Crypto for the newbies: A guide to breaking down the most common concerns
With Bitcoin constantly fluctuating around US$40,000 and NFTs of random art selling for millions of dollars, it is easy for an outsider’s mind to shut down when cryptocurrency enters the conversation. The labels of ‘too expensive’, ‘too complex’ and ‘too volatile’ often are enough to remove the option of cryptocurrency as a meaningful investment from the start.
The ‘crypto-bro’ mentality that seems to gatekeep decentralised finance also does not help when newcomers, particularity women, are trying to grasp some understanding of which investment path they should take.
If you are thinking about taking your first steps into crypto or are merely intrigued by some ways to navigate the common concerns of the industry as a woman, non-binary, or man, this one’s for you.
We spoke with Renee Louise Samson, a crypto coach from She’s Blockchain Savvy, and she helped us create a small guide that breaks down some of the biggest concerns new investors might have as they explore the market.
Crypto vs traditional stocks – What’s the difference?
Samson says that the biggest learning curve for beginners in crypto, as opposed to traditional methods, is learning the technology.
“Stocks and bonds have been around for hundreds of years and are heavily regulated and the methods of buying, selling and storage are standardised. When it comes to crypto, while it’s no longer the wild, wild west of years past, it is a steep learning curve to even start buying let alone storing crypto safely,” she said.
When you invest in traditional stocks, your money is attached to an account managed by the company you invested through. Cryptocurrency is built on the value of decentralisation, meaning that you are in complete ownership and control of where your money is kept.
“For the entry-level investor, it can be a confusing experience trying to navigate the buying and storage of their crypto. What is really comes down to is education. Once you learn the basics of the new technologies, learn how to decipher which platforms are legitimate and how to safely store your private keys, the new investor can start exploring the wider world of blockchain technology,” Samson said.
Crypto, NFTs and blockchain often come at a premium – How can you navigate this without spending thousands of dollars?
On the outside, crypto seems like an expensive vehicle to jump into, when in fact there are ways to dabble in digital investments within your means without risking all your hard-earned cash.
“The truth is that anyone can start investing in crypto. Even with a few dollars a week. It all comes down to educating yourself with the options and seeing which one fits your lifestyle,” Samson said.
The small investment, passive income route is an option for those wanting to get a foot in the door with cryptocurrency, if you do your research correctly.
Dollar cost averaging through an exchange app can really help in growing your portfolio over a period. “It is a set and forget option, for many they won’t miss the few dollars coming out per week and at the historical average of even Bitcoin of 100 per cent a year over 13 years, small amounts grow rapidly over time,” Samson said.
Staking is also another option for people who are concerned about risking their hard-earned savings yet know if their money simply sits in a bank, gradual inflation will get the best of them.
“There are many platforms now whereby you can stake your coins for additional income which can be anywhere from six to 14 per cent on the more popular platforms. This includes stable coins which do not fluctuate in price like other cryptos. For people with money sitting in the bank earning 0.1 per cent interest, this is an easy swap,” said Samson.
Samson said rewards cards are also another way to passively accumulate crypto: “The simple act of switching cards could mean two to ten per cent rewards in crypto every month without having to buy any other crypto. It’s an easy way to start investing without having to sacrifice disposable income.”
The crypto market is volatile – why should you invest at all?
“The bad thing about crypto is that it is volatile. The good thing about crypto is that it is volatile. Volatility is a double-edged sword. You can lose money very quickly. You can also make money very quickly. When investing in crypto you need to be very self-aware. You need to know you risk preferences and plan accordingly. A 25-year-old accountant will have different risk tolerance than a 40 year old stay at home mum or a 60 year old about to retire,” Samson said.
DYOR: Do Your Own Research is a mantra you will hear often in the cryptoverse. Samson said that investores need to figure out their goals and which vehicles will best get them there in the time frame you’re looking at.
“For younger people with a more aggressive investment approach and a longer time frame, they may be more interested in things like ICOs, investing in gaming or metaverse coins, using defi to stake in liquidity pools and YOLOing in on the latest dog coin,” she said. “Young people have been hit hard by consecutive macro events like the GCF and now the pandemic. Crypto is a once in a lifetime opportunity to accumulate generation wealth. They may end up losing some trades, but they have time to make it up again.
For a medium risk profile and medium time frame, they may be in a large variety of major alts on top of a healthy Bitcoin allocation. They use a DCA approach and have a regular savings plan. This is where most people will probably find themselves. A set and forget plan of regular savings in the majors has shown to be very successful over time. Staking those coins will also provide an addition income stream.
For a conservative approach with a short-term time frame, they probably hold most of their crypto allocation in Bitcoin and Ethereum. They also have a healthy amount staked in stable coins for constant income. This portfolio will not have the most growth potential, but it ‘should’ be the most stable over time, as stable as crypto can be anyway.
Volatility can be both good and bad. Coming up with an investment strategy that takes volatility into account is important. Depending on your circumstances you can take advantage of volatility or take measures to insulate yourself against it,” Samson said.