Getting Started with Cryptocurrency Investments and Research: A Brief Guide for Beginners

Hey everyone,

I’ve received a few requests from friends and family members for some help getting to know the realm of Cryptocurrency & Bitcoin, and for guidance on where to start with investments. There are a lot of sites, tools, exchanges, services and programs out there but I want to start with the ultra-basics and keep things simple on this post.

This entry is intended to provide outbound links to places where you can learn about concepts surrounding Bitcoin and other cryptocurrencies (referred to affectionately here and elsewhere as altcoins), and other more actionable things like sign up for exchanges to begin trading. Also, quick disclaimer, there may be affiliate / referral links on this page which should not disturb your experience on the site.

 
How does crypto work?

I will not be diving deep into the above question here, because the history, network, and infrastructure surrounding Bitcoin and its successors has been well detailed across the internet and I’m not here to rephrase it. Basically, cryptocurrencies are digital assets (usually financial in some way). Most digital assets are decentralized, which means they are not controlled by a single governing entity, and this is what makes them unique when compared to traditional ‘fiat’ currencies like the US Dollar, which is controlled by a series of central banking & government systems.

If you haven’t seen Netflix’s Banking on Bitcoin or some background articles after searching “what is cryptocurrency” or “how does bitcoin work”, I recommend doing so before proceeding with any of the actions below.

 

How can I purchase and store cryptocurrencies?

The purchase process itself. Here‘s a really good and detailed guide if that’s what you’re looking for. I’m just going to review the basics. Thankfully it’s nowhere near as weird as it was just a couple years ago, and not nearly as sketchy as getting onto the deep web or joining a cult (though I guess I wouldn’t know).

If you have not yet begun buying into the cryptocurrency market, Coinbase is a great place to start (we’ll both receive $10 if you use that link to sign up). It’s one of the easiest platforms to exchange your fiat cash (US Dollars, most likely if you’re reading this), into Bitcoin (BTC), Ethereum (ETH) or Litecoin (LTC).

If that’s as far as you want to go, I don’t blame you. But if you want to get deeper into the undiscovered coins and try to find the next Ethereum… read on!

 

You’ll also need to sign up for an exchange. My personal favorite of all the ones I’ve checked out is Binance. But there are others, like Bittrex, Kraken, Kucoin, and many more. From there, you’ll want to find instructions on sending your BTC, ETH, or LTC (whichever you’d like to use as your ‘on-ramp’) into the exchange because you will not be able to use US Dollars there. Only cryptocurrency can be used to trade for altcoins. These instructions should be found either from the exchange’s site and involve some long numerical addresses that you should be very careful with. I don’t feel comfortable providing a blanket description or instruction here on the site beyond “look it up and be really careful”.

 

What kind of cryptocurrency investment opportunities should I look for?

The best thing I can tell you is to find a coin that you feel good about. The big 3 (currently BTC, ETH, and LTC) are safe bets for long-term prosperity and tend to grow & decline on the same general trends. However, if you’re looking for the next big coin — find something that you think has a strong promise to play with the big boys, so to speak, and to reasonably grow beyond the first year of development without failing. Many do not make it past this stage or through the Initial Coin Offering (ICO) / Airdrop period, where the coins are sold / given away, respectively, in an attempt to market the coin and company or platform associated with it.

Here are some key signs of a promising coin:

 

Exchange adoption

If a place like Bittrex, Binance or Kucoin announces plans to list a coin that is still in or before its ICO phase, this is a great sign.

A unique and useful idea

There are millions of ways to use blockchain, and new ideas are cropping up every day. Viberate (VIB) is one cool coin associated with a functional platform that I think is very practical. However, the market will not support coins that simply recreate the “decentralized currency” pitch. Bitcoin was fantastic when first created, and still is, but everyone is building off the hype and success. Look for something that puts a new spin on an old concept or seeks to accomplish something ambitious. If you see sketchy, vague language or typos on the project’s website or smart contract terms, I’d honestly say to stay away because it might be a scam. There are plenty of opportunities out there and its not worth risking your identity & your money for something that maaaybe could be prosperous.

Good distribution and trends

Take a look at the coin on coinmarketcap.com. The company’s smart contract should be available on their website, and indicate how much will be made available, to whom, when, and whether unsold coins will be “burned” (destroyed) or not. Look for information surrounding the total market cap and current circulation if it’s a coin that has already passed its ICO.

Solid team

Look for experience in the industry from the key team members. Every legitimate project will publish a short profile of each person involved. A big team full of seasoned industry veterans is what you’re looking for.

Blockchain infrastructure

New ICOs must be launched from an existing blockchain, unless they plan on building their own. For example, a project using Ethereum’s blockchain will require Ethereum exclusively to purchase the new coin (no BTC or LTC or others are allowed). ERC-20 has become one of the standards, but be sure to research whichever the coin in question is going to use.

Other resources

Look for a detailed white paper or presentation that can coherently explain the technology & intended purpose of the coin. Other assets can include videos, blog posts and other contributions from the team. Activity from users on Reddit and Bitcoin.org are also a great sign of a worthy investment. Almost every altcoin will have its own dedicated subreddit (i.e. reddit.com/r/potcoin) with an overview of the coin, some stats, and active user community on Reddit. Hype is key because it is often an indication of eventual value of the coin.

 

Safely storing your purchases

Once you’ve made some trades, there are a couple great options for storing your wallet holdings on a secure device in the privacy of your home, like the KeepKey or the Ledger Nano S. Using these devices is vastly preferable to keeping funds stored in an exchange after making a trade, especially if its a coin you’ll be holding for a while — and most altcoins are likely to be long-term holds at this stage in the market maturity. Make sure when you do use ledgers like these, that you follow instructions extremely carefully and test it with a small quantity of coinage before sending your entire wallet, just to ensure it all works the way you’ve set it up.

 

Footnotes

Lots of industry vets like NotsofastNeedacoin, or Erik Voorhees will take to Twitter to talk shit or share key insights, news, or findings. Definitely worth your attention to follow a few guys like this even if you’re not big on Twitter (like me) just to keep your ‘ear to the ground’.

Here is a nice list/translation of common terms used in the industry, mostly containing important slang or abbreviations. Thanks to shapeshift.io for putting that together.

 

I would also, of course, encourage you to continue doing research out on your own and proceeding with immense caution. In my investing experience there have been times where I’ve gone up over $1k and then weeks later been in the red. It’s a wild game but lots of fun and really the market is just getting started so it’s likely to be a long, scary, sickening roller coaster. But what else would you really want to do with your spare income? Buy fidget spinners? I didn’t think so. Happy investing!

-Dan