All You Need To Know Before Investing in Crypto

Man using a smart phone to monitor his cryptocurrency and stock trading stock photo
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A little fewer than one in four people invest in cryptocurrency, according to a new study from GOBankingRates that surveyed more than 1,000 American adults. Among the more than three-quarters who don’t, the most common concerns are that they don’t understand it, it’s too volatile, it’s not regulated enough, they don’t trust crypto security, or they don’t think it has a long-term future.

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All are legitimate concerns, but many of those concerns can be alleviated if you take the time to learn the fundamentals of crypto investing. GOBankingRates asked the experts for advice for novices who are ready to dip their toes into the crypto waters.

Here’s what they said.

Learn as Much as You Can — and Never Stop Learning

The biggest percentage of the study’s respondents who don’t invest in crypto avoid it because they don’t understand it. That’s fine, because step No. 1 is to learn everything you can about all things crypto before you put a single dollar down.

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The financial services and tech company Brex maintains a good list of educational resources organized by skill level — beginner, intermediate and advanced. If you’re a novice, pick one from the beginner list and dig in, but don’t think that your work stops after you’ve learned enough to put your money in play. Ongoing education will fuel your success for your entire investing life.

“Continuous knowledge about the industry is your biggest leverage to succeed in crypto,” said Rexor Allen, founder of NFT Drops. “When investing, regardless of what coin, you really have to exert effort in observing behavioral patterns and trends, which can be an advantage when making decisions.”

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Determine Whether You Can Stomach the Highs and Lows

Many who responded to the survey avoid crypto out of fear — fear that it’s too volatile, too unregulated, and too vulnerable to security issues.

There’s no denying the volatility. A gain or loss of 6% or 7% in a single day on the S&P 500 would be historic. On the crypto markets, that kind of movement would barely register.

“Cryptocurrency’s only drawback is the volatility, which almost reaches 10%-15% highs and lows on a given day,” said Jibran Qazi, an avid NFT trader, a blockchain industry veteran and an online marketer with MCPD. “Consider this a risky space. Investors should only invest the money they are ready to lose,” said Qazi.

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Understand How the Choices You Make Affect Your Security

While the coins you choose to invest in could realize massive gains or losses in a very short time, there’s nothing inherently unstable about the underlying technology.

“Investing in crypto may be risky, but crypto itself is not risky,” said Jason Cordes, founder of CocoLoan. “It is based on blockchain, which is highly secure. The thing is which platform you are using for investment. The overall technology and mechanism are safe and trustworthy.”

In the end, the level of security you enjoy has a lot to do with the choices you make.

“Crypto, at its core, is a mixture of encryption, internet transactions, and micro-banking,” said Paul de Havilland, content marketing manager at Voxels, a virtual world built on the Ethereum blockchain. “While it has seen security challenges in the past, hacks are becoming less common, and good practice with passwords and storing sensitive information is sufficient to keep people safe. The main hurdle that needs to be overcome is the fear of self-custody. With crypto, you are in charge of your own money.”

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Being in charge of your own money means understanding how crypto is stored.

Get a Crypto Wallet so You’ll Be Ready To Stash Your Coins

Crypto wallets hold your crypto keys and passwords to let you securely store, retrieve, receive, send and exchange cryptocurrency. Some, like Ledger, are hardware wallets that look like USB sticks. Others, like Coinbase Wallet, are apps.

No matter which kind you choose, do your research first and make your decision based on security features.

“When choosing the right wallet, you should ensure that the platform has its own cold storage and two-factor authentication,” said Anup Kayastha, crypto expert and owner of CryptoProfitCalculator.

Register With a Crypto Exchange and Start Trading

You can’t buy and sell cryptocurrency through a regular brokerage account the way you can stocks, bonds and ETFs. To get in on the action, you’ll have to register an account with a specialized cryptocurrency exchange. There are many, but Coinbase is the biggest and most reputable in America. Do your own homework, but understand that it matters which exchange you choose.

“Rigorous security measures are in place when crypto exchanges are properly regulated, and governed by the same rules that other major financial institutions are,” said Harry Clynch, a writer for Disruption Banking, a crypto-focused online financial publication. “Coinbase, which is listed on the NASDAQ, is a good example. Trading crypto products can be a positive and safe step for investors, but only if done on established and regulated crypto exchanges that take customer security seriously. Investors should consider this before making the decision to start trading.”

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of Wall Street's investment community in New York City.
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