A beginner’s guide to crypto investment
This article is not to be understood as an encouragement to invest in cryptocurrencies. Instead, it is intended to help newbies understand the pitfalls of the crypto market and navigate the learning phase that is crucial to understand the risks and benefits of investing before taking action.
We have asked several professionals working in the crypto space about their personal experience investing in the crypto market and any advice they have for newbies. Below are personal experiences and advice crypto professionals hoped they would have had when they were new to the field.
First rule for all investments is: DYOR — Do Your Own Research!
1. If it sounds too good to be true, chances are it’s a scam
- Cristina Ceban, Founder at Women do Crypto:
There is no doubt that blockchain and cryptocurrency will revolutionize our current financial system. However, this technology, while immensely promising, is not free from scams and frauds.
As blockchain slowly becomes a part of our daily lives, I believe it is important to generate awareness and remove the entrance barriers for new joiners. In a still mostly male-dominated field, it can be more difficult for women to find the right resources and advisors. That’s why I founded ‘Women Do Crypto’ to help women navigate through the vast amounts of information and filtering out scams and frauds.
Let me give you a few concrete examples of how to spot red flags:
- Promise of guaranteed returns
- Typographical errors and obvious misspellings during communication
- A poor-quality website but active presence on social media with excessive marketing
- Intensive cold calls with a sense of extreme urgency
- Promise of crypto and NFT gifts
2. The added value of crypto in emergency situations and how to make use of bear and bull market cycles
- Max Burger, Ambassador at Nimiq:
I am a big fan of cryptocurrencies and use them wherever I can. Besides that, I also see cryptocurrency ownership as financial protection for emergency situations. Everyday we all assume that tomorrow the banks will open again and fresh money will come out of the ATM. But as we have seen again in recent events, there is no guarantee and no security — so what will you do if you suddenly can’t access your traditional money anymore? Cryptocurrencies are ideal for this! My plan is to always have a set amount of cryptocurrency for this case, as unlikely as it might be. When prices are low, I purchase additional crypto to keep it at the set amount of euro equivalent; and when prices are high I spend the surplus through crypto points of acceptance, such as the ones facilitated by the SALAMANTEX crypto payment solution.
Let me compare it to solar photovoltaic energy to make it more tangible. Let’s say you have solar PV panels on your house’s rooftop. They are monitored through an app on your phone so that you can always see when the sun is leading to more electricity for you. On a super sunny day, you might decide to do all your laundry and vacuum the entire house as you have a big amount of electricity to make use of. On a rainy day, on the other hand, you might have to purchase additional electricity from other sources to run your appliances. Same thing with cryptos: when it’s going well you can spend, when markets are down you can purchase additional holdings to keep your crypto amount at a stable level. I am currently trialing this concept for myself, and we will see if it will prove advantageous or not. Don’t take anyone’s word as the ultimate advice you should jump on, too. DYOR!
3. Stay in control & don’t listen to anyone claiming to have it all figured out
- Elton Lu, Head of Operations at OTC Supply:
Trust yourself, and yourself only. From my perspective, I can only give the advice to watch the series of videos we made at OTC Supply, as it will help novice users understand how to use Bitcoin and how the technology actually works. We’ve made these videos specifically to cater to novice users and translate all the technicalities without needing a computer science degree. The most important point of all of the information is that to have full control and visibility of your own crypto assets, it is best to not leave your cryptos in an exchange or centralized platform but have a personal, non-custodial wallet. Store your private key and recovery phrase securely: no key means no crypto!
4. Don’t invest more than you can afford to lose & and don’t recommend cryptos
- Carina Scharf, Sr. Marketing Manager at Cubozoa:
I follow a more conservative approach for investments. Especially in the early stages I would recommend to only play around with small amounts to get a better feel of the fluctuations of the market. Once you feel like you’ve got it all figured out, still make sure to never invest more than you can afford to lose. You wouldn’t be the first person to become over-confident and then lose their livelihood.
Since my first day working in the crypto industry, people simply assume that I have insider knowledge regarding the crypto market and ask me for investment advice. Careful! Most companies have a policy in place that forbids the external sharing of confidential information. Insider dealing is an illegal practice even if done by oneself and not a third party. Secondly, the crypto market is known to be a highly volatile market in which one tweet by an influential person can already lead to a crash or boost a coin to the moon. Would you really want to be the person that recommended an investment to a friend or family member and then saw them lose money because the market acted different to your prediction? I don’t think so.
5. Crypto and tax declaration, why there is a connection
- Matthias Reder, Bitcoin Key Account at Coinfinity:
The crypto space is no longer ‘the wild west’, more and more countries have implemented laws to provide a regulatory framework for crypto businesses and also tax crypto investment profits. Let’s take Germany as an example. There investors are required to hold gains from a cryptocurrency investment for at least one year before they can claim capital gains tax exemptions. Importantly, regulations may vary for different digital assets so that there can be one rule for cryptocurrencies and another one for NFTs. There may be varying regulatory jurisdictions for your country of residence and the country you have conducted the investment or purchase. Ensure which regulation you should follow to not (unknowingly) get into trouble. I am not a tax advisor by profession, that’s why I personally make use of a special software that helps me with my tax returns.
As general advice for everyone planning to venture into the world of crypto or digital assets investment, I can’t say DYOR enough! Even if you are eyeing the NFT market, you should start with a basic understanding of how the blockchain and Bitcoin work. It’s like driving a car: you wouldn’t go straight for a Lamborghini with your new driver license but start with a low cost secondhand car to learn driving and once you are an experienced driver might upgrade step by step.
Now that we have covered some basics of how to get into crypto investments, let’s discuss what you can do once you have been successful in making a surplus with your crypto investments. Payment with crypto is still in its infancy but there are already merchants that offer this solution, have a look at this map of points of acceptance via SALAMANTEX and happy spending 😉