7 Things to Know before Investing in Cryptocurrency

Cryptocurrency is a new type of asset that is currently popular in various parts of the world. In fact, crypto is the catalyst that gives rise to new industries that focus on blockchain technology, Web3, and digital financial ecosystems. The crypto industry is growing rapidly in developed countries such as the United States as well as developing countries like Brazil, Indonesia, and El Salvador. Indonesia is one of the countries where many people are starting to invest in crypto assets. According to Bappebti, the number of crypto investors in Indonesia in 2022 will be 12.4 million people. However, you have to be careful if you want to invest in crypto assets. You can lose a lot of capital if you are not prepared. So, what are the things you need to pay attention to before investing in crypto assets? How to prepare before entering the crypto world? This article will explain it in detail.

Article Summary

• 🪙 Cryptocurrency is a digital currency that uses blockchain technology and cryptography. Unlike the currencies we are used to, crypto assets are not controlled by anyone, be it the country or the company that created them.

• 🚀 The crypto market is relatively new making its dynamics move quickly because many new projects are popping up. Market conditions like this provide a golden opportunity to earn huge profits for investors and traders who understand how to take advantage of it.

• 🗒️ If you are new to the world of investing in crypto assets, you need to learn the basics of cryptocurrencies so as not to experience big losses from the start. You can start by knowing basic crypto terms, understanding the principles of the crypto market, reading and researching various crypto assets yourself, and finally starting your investment journey slowly.

What is cryptocurrency?

Crypto assets are digital currencies that use blockchain and cryptography technology. Unlike the currencies we are used to, crypto assets are not controlled by anyone, be it the country or the company that created them. In addition, the technology behind crypto is also not limited by national boundaries because all crypto assets are digital. You can buy, transfer, and sell the crypto assets you own everywhere in the world. This makes crypto an attractive asset that many people end up buying and using.

Moreover, the crypto asset market is a relatively new market, with many crypto projects popping up every year so the market is moving fast. The market provides a golden opportunity because the price movement of crypto can give profits between 100 to 1000 percent. Investors who understand market conditions can take advantage of cryptocurrencies to increase their profits many times over.

1. Understanding crypto terms

The first thing you should do when you are just entering the crypto world is understand the basic terms of cryptocurrency. These terms will help you understand the asset you want to buy and the basic concepts of crypto. In addition, it is also useful so that you can avoid fraud that deliberately targets people who do not understand crypto at all.

Here are some basic crypto terms that you need to know:

• Blockchain: Blockchain is the technology that allows crypto assets to be created. It is a decentralized data storage technology.
• Bitcoin: Bitcoin was the first cryptocurrency and the reason why the crypto industry can be as big as it is today. In addition, Bitcoin is the most valuable crypto asset whose price movements affect the entire market.
• Altcoin: The term used to describe cryptocurrencies other than Bitcoin.
• Bearish-bullish: Both terms are used to describe market sentiment. Bear/bearish= market conditions are negative and prices are falling. Bull/bullish= market conditions are good and prices are rising.
• HODL: A popular term from the word “hold” which means to keep and not sell your crypto assets even if the price goes up or down.
• Whale: The owner of a large number of crypto assets that can affect price fluctuations.

2. The crypto market is very volatile

One of the most important things you need to understand about cryptocurrency and their markets is volatility and price fluctuations. Unlike the stock market and other assets, the price increases and decreases in crypto assets occur in a short period of time and in large quantities. If a price increase of 20% is considered extraordinary in the stock market, cryptocurrencies can experience a 100% increase in a few hours. Unfortunately, it can also experience the same decline just as fast.

Also read: Psychology of trading

Therefore, you need to understand the big risks involved in investing in crypto assets. Investing in crypto requires extra patience to be able to deal with drastic price drops and increases. Reliable crypto investors will understand not to impulsively sell when they suddenly drop and not to FOMO in when prices suddenly go up.

FOMO is an abbreviation of fear of missing out which means fear of missing out on the current trend. In the context of crypto, going against FOMO means that you don't impulsively buy a crypto asset just because it's popular and the price is going up. Usually, people who buy assets just because of FOMO will end up losing money.

3. Don’t immediately trust information from social media

When you start learning about cryptocurrencies, you will find many influencers and popular figures who provide a variety of content from education to financial advice. You need to be careful when watching and reading content like this because there are many cases where content creators are paid to promote certain crypto assets.

You need to try to find a neutral source of crypto information that talks about the advantages and disadvantages of an asset in a balanced way. In addition, try to find as many sources as possible so that you are not too influenced by one piece of information.

4. Watch out for scams

The crypto market is a relatively new market but it manages to attract millions of new people every year. The combination of a relatively new industry coupled with the sheer number of people without proper knowledge is enough to make it a haven for various con artists. Even though crypto is technologically safe, there are weaknesses that criminals and scammers can still exploit.

One of the most common examples is phishing which uses links from email or social media. In addition, there are many scammers who offer crypto business or asset management. If you are interested in the crypto world, the safest way is to try it yourself without relying on other people. You must remember that crypto is not instant money. The process of learning to invest in crypto will usually start slowly until later you are able to make investment decisions independently.

5. Research, research, and research!

One of the principles you will often hear in the crypto world is DYOR or Do Your Own Research. DYOR is an encouragement to anyone who wants to invest in cryptocurrencies to do their research independently and not follow other people. This means that you need to read, ask questions, and discuss with others to get information about the cryptocurrencies.

Also read: What is fundamental analysis and why is it important?

In addition, you can dig up information from the following news portals about crypto:

• Coin Desk: Crypto asset media that presents the latest news from the crypto world
• Coin Telegraph: Crypto news portal with a weekly review section
• Decrypt: Crypto asset news site that often creates in-depth content
• Coinvestasi: Crypto news portal from Indonesia
• Blockchain Media ID: Cryptocurrency media from Indonesia

6. Key points in crypto investing: When is nothing

In the world of crypto investing, momentum and timing are everything. One of the principles that must be adhered to in crypto investing is buy low sell high. The ‘when’ you buy an asset is usually as important (and sometimes even more important) as the ‘what’ asset you buy. An example is the DOGE token which has poor fundamentals. However, if you buy DOGE right after Elon Musk talks about it, chances are you can make a big profit.

Basically, regardless of the fundamentals and potential of a crypto asset, if you buy it when it is at its highest price, you are likely to lose quite a bit. On the other hand, if you buy crypto with strong fundamentals at a low price, your chances of getting a profit are even greater. To carry out this strategy, you need to have an understanding of the market context such as bear and bull trends as well as good technical analysis. All of these things will come along with increased experience.

Read also What is Bull and Bear Market?

7. Start slow!

The last thing you should pay attention to when you want to invest in crypto assets is the initial investment amount. For beginners who are just entering the crypto world, the best decision is to start slowly and in small amounts. The last thing you want is to suddenly lose all your invested money within a week or month.

Sometimes the best lessons and experiences are losing money or having a loss. Therefore, start your investment in small amounts. You can always increase your investment when you are experienced and can understand the market situation. One of the most basic strategies in crypto is DCA or dollar-cost averaging. This strategy is similar to incremental savings where you consistently add the same amount to your investment assets. This is suitable for those of you who want to invest in crypto assets within a period of 1 year and more.

Buy the dip strategy is one of a popular strategy, which is a strategy to buy crypto assets when the asset price is down.

Read also: What is Buy the dip and how to do it?

Buying cryptocurrencies

You can start investing in cryptocurrencies in the Pintu app. Through Pintu, you can buy cryptocurrencies such as XTZ, ETH, SOL, and other cryptocurrencies in an all-in-one convenient application. Then, you can use these assets to buy NFTs in the marketplace.

Pintu is also compatible with popular wallets such as Metamask to facilitate your transactions. Download the Pintu app on Play Store and App Store! Your security is guaranteed because Pintu is regulated and supervised by Bappebti and Kominfo.

You can learn more about cryptocurrencies through the various Pintu Academy articles that we update every week! All Pintu Academy articles are made for educational purposes only, not financial advice.

References

• Nathan Reiff, What You Must Know Before Investing in Cryptocurrency, Investopedia, accessed on 7 April 2022.
• Nine Things to Know Before Investing in Cryptocurrency, Coin Market Cap, accessed on 7 April 2022.
• John Puterbaugh, 4 Questions to Ask Yourself Before Buying Cryptocurrency, TIME, accessed on 8 April 2022.
• Marc Hochstein, Lawrence Lewitinn, Nikhilesh De, Buying Your First Crypto? 10 Things You Should Know, Coin Desk, accessed on 8 April 2022.
• Eric Rosenberg, How to Invest in Cryptocurrency, The Balance, accessed on 11 April 2022.
• 6 Things to Know Before Investing in Crypto | SoFi, accessed on 11 April 2022.