People who just entered the crypto market may feel overwhelmed with the number of possibilities and find it difficult to get around. Have you ever experienced this? If so, this blog post will help you understand more and navigate in the unknown waters of crypto. Let’s dive in—literally.

Understanding cryptocurrency

Cryptocurrencies are digital assets built on top of blockchain technology, which at first aimed to resemble money. Due to its nature, it has become a home to speculators, who try to navigate the market and predict the price. Cryptocurrencies offer a permissionless way to transact between individuals and interact with one another in a transparent manner.

Crypto vs traditional markets?

Additional experience in the financial markets can help you get around, but there are many differences you may not be aware of.

Cons of crypto

It’s much harder to access cryptocurrencies. Although many efforts have been made, it’s still harder to get exposure to crypto for an average person in comparison to, for instance, stocks or ETFs. The liquidity is also much thinner, making it easier for whales—individuals or organizations with significant monetary resources—to manipulate the prices by either dragging them down or pumping them up. The potential for scams is vast, as the space is mostly unregulated, making it a paradise for scammers.

Pros of crypto

It’s not all that bad, though. Cryptocurrency is traded 24/7, which can be beneficial and disadvantageous—it depends if sleeping is an activity you enjoy. Crypto is also accessible globally with no geolocation restrictions, making it an ideal investment for citizens of poorer countries. The potential for returns is astronomical, but the losses are also much more severe.

What is a DCA strategy?

Dollar cost averaging, often called DCA in short, is the way of purchasing an asset on a regular basis regardless of the price. For instance, you decide to buy $100 worth of Bitcoin every week and execute this strategy. It’s recommended that you set up a recurring buy order on one of the available exchanges or different providers to never miss a day.

DCAing is a stress-free way to invest your money in the market.

Buying based on emotions

Many people starting out make the mistake of buying based on emotions and hope rather than logical observations—let me explain. As a beginner, instead of buying an asset regularly, you decide to accumulate cash and buy at the bottom and sell at the top. Sounds like a good plan, right? Not exactly. What ends up happening is you miss the bottom and later you are either sidelined or end up buying at a higher price. Both decisions hurt your portfolio in the long run.

The downsides of DCAing

This strategy has its downsides too. You may start your regular buy orders at the top and experience losses in the near term. It’s also worth considering the asset you’re investing in. While a DCA strategy works for BTC and ETH, it may not be a great choice for buying altcoins. Diversification is key, so no matter what others tell you, have a balanced portfolio that doesn’t rely on a single asset.

By utilizing a DCA strategy, you reduce the risk of emotions playing a part in your decisions and let time do its thing. Remember: time in the market always beats timing the market.

What does it mean to HODL?

HODLing is another strategy worth bringing up. It originated as a typo on a Bitcoin forum. The basic strategy is based around having “diamond hands” and not getting shaken out. When you consider Bitcoin as the most scarce asset on earth and acknowledge the fact that everything is going to zero against it, you don’t have plans to sell.

What is cryptocurrency trading?

Trading is one of many strategies to make money in this market. It is a very complex topic, however, and requires years of experience to master. You may get lucky at first and make some money on a particular trade, but things can quickly turn around, and one-time profit is not a guarantee for next wins.

Types of trading instruments

Then there are multiple ways of trading. You can buy and sell spot pairs as well as try your luck with margin or perpetual trading. Let’s not get into details, but leverage allows you to make or lose more money on a price movement.

A tough business

Many have tried and many have failed. It’s a long-term gain, and you should not only invest in the experience but also in knowledge. Trading is all about timing the market, and there are very few who can accurately predict the next price swing, and there are none who are right 100% of the time. Recall these words the next time you see “gurus” flexing their imaginary profits and trying to sell you courses.

Bull vs bear markets

What is the difference between a bull and a bear market? Good question. Bull markets are characterized by exponential gains, and people can accumulate generational wealth during these periods. Still, bear markets may erase these profits in a blink of an eye.

You should have a deep understanding of the market cycle as it tends to favor the informed ones. Bull markets provide an opportunity for tremendous portfolio growth, whereas bear markets teach patience and discipline. Master your emotions and learn as much as you can to not be caught off guard.

In the bull market most assets appreciate, while during the bear market their valuations fall.

The 4-year cycle

Crypto apparently operates in a four-year cycle—it's a fact until proven otherwise. It is determined by Bitcoin halvings, which occur approximately every four years. During a halving, the Bitcoin block reward is reduced by half. The halvings help Bitcoin become more scarce with time and reduce its inflation rate. 

Historically, there’s only one year of downside and three years of upside for Bitcoin. While Bitcoin acts like a risk asset, it is regarded as digital gold. The same is not true for altcoins. While they tend to outperform Bitcoin in the post-halving year, altcoins can get crushed and experience devastating losses. In a risk-off environment Bitcoin thrives in comparison to altcoins and its dominance can significantly increase. It’s worth noting and implementing this in your strategy, to preserve and increase your portfolio valuation in satoshis, which is the ultimate goal.

Mistakes you should avoid

These mistakes could decimate your portfolio. Avoid them at all costs!

Emotional decisions

Emotional decisions are what you regret the most. When you make an impulsive and uninformed decision, you will probably lose.

Don't overleverage

Another thing is to not overleverage. Try to stay away from leverage at the start and learn more on the topic. By trading perpetual contracts, you can win some, but also lose a lot.

Take security seriously

Don’t disregard good security practices. Your crypto can evaporate really quickly if you don’t store your seed phrase safely and easily fall for phishing or address poisoning scams.

Focus on quality

Stop chasing hype and trying to find the next big thing. Focus on research and learning about what you enjoy the most. Invest only in projects you understand.

Resources to learn more

If there’s one thing you should strive for, it’s knowledge. Soon you will see the correlation between your education and your portfolio growth. There’re a lot of sources out there like the blog post you’re reading. Make the most out of these resources and follow influencers who share valuable insights on X.

A famous quote by Warren Buffet also applies to crypto: "The stock market is a mechanism for transferring wealth from the impatient to the patient".

How to easily buy crypto

To get your hands on your first crypto, you may also alternatively use an onramp platform like Swapped.com, which supports various payment methods, and you get your crypto assets delivered in minutes. Click here to make your first purchase.

Time to take action

Cryptocurrencies are volatile assets full of great upside and downside potential. You can start DCAing in bluechips, HODLing Bitcoin or give in to the temptation of trading. Don’t forget about the risks of scams, exploits and security breaches lurking at every step. Take your time and learn - after all, crypto may not be for you if you’re not a fan of heavy losses and vast price fluctuations. Also, always remind yourself to never invest more than you can afford to lose.

Everything of importance was covered, but the decision is up to you. Will you take up the challenge and invest in this fast-growing asset class?