You’ve come to the decision you are ready to invest in the cryptocurrency space. If you are ready to dive in headfirst, you realize there is more preparation to investing in the crypto space than just signing up for an exchange and depositing cash. You understand the importance of a wallet, have decided on what asset fits your risk tolerance, considered a balanced portfolio, have committed to being a HODLER, and have a basic understanding of both the fundamentals and technicals of your desired assets. 

Assuming you have all these boxes checked, you are ready to invest in cryptocurrency. Treat the remainder of this blog as your checklist. If you are missing one item, easy fix. Missing two or more items means it’s time to go back to the drawing board before taking the leap. When it comes to investing, it’s better to be right than to be rushed.

Do Your Research

Before you invest a dime into the cryptocurrency space, you need to first understand what the space consists of. This does not mean you need to be an expert on the top 100 coins by market cap or have a perfect understanding of blockchain. You should, however, spend some time researching both Bitcoin and Ethereum and gain a basic understanding of what an altcoin is. 

I have written a number of blogs on all sorts of Bitcoin topics, as well as Ethereum to help get you started. Blogs, podcasts, books, articles, newsletters are all great places to build your foundation in the space. 

You will know you are ready to invest in cryptocurrency when you start to gravitate towards assets that catch your attention. To be frank, if you are immediately skipping past Bitcoin and Ethereum straight for a low cap altcoin, you have probably taken a wrong turn. Crypto offers many right answers, but the importance of Bitcoin and Ethereum can’t be understated. Brushing over them reveals a lack of genuine preparation. Bitcoin and Ethereum should be your reference points. Even if you believe you have found the next altcoin gem, you need to have a decent grasp on the two major coins. Compare what you know about Bitcoin and Ethereum to other coins. It will keep you on track and minimize risk.

invest in cryptocurrency

Pick Your Poison 

You may be anxious to pull the trigger, but don’t release your capital just yet. You next need to decide what type of exposure fits your risk tolerance and strategy. This may seem counterintuitive, but understanding what assets or type of exposure you desire will save you time, money, and energy moving forward. 

If GBTC is right for your investment needs, Robinhood or Coinbase won’t be of any service. If Ethereum derivatives are what you are looking for, your traditional broker probably doesn’t offer that product. So, whether it be mining stocks, Ethereum, meme coins, derivatives, pseudo-Bitcoin, or direct exposure, it’s important to know where you can purchase the asset or contract. 

Blindly setting up a Cash App or Robinhood account will limit your options. Take the time to decide what makes sense first, then find the platform that fits your needs. You should probably take the time to learn the different ways you can gain Bitcoin Exposure. Or you might need a step-by-step process on how to vet a particular coin.

When to Pounce

Now that you have your investment picked out, you need to consider a time frame. Ideally, you will hold the asset for over a year. That way, when it comes time to sell, you are paying long-term capital gains tax vs short-term capital gains. The difference between the two is huge, but it is also worth considering where the asset is in its cycle. 

Bitcoin for example tends to follow 4-year cycles, as a general rule of thumb. These 4-year cycles tend to dictate the direction of the larger crypto market. Holding your investment for a year is wise, but that does not mean you should automatically accept holding into a bear market if taking profits is your intention. It is better to pay short-term capital gains than sit on an asset down +80%. 

If your plan is to hold for a longer time frame, say 5 or 10 years, then the current position in the cycle doesn’t matter as much. Long-term capital gains will be achieved, and hopefully, you have dollar cost averaged into your position during the dips and bear market. 

As we like to joke about in crypto, HODLING is actually a very powerful strategy. Statistically speaking, time in the market almost always beats timing the market. If you HODL long enough, a regular wage that continues to accumulate on dips will likely perform exceptionally well, beating out the majority of the market. Experienced investors may tell you investing is easy, but it takes more than patience. The only thing that will keep you going on the days you feel like exiting is conviction in your assets and strategy.  

invest in cryptocurrency

The Necessities 

With a base knowledge of the space, preferred asset(s) in mind, and time frame picked out, it’s time to set up both an exchange and a wallet. A lot of exchanges offer their own wallets for you to transfer funds into. This is a great way to learn the functionality of sending and receiving cryptocurrencies. 

It is important to pick the exchange that offers the assets you want. The easiest way to do this is to search your coin on CoinMarketCap or CoinGecko and scroll down to supported markets. This will list all the platforms that offer the asset by volume and other metrics. For a full guide on how to navigate crypto aggregators, read my 13 Tips To Get The Most Out Of Cryptocurrency Aggregators

As you accumulate a sizable investment, it’s time to consider moving your funds. Ideally, you’d transfer them off the exchange you purchased them from or the hot wallet you set up, and move them into a cold wallet. The two most popular devices are the Ledger and Trezor, both of which will do a better job of keeping your investment safer than an online wallet or exchange. 

When learning to use these devices, it is best to practice sending just $1 before you send large amounts of money to an address that you may have mistyped or messed up copying. The best security practice is to never tell anyone you own one of these devices, and never share your private keys. Pay close attention to the instructions you receive when setting up the device. Scammers, and fishers are actively seeking out your funds.

You Did It… But You’re Not Done

You are now the proud owner of a well-executed crypto investment you believe will change the world. From here your story has only begun. To be a good investor means you stay on top of both your particular asset, its competitors, and the space in general. 

Just because you have a plan to hold for 5 years does not mean you are exempt from reading articles or checking in on the market. People change and protocols do, too. It’s okay to rebalance from time to time and also change up your strategy. 

The highest performing investors are those that tend to do nothing, but they are still actively a part of the space. They are always ready for those big moments when the world is either greedy or fearful – ready to capitalize on the opportunity. 

If you own Bitcoin, you should probably brush up on Taproot and the Lightning Network. If Ethereum is your pick, take some time to study what EIP-1559 was, and how 2.0 will impact its ecosystem. Staying informed on your investments will keep you on track, especially during the days your investment doesn’t look as shiny as it once did. 

Some who invest in cryptocurrency will never sell. If you are ready to let your investment go, I can tell you how.