Basic Guide to Investing in Altcoins
I've seen a lot of people asking about alt coins lately, and I figured I'd make a quick guide on some important rules to live by in order to successfully navigate the altcoin marketplace. With absolutely zero regulation or consumer protections in place, there is a higher burden placed on the investor in order to make sure his or her funds are safe. I'll go over a few important questions to ask yourself before investing, and few rules to guide your trades as you learn the market.
I want to begin by saying thank you to all those who actually offer unbiased, solid advice to those new to investing or in cryptocurrency. I know there are many here who try to manipulate others for their own agenda, give bad advice or simply troll. I have learned a great deal here from those who contributed sound advice and in return I'd like to do my part for this community.
I know many feel they have missed their opportunity to profit from the crypto market, but the opposite is true. Cryptocurrency is a baby and still has a lot more room to grow. However, before you begin throwing your money into this market it’s important to do the proper research. Ask yourself the following questions:
- Do I understand what an altcoin is?
- What problems is this altcoin trying to solve?
- Do I understand what Blockchain is?
- What are miners?
- What will happen to the value of my coins if BTC drops in value?
If you can answer all of those questions, I'd say you're ready to start investing, but I would trade under the following guidelines in order to fully protect yourself.
My AltCoin Investing and Trading Rules:
1) Don't Buy or Sell on Emotions:
Do a quick search on r/wallstreetbets, and you'll see a number of bad decisions fueled by emotion. It sound so obvious, but it bears repeating: you should have a logical reason before executing any trade.
2) You can’t time the market.
No one has ever successfully timed the market consistently over multiple stocks and the crypto market is no different. Maybe 0.000001% of the population knows enough about this uncharted market to time it correctly. If you're reading this post, I'm sorry, but you're not one of them :)
3) Invest only what you’re willing to lose.
This seems like common sense, but it needs to be said nonetheless. You don’t throw all your retirement money, savings, etc. into the Crypto Market (really, any market) no matter how much you believe in it. And if you're not going to heed my advice, at least do enough research so you don't pull out your hair.
4) Diversify your Portfolio
There are a lot of fertile alt coins in this market. However, the US government is always looming in the background, waiting to swing it's regulatory scythe. Invest in a few different applications of the blockchain across a few different sectors and hedge yourself from that risk
5) Understand the coins you’re investing in.
You’d be surprised how many people go to Reddit and see a highly voted comment saying “Buy XYZ” and they listen and buy it without doing any research. If you see a coin that is popular take that as the first step in researching the coin and then make an informed decision. What problems is company trying to solve? How active are the Devs? Do they have a community online? How active is it?
6) Stay away from ICOs
As someone who's personally lost $500 trying to get in on an ICO at the ground floor, stay away for a few days and let them stabilize. There's no regulations to this part of the market, the big players can pretty much do whatever they want. Smart money stays away.
7) Understand your Risk
Make a note that you're not investing in the stock market, these are not bearer bonds. If you invest, you could lose ALL your money from a number of different risk factors (bad investments, security breach, lost passwords, etc...). The reason fiat currency is so painful is because there are safeguards to get your money in the event of a breach, alt coins do not have that luxury. Get a hardware wallet, store your funds, and hedge that risk as much as possible.
Thanks for reading thus far. This guide is very incomplete, it is meant to be a starting point. Please give me some feedback or add any of your own tips in navigating this chaotic market in the comments, and I'll add them in!
If you would like to check out my recommendations for specific platforms to use and trade on, check on my post here.
Stay away from ICOs? You don't hear that often enough.