5 Must-Know Tips When Beginning in Crypto | doshi
This blog post will go over 5 must-know tips for beginners who want to start investing in cryptos.
If you’re just getting started in the world of cryptocurrencies, you may be feeling a little overwhelmed. There’s a lot to learn, and it can seem like everyone is talking about things that are over your head. Don’t worry — doshi is here to help! This blog post will go over 5 must-know tips for beginners who want to start investing in cryptos. By following these simple tips, you’ll be on your way to mastering this exciting new market!
First of all: What is a Cryptocurrency?
A cryptocurrency is a digital asset that uses blockchain technology to ensure all transactions are secure and practically impossible to counterfeit or double-spend. Cryptocurrencies are commonly decentralized and are not controlled by governments or financial institutions. Decentralized means that no single entity controls the network. Instead, it is run by a global community of users who work together to validate transactions and keep the network secure! Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
Now that we have a basic understanding of what cryptocurrencies are, let’s get into our tips!
Tip #1: Do Your Own Research (DYOR)
Before investing in any asset class, it is always important to do your own research. The same goes for investing in cryptocurrencies. By doing your own research, you are less prone to making an uninformed decision. We, therefore, always advise you to research and understand the different types of cryptocurrencies and the overall market before investing.
A great place to start is to understand more about Bitcoin and Ethereum. When combined, the two cryptocurrencies make up 65% of the entire market. So learning about just these two cryptocurrencies will give you many insights into the driving factors of the market.
Another interesting perspective: Bitcoin and Ethereum combined have a market value of $780 billion — that’s roughly the same as Tesla, the world’s most valuable car company, which has a market value of $760 billion (as of May 30th, 2022). If you believe in the promise of cryptocurrencies, there is a lot of room to grow!
In addition, it’s helpful to learn about unique concepts in the crypto market. This might include bitcoin’s market cycles, and HODLers (a term for retail investors who do not sell, which stands for Hold On for Dear Life). Another one is the emerging use cases of blockchain technology (what on earth are NFTs?), which drive consumer adoption.
There are many resources where you can DYOR, including Coinmarketcap.com, Investopedia, or our doshi learning academy. At doshi, we have worked with academics and researchers to provide you with a structured curriculum that explains simplified concepts. The contents are bite-sized, which explains critical concepts in a gamified way. This helps you learn everything you need to know about cryptocurrencies and the broader market. At the end of each lesson, there’s a quiz for you to test your knowledge and earn experience points to claim rewards.
Tip #2: Start Small
When you’re getting started, it’s important to start small. Investing a large amount of your savings right away can be risky — you could end up losing a large portion of your investment if you don’t know how the market works. Cryptocurrencies are more volatile than other asset classes such as stocks or bonds. By gradually increasing your investment over time, you can minimize your potential losses while still giving yourself the opportunity to see long-term profits.
Also, starting small is a great way to understand what risk you are comfortable with as an investor. If your portfolio is down, but you still think it’s a buying opportunity, it’s an indicator that you cope well with risk and manage your emotions. Conversely, if you get stressed by the ups and downs of the market, you might want to reduce your overall exposure.
Tip #3: Diversify Your Portfolio
Diversification is crucial when it comes to investing. This technique greatly reduces risk by allocating investments across different asset classes, including cryptocurrencies, stocks, real estate, or bonds. You’ll be less likely to experience a significant financial setback if one of your assets doesn’t perform well.
Despite the recent sell-off in crypto alongside technology stocks, it has been shown that crypto has a low correlation to other asset classes. This means that crypto prices might not necessarily follow suit when the stock market goes down. Research shows that the 0.24 correlation between Bitcoin and Emerging Markets is the highest positive, but any value less than 0.3 indicates almost no positive correlation! This means that even a small exposure to crypto is beneficial to a long-term investor.
You can further reduce risk by diversifying your cryptocurrency portfolio. When DYOR, you realize that cryptocurrency projects have vastly different use cases. Like investing in stocks, investing in projects with varying use cases is an excellent way to diversify your portfolio and reduce your risk. It protects you from making bad choices and gives you exposure to potential superstars.
Tip #4: Store Your Crypto in A Secure Wallet
When buying or selling cryptocurrencies, you will need to use an exchange or a crypto wallet. These online platforms allow you to buy, sell, or trade cryptocurrencies. It’s important to use a reputable, secure exchange with low fees. However, the problem with exchanges is that they are designed to buy, sell, and exchange cryptocurrencies but not necessarily safely store them.
If you are looking to hold your crypto for the long haul, we advise looking into moving your funds to a secure wallet. At doshi, we have made the process of buying, selling, and holding cryptocurrency easy for you. As a non-custodial wallet, you are in charge of your funds, making it a lot more secure to hold your investment over a long period of time. We have also partnered with regulated exchanges, so you can directly buy the most prominent cryptocurrencies, such as Bitcoin, Ethereum, or Solana.
Tip #5: Learn about The Benefits of Blockchain
To really understand how a cryptocurrency works, you need to learn about its technology. Blockchain is a digital ledger of transparent transactions to all parties, secure and immutable (i.e., transactions cannot be modified). Because of its unique properties, it has many practical use cases, including transferring money at a lower cost than banks or ensuring that art or music is traceable to the original owner.
By understanding the practical applications of blockchain more deeply, we start to understand which cryptocurrency projects actually focus on creating consumer value rather than building investor hype. This allows you as an investor to avoid FOMO (Fear of Missing Out) and stick to your own investment strategy.
These are just a few tips to get you started on your journey into cryptocurrency investing. Remember to do your own research and always invest responsibly.
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The information contained in this article is not financial advice and is for general informational purposes only. Please consult your financial, legal, or tax advisor before making any decisions.
Cabital (n.d.). Asset Allocation: How to Diversify Your Crypto Portfolio. [online] www.cabital.com. Available at: https://www.cabital.com/blog/asset-allocation-why-it-is-crucial-to-diversify-your-crypto-portfolio#:~:text=Crypto [Accessed 31 May 2022].
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