Cryptocurrencies for Dummies: What Should and Should Not Be Done

Just a year ago, a bitcoin was worth about $9,000. Today, the owner can get $50+ thousand for a single coin. At a time when cryptocurrencies are a hot topic, many people especially want to dive into it. What if I don’t have time, right? But how do you enter this world the right way? What questions should a future crypto-investor or trader clarify? In this article – in concise and clear language about the main points.

Nine essential steps at the start
Here are a few rules to follow. It’s important to understand that this material is not a recommendation to trade, it was created for information purposes. The information gathered here can be useful, as tested by trial and error.

Study the selected project.
Usefulness is the first thing to highlight for yourself. Popular today are financial instruments like loans, investments in home sale or rental companies, alternative energy technologies, and so on (DeFi). Without utility, the project will eventually cease to be of interest to the community – this is the first thing. The second is that such projects will be more susceptible to artificial influences from stakeholders, such as voshtrading and speculation.

Cryptocurrency ratings cannot be ignored, yes. But.
There are top altcoins, they have already gained their audience. But on such coins, it is advisable to stick to a holding strategy and small investments.

Rely on useful resources.
Add sites to bookmarks on your computer to track the dynamics of asset values. For example, CoinMarketCap, CoinGecko.

Gain basic knowledge of what an order is.
What varieties there are, how each particular order works. It is necessary to find the least “painful” form of trading. At the start, as a rule, one turns to stop-limit.

Study the instruments of a particular cryptocurrency exchange.
Thoroughly and carefully. As a rule, they provide tables of price dynamics, place stacks that show all ongoing trades, longs and shorts.

Determine a strategy.
What kind of trading will you do, what will be your strategy? Will it be quick trades, lots of assets, small investments, trading? Or investments “for the future”, measured trade. In general, again – longs and shorts – go deeper into this topic.

Learn the basics of technical analysis.
It is recommended to fill the books for some time. A good idea is Murphy. He explains in simple and clear language what patterns are, how to track trends, how to evaluate statistical data. Perfect for starting out.

Choose a cryptocurrency wallet.
Cryptocurrency wallet – be sure to learn what they are and which one is right for you before you open it. It is recommended, for example, to keep the bulk of assets in a cold wallet, and to use a hot wallet for transactions.

Free cryptocurrency giveaways.
If you are considering airdrops as a way to delve into the world of crypto, cryptocurrency, or more precisely, cryptoproject, is most likely just around the corner. You should be careful. The medium recommends not rushing to invest, and after getting free, take some time to take a closer look. Often after such marketing activities, the price rises, but after some time stabilizes and falls.

Understand the functionality of a crypto project
More than once I heard the question: “I bought a project token/coin? But how is the work of the project related to its assets, how do I understand the work of these projects?”.

Imagine that there is a company that produces a certain product, provides a service. This company has stock. Depending on the success of this company, the value of its shares can rise or fall. It’s the same with crypto projects.

• Bitcoin’s position in the market. The first cryptocurrency, as can be traced even today, pulls the entire world of cryptoassets with it. It rises – often others rise. It goes down – others go down.
• Does the coin/token have an issue. Here, as in stock trading, there is a correlation: the less free (not traded, not on hold) coins there are, the higher the supply. Successful companies get their demand from this. A trading strategy can depend on this factor.
• Whether there is a mining pool, what its activity is. This will help determine the number of coins in circulation.
• Including the actions of large institutional investors should be monitored. Often, large investments in projects from outside predict a rise or fall in value; can also indicate promise and usefulness.
• Technical analysis is a must. The basic figures of technical analysis, such as resistance and support levels, and candlesticks, all need to be understood, preferably in their entirety. Especially if significant investments are planned. Very useful material with basic information can be found here.

It is also mandatory to take into account the complexity of the network when mining. The hash rate can increase or decrease. This can affect the pricing. Finally, the behavior of the miners: whether they are actively selling, buying or holding the mined assets. If they are holding, then it’s probably not worth the rush to trade.