What to Consider When Starting to Invest in Crypto

Last year, the cryptocurrency market saw its most significant growth ever. In November, the market cap hit the all-time high value of $3 trillion, and the number of blockchain wallet users grew from 66 million to 79 million from January to November.

Despite this, many people are still wary of investing in crypto, even though they might feel curious about the subject. Why? Mainly because they find it troublesome to learn about its benefits and pitfalls because of all the varying information available and the complex terms most industry insiders use.

However, many startups and companies across industries are implementing strategies that make investing in crypto straightforward, easy, and exciting. For instance, the gaming platform Axie Infinity lets you earn tokens for playing, or TripCandy, the travel platform I co-founded, gives you token cash back rewards for every travel booking. So, in the spirit of welcoming aspiring investors into the crypto space, here are some essential elements to have in mind.

Key Considerations for New Investors

Many people invest only in cryptocurrency because of its ability to trade for high returns. However, as with any type of investment, profits are far from guaranteed. Even if smart investments shield you from losing everything, you can’t eliminate the risk of losing what you’ve invested.

In the same sense, novices have to know that most tokens and crypto are regulated by the SEC. As this technology is in its early days, a lot of governments – including the U.S. – are just starting to roll out laws and regulations that might change how they behave. For example, there is debate around their nature, if they should be considered regular currency or investment security. And whatever decisions they make might change the rules overnight, so it’s best to be prepared.

As you will quickly notice, there are a lot of tokens available for purchase, making it difficult to identify scams and coins with little to no chance of gaining popularity. Think wisely before you put your money in something likely to disappear.

In my experience, a good rule of thumb is picking cryptocurrencies and tokens based on their fundamentals. This means researching the project like you would if you were to invest in real estate. This won’t guarantee the success of the coin or token, but it can give you a general sense of security because depending on how solid a project is or who is behind it, you can more or less tell if it’ll gain traction in the future.

For tokens – that is, the digital assets issued by a specific project  – I study the team, where they come from, who the CEO is, and what they have done previously. It is also helpful to see whether the idea behind it makes sense – because many don’t. I want to learn about the founder’s vision, where they want the project to go, and how they will get there.

For coins – which work just like regular money to exchange for goods and services – I also look at the team, their history, and who else is backing the coin development, for example if a well-known VC supports them. I consider their goals, their roadmap, and how much progress they have made. Finally, I find out why this coin is better than others. This could be the transaction speed, the cost of the transfer, or the number of people using it or adopting it for other purposes, such as payments.  

Lastly, for those sitting on tenterhooks about investing in crypto but who don’t feel comfortable or don’t like trading, there are other ways to make money with the technology. For example, some people choose to mine popular coins like bitcoin or ethereum. And there is also the possibility of staking, which lets you earn rewards for the crypto you put in as it works similarly to an investment fund. You put your crypto in a staking pool, and they put it to work which gives you “interests”.

There are many possibilities for new investors, and as with everything else, the best way to learn is to get involved and start trying. Research as much as possible and start small if you don’t feel very confident. Just like the Internet, which no one thought had a chance at first, cryptocurrencies are just getting started and have a long career ahead of them. Now it's up to you to decide whether you want to rush ahead or slowly follow behind.

Author Bio

Jeremy Foo, Founder and CEO at TripCandy