Hi everyone! I just joined the crypto space and community a few weeks ago with the Etherium craze (yes one of those people but we all start somewhere).
One of the things that I believe that makes cryptocurrencies strong is community - many of us are not just chasing the next big buck we passionately believe in the technology and the future. So, here are some of the biggest mistakes I made so far as a newbie. As many insights on steemit have helped me, I hope this saves people starting google searches, forum hopping, money, and more time.
Please feel free to add anything else that I missed in the comments. Let's give budding crypto seekers a warm welcome by helping them not make the same mistakes we did =D.
Don't let others do the thinking for you
Remember cryptocurrencies is still a market of speculation than maturation. Meaning much like when the stock market was first forming in the United States, it was the "belief" of success that drove initial investments. However, just because cryptocurrencies are not relatively knew does not mean there is no place for your own due diligence or market research.
One of the biggest mistakes you can make in cryptocurrency is to let other people think for you. Simply googling valuation and basing your judgements off price projection is a one way road to disaster. Instead, use the experts in the field to inform where you direct your research. For example, block geeks, the steemit community, zero hedge, and so forth. Doing your own research will turn you from a pump and dumper to a much shrewder investor. Who knows that instead of day trading on exchanges, buying undervalued currencies with minimal investment and sitting on them is where the big returns are.
Paying too many fees (aka use the Right Exchanges).
I first used coinable because the UI was so simple - it looked like a modern banking app. The price you pay is a whopping 1.5% in fees for linked accounts. Not a big deal? If you bought Etherium lets say around 375 that means the price has to reach 380.625 before you break even. Plus it takes 3 to 5 days for the money to come out and another 3 days for anything to be credited to your account.
Instead use faster exchanges like gdax (ETH, BTC, LC) or Bittrex for alt coins. You will save time as the deposits are much faster and money with lower fees such as .25% for sales and 0 for exchanges.
Not thinking of taxes (especially to my USA peeps)
In the U.S., cryptocurrencies are considered intangible property. You will pay taxes on them when you sell and withdraw. This includes capital gains. So, when you sell bitcoin for example, you have to report it. I know people's minds shut off when thinking about taxes BUT not incorporating taxes when you sell may make you lose money than make it. These taxes are for all cryptocurrency not just Bitcoin.
Here are a few resources to help you out:
Crypto Currency and Taxes - Tax Adviser
Bitcoin Taxes
Turbotax Guide
Don't use Credit Cards
There are only a few places that allow you to buy crypto with cc and they are all not worth it. Coinbase charges a 4% fee for credit card transfers! Changelly is another. Although cryptos conversions are on pace with the market there USD exchanges via CC are often not working and, if they are, now where near the real exchange rate. For example, 1 USD = 2.1 XRP (Ripples) when on Bittrex it is around 4. See the below table and convert them yourself =D.
Don't respond to volatility- it can be anything
A prime example is the Bancor ICO that happened on Monday June 12th. The massive buys inflated the price of ETH to 416 and many people bought thinking support would happen around 360-370. Over the long term, ETH will rise but just a bit of patience and they could have bought at 310. If you see sudden spikes and drops, be wary of moving a large amount of crypto unless you are trying to short and that is always a gamble. If you are playing that game, only put in what you can afford to lose.
Think 5 years not 5 days
The above is a great lead into a major recommendation to use long term strategy. Do some research and find some undervalued currency that you can sit on for a while. A few that come to mind that are worth some research are Ripple, Golem, Bitbay, Siacoin, Digitcoin, and a few others I've seem floating around consistently on Steemit. The lesson is the biggest returns in the crypto space have happened over long periods of times. People who found technology they researched and believed to be valuable, bought at a few cents, and let their trust pay off. As crypto booms and you get more people who worked in finance come in, you may hear things like margin trading and so forth. But, my advice...
Don't become a day trader
Cryptocurrencies are tempting because they are volatile. One day you can see prices double in value and with a simple click of a button your 1,000 becomes 2,000. I did this over the past few days and let me tell you it is not worth unless you want cryptos to be your life, have access to real time information, or moving large amounts of cash.
Why is day trading not ideal for beginners:
You are working on margins - small ones that provide little value
Beginners, myself guilty, are lulled in by the stories and hype when cryptos are sky rocketing or dropping in value. This exposes your investment to predicting what the peak and low prices are. You may have heard the term "burned" in forums and this usually occurs when people buy into pumps and dumps. Unless you know exactly what you are doing don't do it. I use the 5 why strategy.
Why are you buying or selling?
Why X4
What am I missing
I become happier seeing my profits rise while not running around like a chicken with its head cut off.
You don't have enough information or where to find it
The bancor ico for example. Experienced crypto traders knew this way before hand and dumped their ETH at peak to buy again when low. If you are knew, assume you don't know what you don't know. Subscribe to credible crypto updates and get familiar with the industry first. Although it looks like cryptos are what's being traded during spikes and lows, its really information. Instead, for the third time, look for undervalued coins you can hold in the long term.
Not healthy
I sat in front of a computer for 12 hours over a weekend monitoring coin prices. If that's how you want to spend your time, that's great, but striving for a balance between information and a life is worth the trade off. Look for the long term always. Invest in projects you believe in with well done research.
Conducting research incorrectly
Information is everything in crypto and there is a wrong and right way to do it. Before you go forum hunting for advice and opinions remember these three things:
1.) No one can accurately predict the price of crypto. Projections are simply projections.
2.) A correlation is not a causation. Trends are a great way to make better decisions and sometimes that decision is not to invest.
3.) Be careful who to trust.
As adoption rises, the price of coins rises. That's why marketing is mentioned so often along with the technology. You may hear "technology is great and all they need is marketing." White papers, information on websites should be considered marketing material or hopes. Look for technical release notes and metrics. For example:
- What is the rate of tech improvement?
- Is the crypto redundant with any of its major competitors? If so who will win out?
- Who is the dev team? What is in the product roadmap?
- Are they transparent?
- What is the size of the community?
Even with all of this information, there is no guarantees but you are much better than those who didn't do it!
Stay on top of the news
Think of staying on top of the Crypto news like reading the New York Times x 100. Since a lot of crypto currencies are still in the speculation phase of market maturity, small leafs in the wind can drastically surge prices. Not to mention changes happen at a much faster rate. Always keep in mind not to be swayed by volatility and there is larger incentive to spread "rumors" to inflate prices (you see this all the time on some forums). You have to make sure the updates you listen in on are:
- Current
- Accurate and Reliable
- Relevant
Here are a few I check in on other than Stemmit:
Coin desk
Blockgeeks
Cryptonews
Don't push yourself into a corner
If you missed a wave its not the end of the world. It's not too late. You can't go back in time but you can make the right investment in the future by avoiding some off the mistakes I made. Diving into something because you feel like you are missing out should not be the primary driver.
Let's take Etherium for example. Is it too late to buy? Do some research! I don't think it is personally as the market is still stabilizing. Funds like Zero hedge are in for the long term and "the flippening" (the rumored switch of Bitcoin to Etherium) is still in the winds. Is this enough? Thats for you to decide. I believe that ETH will rise more than the support levels around 360 because I believe in the tech. Here is a guide to ETH that I read before investing:
Whew you did it! That was long but I hope it helps you avoid some of the mistakes I've made. Welcome to crypto. Welcome to steemit. Nothing but the best in your journey.
