoin, Ethereum, and maybe even XRP.
As you know, XRP won the regulatory lawsuit, but you cannot beat just looking at Bitcoin as your primary cryptocurrency because they are the largest in market cap. I believe Bitcoin will still be one of the safest digital assets because of the large market cap. If you are a medium-risk investor, you may want to look at some of these medium-risk cryptocurrencies.
Medium-Risk Cryptocurrencies
These will be the ones that are different altcoins, still usually within the top 100. For example, it’d be Solana, Cardano, Chainlink, Tron, Polygon, Polkadot, Avalanche, Stellar, Cosmos, and Monero. Now, you don’t need all these cryptocurrencies in your portfolio.
You could have just two or three of them to spread it out. My purpose in revealing this to you is so that you have some clarity on what a medium-risk crypto might look like. From there, we will have your high-risk cryptocurrencies.
High-Risk Cryptocurrencies
These are every crypto I’d consider that’s not within the top 100. My list of high-risk cryptocurrencies includes meme coins, small caps, and micro caps. Small-cap cryptocurrencies generally have a market cap of less than $500 million. Microcap cryptocurrencies have a market cap of less than $100 million.
Now, in a bear market, this number fluctuates. In a bull market, it rises even more because so much money goes back into the crypto market. But I’d say this is a safe number for at least the purpose of just getting a base standard. Now, one considers the example of high-risk crypto is Shiba Inu. They are still at higher risk. That’s a bit more subjective, but just any other meme coin that we’ve seen coming up within the past few years that was unable to break into the top 100.
How do Crypto Taxes Works in the US?
So, for the rest of my people, crypto taxes here in the US are more complicated, and the IRS treats cryptocurrencies as property for tax purposes. This is because you trigger a capital gain or a capital loss if its market value has changed from the time of purchase to the time of use or selling.
Suppose you’ve taken a big L within one year but expect to make a lot of money in the next year. In that case, you can realize many of those losses and then avoid paying taxes on the gains you make because of the rule that the IRS has set where your losses can be carried over into the future.
Now, on the other hand, one thing that I love about holding crypto for a long period is that you get taxed at a long-term capital gain rate if you have that asset for longer than one year, which is much lower at zero to 15 or even 20% depending on your tax bracket and if you are an individual or if you’re married.
Now, when it comes to crypto, different taxable events can happen. So, you are selling your crypto, but people don’t realize that exchanging one crypto for another incurs another taxable event. On top of that, you also have to get taxed any time you earn rewards on your crypto for anything staked or if you’re even earning things like a free airdrop.
So, pretty much from all this, I’ve realized over the last few years is that if you are manually inputting all the times that you’re doing something with crypto or something that you’ve received for free, I’d be surprised if there’s anyone in the world that could do this within a short period without making a mistake. So, knowing that, I make sure that I use available software. Now, software is getting even better over time.
I’ve used Coinly for the past few years because they’ll sync everything up. They’ll make sure that you’re not forgetting anything. On top of that, I will stack that with a tax professional or a CPA, at least for my books. Generally, I’ll avoid the third way, manually inputting all my tax-accountable events that happen within that year.
Many people think profit is pure profit, but at least here, if you’re living in the States, you’ll pay a decent amount to the tax man. It’s unfortunate because if you mess up your taxes, the penalty is like, OK, jail time, or OK, here’s a huge fine. As long as you know about some software, I’m still above most of the pack.
Best Crypto Tips & Suggestions
Tip 1: Start Your Crypto Journey in A Simple Way
Tip number one: start your crypto journey. I’ve often seen people get overwhelmed within the space because they immediately want to jump into all these complicated things. If you go into certain DeFi protocols and use on-chain analysis to find anomalies between some of the best cryptos with the highest TVL, you can instantly overwhelm yourself.
But in the beginning, I’d say simplify everything. Start by opening up a free account with an exchange. Start slowly from there. Get more comfortable over time. Don’t rush this process.
Tip 2: Join A Community
My second biggest tip is to make sure you join a community. Find Facebook, Telegram, or WhatsApp groups that are not scams. Always make sure that’s the case. But you want to find people you can look up to, who can guide you, and also a community of people within your same level.
One way you can hold yourself accountable is by having people you can talk to closely and trust. If it weren’t for a couple of my friends that we could dive deep into the whole NFT market, I would have been able to make the money that I did and learn as much as I did at the time.
Community is huge in whatever you’re doing, and it will give you a lot more clarity than if you were to tackle it alone. If you have an Instagram, it doesn’t hurt to post a few stories about you, you know, making a few trades, having a few wins, or wanting to learn more from others and just putting up a group chat.
You’d be surprised that the little group chat you made from just that one post could become your closest friend for the entirety of your life. And you guys might be the ones popping bottles on the yacht when you guys take off.
Tip 3: Make A Plan To Achieve Your Goals and Stick To It
Tip number three: plan to achieve your goals and stick to them. Many people enter the crypto markets without knowing what they want to do. Sometimes, people flip-flop based on their emotions, losing much more money than if they were to stick with a plan and see it through.
Have a plan, write it down, type it out in your notes, but know what you want to do. Know your goals, what you think, and the exact strategies and steps to build towards that. One way to help develop your goals is going on Twitter, guys. You’ll easily understand different people’s strategies, their threads, and what they do to find some of the biggest winners.
If you plan to be in the crypto space for a long time, be on Twitter, know how to make lists, and follow the right accounts, this will also give you a huge advantage in making the best plan for yourself.
Tip4: Be Skeptical
If you want to try out a new crypto service or work with someone in crypto, research and always take caution. There are a lot of bad projects and bad actors here.
And if you want to be around here for a long period without losing money to just vicious scams that are going on, you want to make sure that you have a level of skepticism in what you do. So, if anyone ever DMs you, be careful. If anyone ever adds you to a group, be cautious, too.
Tip 5: Take Profits
Tip number five, and that is to take profit. Do not be greedy. In the last bull run, I’ve seen so many people making this mistake where they kept saying, OK, Dogecoin is going to hit a dollar. I won’t sell until a dollar and two dollars and five dollars. And it just kept going on. To succeed as an investor, you must learn to take profits and not get greedy.
If you’re already up, you’re already up. You’re already making some money. You do not need to get so greedy that you cannot cash out anything. I know people who have had the opportunity to make millions of dollars but could not close on it. If you get close to making whatever goal you had set from our previous tip, follow along with it because there will be more cycles.
We have not yet seen a continuous bull cycle that lasts for a very long period where everyone is constantly making money because in the world of crypto and investing for someone to make money, they are buying it off of someone who is selling and vice versa. So, don’t be afraid to sell too early in this market.
I know FOMO can get the best of you when you see it riding a bit more up, but it is never a bad thing or a loss for you to make money and close it out. So, knowing all that, you guys should be like a superset, but I want to make sure you’re super duper set.
Joseph was responsible for cryptocurrency and evergreen news at Investoadvisor. Joseph wrote a weekly cryptocurrency column. Before he had the right to vote, he studied the changing and constantly evolving landscape of crypto and blockchain.
