Essential Guide to Start Investing #1
We got a buy signal folks.
If you are interested in general background information before investing, look back at previous articles found here.
So, you decided to take a small amount of money that you can live without and begin investing in cryptocurrencies. Now picture yourself setting this money on fire.
You should not invest money you can’t afford to lose, and with all investments, you should do your due diligence and thorough research.
The goal of buying these assets is the potential for sizeable long-term growth. While many factors are driving the demand for digital assets, the main reason is to hedge against the inflation of our monetary system. With the stagnation of our economy and rapid addition to monetary supply, the pressure on the US economy is enormous, with potentially devastating effects for traditional investors.
This instability is encouraging institutions to dip their feet in the crypto pool. While we like institutions to notice cryptocurrency, these CEOs look for protection and aren’t entirely sold on the underlying technological advancement. In past cycles, gold and mining stocks served well as solid ground for investors to land amidst the mudslide.
Enter cryptocurrency.
Sign Up Somewhere
The first thing you need to do is sign up. Coinbase is the best option. Coinbase has higher fees but is the most user-friendly.
Always practice good cybersecurity and set up 2FA (2-factor authentication) on your trading accounts for security purposes to help mitigate breaches. My preference is the app Authy for backing up 2FA codes.
Protecting Yourself
One of the oldest adages for cryptocurrency is “not your private keys, not your money.” Always protect your currencies with a hardware wallet. They are relatively cheap and allow you to hold your coins off exchanges. Since cryptocurrencies' inception, hackers stole 11 billion dollars from exchanges. These large pools of users’ assets are a massive target, and with crypto being very liquid, money can easily be lost. I recommend Ledger or Trezor hard wallets. A review of various hardwallets can be found here on the benefits and drawbacks of each.
Dollar-Cost Average
One of the best methods for entry into a long-term position is through dollar-cost averaging—multiple small purchases over time instead of buying the total amount you want to invest in one purchase. The benefit of this is keeping emotional trading in check. When dealing with more significant sums of money, investors let their emotions get the best of them and can end up making rash decisions. This strategy allows for multiple purchases and can lead to better entry points during turbulent cycles. For a more in-depth analysis of specific assets, consider joining my subscription with daily setups.
Sit Back and Enjoy the Extremely Bumpy Ride
As with any emerging asset, it takes time to solidify its real-world value. Cryptocurrencies are still in their infancy, which leads to volatility. As time goes on, the market becomes more stable as its actual value is realized. Analysts have noticed more stability in digital assets, but that doesn’t mean it’s without unpredictability due to market forces. On our last rise in 2017-2018, there were nine price corrections, and so far this run, we had 1 +30% correction in September 2020.
This shows historically that we are either gaining more stability or that we have a long ride ahead. Either way, the addition of BTC to corporate balance sheets is not a short-term play. As all successful investors will tell you, time in the market beats timing the market.
That’s All, Folks
It’s a great time to come into the water; make sure you have your floaties on before you do a cannonball into the deep end. Corporations and institutions are just starting to put on their bathing suits, and they take up a lot of space in our small pool.
Get all of your crypto news here in the weekly round-up:
NY AG’s $850M Probe of Bitfinex, Tether Ends in an $18.5M Settlement🍻😂
A closely watched legal case involving Bitfinex and Tether, with significant implications for the cryptocurrency industry, has been resolved.
The New York Attorney General’s office (NYAG) has settled with Bitfinex over a 22-month inquiry into whether the cryptocurrency exchange sought to cover up the loss of $850 million in customer and corporate funds held by a payment processor.
The NYAG’s office announced the settlement Tuesday, formally ending the inquiry that kicked off in April 2019. Under the terms of the settlement, Bitfinex and Tether will admit no wrongdoing but will pay $18.5 million and provide quarterly reports describing the composition of Tether’s reserves for the next two years. Read more.
MicroStrategy Bets Another $1B on Bitcoin as Saylor’s Pumping Hits Ludicrous Speed 🤑
MicroStrategy announced the purchase of another $1.026 billion in bitcoin Wednesday, turning mountains of zero-interest debt into one of the single largest (dollar-denominated) bitcoin investments ever executed by a publicly traded company.
CEO Michael Saylor’s business intelligence firm bought the 19,452 BTC at an average price of $52,765 per coin. It now holds 90,531 BTC (+2.69%) worth $4.78 billion at press time, almost certainly bolstering its perception among Wall-Street types as a de-facto bitcoin ETF, albeit one wildly overpriced.
The latest buy, MicroStrategy’s single-largest dollar investment in the crypto, is second only to Tesla’s $1.5 billion investment on the list of (known) bitcoin allocations by a U.S. company. MicroStrategy was already and will likely remain the non-crypto firm with the biggest bitcoin bags as CEO Michael Saylor continues to pursue a coin acquisition strategy now codified in the business intelligence company’s mission. Read more.
Square Buys Another $170M in Bitcoin 👍
Payments giant Square said Tuesday it had purchased an additional $170 million of bitcoin, adding to the stash it purchased in October.
Someone should have looked at the recent price before that went to press.
According to the payment processor’s press release, the company added 3,318 BTC to its treasury for $170 million. Doing the math, that results in a per bitcoin purchase price of $51,235.70. Read more.
How Coinbase Is Worth $100B 🕴️
The capital markets feel like one giant game. With the profound volatility of crypto assets, the billions of issuance in special purpose acquisitions companies (SPAC) trying to take fintechs public and incredible monetary printing by the U.S. government, it is hard to know whether anything has real value. The animal spirits are on full display.
It is in this fantastical moment that Coinbase, a household name for crypto trading, is planning its direct listing. The implications of such an offering is liquidity for founders, investors and employees, as well as the opportunity for deep visibility into Coinbase’s economics. Is the company worth $10 billion? Or $100 billion? In this analysis, we explore the question using a detailed financial model. Read more.
State of Crypto: The US Government Keeps Mentioning Terrorism 👎
The past two months have seen multiple government officials discuss crypto projects in the same breath as the Jan. 6 insurrection. This is a potential sign that regulators might tie cryptocurrencies to domestic terrorism.
The Subcommittee on National Security, International Development and Monetary Policy, a part of the House Financial Services Committee, will hold a hearing on Thursday titled “Dollars against Democracy: Domestic Terrorist Financing in the Aftermath of Insurrection.” While it’s unclear what the subcommittee plans to focus on, likely to come up is a December transaction of 13.5 bitcoin (BTC, -10.99%), worth around $500,000 at the time, to far-right figures who may have been present at the Jan. 6 Capitol Hill insurrection in Washington, D.C. Read more.
That’s all for the weekly Crypto Crier. If you enjoyed this article, please like and share. If you have any questions, please leave a comment, and I can answer your questions further. As with all of my writing, this is not financial advice and is my opinion. I cannot stress enough how important it is to do your own research on all financial endeavors. I hope that these newsletters can help investors realize the current economic systems’ downfalls and usher in a more equitable system without middlemen.
Let’s build something together.
Tell your friends and family. This Newsletter targets entry-level crypto investors. With more people understanding digital assets, we can finally progress to better systems. 🗣️
If you enjoyed this article, please consider subscribing to my paid newsletter, which includes an analysis of my top picks and setups for entry/exit positions—all of these extras for the price of taking me to lunch.