Let’s focus on what you need to know and do when buying crypto this week.
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Just do it.
One thing you hear a lot in the crypto space is the best way to learn about crypto is to “do crypto.” For this week we’re going to focus on what you need to know and do when buying crypto for the first time and what you need to do every time you are considering adding a new coin to your collection.
What You Need to Know Before You Buy Cryptocurrency
(Bitcoin price chart/CoinDesk)
So last week we got you set up with a wallet and account on an exchange. Technically, all you need to do is fund your account on that exchange and hit “buy.” But, please, don’t smash that buy button just yet.
The first thing to stress is that while crypto is an exciting new asset class, it’s also still highly speculative and volatile. Even the oldest cryptocurrency, bitcoin, has seen massive swings in value over both short and long time horizons. While from July 2022 to October 2022 its price largely remained within spitting distance of $20K, bitcoin’s price saw huge swings in 2021 including hitting its all-time high of over $68K in November 2021. That price chart above is the price chart from January 2021 to October 2022.
Those are some big swings, and if you bought in at the height of hype driven by FOMO you’d have lost quite a lot of your investment. So before you buy your first or next crypto, read this great explainer that some of my smartest colleagues wrote:
Beyond the Big Two: How to Evaluate a Cryptocurrency
(Dall-E/CoinDesk)
Most investors I speak with are familiar with bitcoin and ether and are interested in understanding what other cryptocurrencies are out there that could be worth their money. Maybe they’ve heard of meme coins like the one favored by Elon Musk, dogecoin, or they are interested in diversifying their holdings in digital assets.
With the number of cryptocurrencies nearing 20,000, the fact of the matter is the vast majority of those coins are not worth your money. So how can you sort the silly from the serious and, most importantly, from the outright scams?
Here’s three key pieces that outline what you should look for when choosing an alternative crypto to the “big two” and a guide on seven important ways to assess a crypto:
If you’ve posted anything on social media and it contained the word “bitcoin,” chances are you found some spammy bot in your replies promising “free bitcoin” for entering a contest or starting an account at a site you’ve never heard of. Please, don’t do any of these things.
One thing that’s just as true in crypto as it is in traditional finance is that if something sounds too good to be true, it probably is. But con artists don’t only target marks with fairly obvious scams. They will create slick, professional-looking websites that seem legitimate or even create apps that have names of legitimate companies but have nothing to do with that company. Here are a few suggestions to avoid falling victim:
Thanks for reading. Next week we’ll look into some of the things that are the same and what’s very different in crypto versus traditional finance. Meanwhile, if you have questions or feedback, reply to this email and let me know.
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Disclaimer: The information contained in this newsletter, and any information linked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. You should seek additional information regarding the merits and risks of investing in any cryptocurrency or digital assets.
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