written by
Nico Lim

Smart Crypto Investing: The Ultimate Beginners Guide

Learn Slider Posts Investment Education 26 min read

There is no simple solution to the world’s financial problems. But crypto is a pretty good start.

Whether you’re a complete beginner, or you’ve been trading for a while, this guide will break down everything you need to know to make profitable crypto trades from Day 1.

In this guide we’ll cover:

If you’re wondering, “Is crypto investing for me?”, “What makes a good crypto investor?”, “When is a good time to buy?”, “What does a good trade look like?”, “What are the common mistakes new investors make?”, “Where should I store my crypto?”, and “What kind of investing strategy should I use?”, then this guide will answer all your questions and much more.

There is a fair bit to get through, but we have broken it down into easy-to-digest sections so you can skip around if you’re looking for something in particular.

Reading guides like this and putting in some time to learn the basics will pay off in the long run. By the end of this guide you’ll have the edge on the vast majority of beginner crypto investors and can start your investing journey off on the right foot.

If you are interested in trading with us but need a bit more guidance, our dedicated team at Digital Surge is more than happy to personally help and guide you through the process.

If you are totally new to crypto and don’t really understand what it is and how it all works, check out our Bitcoin for Beginners article which will have you up to speed on the basics in no time. More great content can be found at our education hub, including a collection of timeless crypto trading wisdom.

Okay, let’s get started.

A few things to know before investing in crypto

  • The crypto market is a volatile one (both a good and a bad thing)
  • Despite still being in its infancy, cryptocurrency is one of the fastest-growing financial industries in the world
  • Cryptocurrency is much more than just Bitcoin – there are thousands of other promising coins (“altcoins”) on the market
  • Some real-world use cases of crypto include financial transactions, online voting, supply chain management, digital IDs, medical record-keeping, weapons tracking and tax regulation, to name a few.

Is crypto investing for you?

If you are interested in innovative technologies that can change the way we live, crypto is a great place to learn and make some profit along the way. A big factor in whether or not a coin will succeed depends on its utility and unique ability to solve a problem in the world or improve on an existing technology.

For traders who don’t mind doing a bit of research and educated guessing, crypto investing is like nothing else out there. It is an exciting new resource that rewards those who understand what they are doing and have a high tolerance for risk.

However, if taking risks makes you nervous and you are prone to FOMO and making impulsive, emotional decisions, then crypto may not be for you. There are many other investment opportunities out there that aren’t nearly as volatile, and if you are just trying to make a quick buck without learning the ropes, you will probably end up worse off than when you started.

What makes a good crypto investor?

In the words of Warren Buffet, “never invest in something you don’t understand”. And we’d have to agree. Luckily, with all the no-nonsense educational resources out there, you don’t have to be a financial wizard or a crypto expert to make the most out of the crypto market.

If you are okay with taking risks, handling volatile price swings, overcoming FOMO and putting in the time to understand the market and the coins you are investing in, you have what it takes to be a great crypto investor.

A successful crypto investor is not easily swayed by the hype-of-the-day and is able to make decisions based on information rather than emotions. A huge part of the crypto craze we have witnessed in the past decade has been a result of emotionally driven decisions. While we recommend taking advantage of the craziness when possible, we do not advise being a part of it.

Is crypto a good investment?

When it comes to investments, there are never any guarantees. However, the past few years have confirmed our belief that crypto is here to stay. In the past decade, many altcoins have emerged and seen a meteoric rise in value and widespread adoption, especially in the business and finance sectors. While you don’t have to be an expert, doing your research and taking the necessary precautions are key to effective investing.

Is it too late to buy Bitcoin?

People have been saying it is “too late” to buy Bitcoin since you could buy one with the change in your pocket. We disagree. If you understand the technology and potential behind Bitcoin and its blockchain technology, you will realise that Bitcoin still has a lot of room for growth, and that blockchain technology is still in its infancy.

It is never easy to say when a crypto has reached its all-time-high, but undoubtedly, cryptocurrency is still in its early stages and should be treated accordingly. This means exercising caution with all your investments and not being a weak hand and selling too early if there is a dip or a rise. More and more investors are diversifying their portfolio between lower-risk, established cryptos, and more risky, novel coins that offer a huge potential for rapid growth.

What should I research/do before investing in a coin?

Identify the unique utility of a coin

One of the coolest parts about investing in cryptocurrencies is judging and betting on which crypto will be useful to the world in the future. A coin’s ability to solve a problem in the market or significantly improve an existing technology is usually the biggest tell-tale sign that it will be widely adopted in the future.

For example, Ethereum enabled the use of smart contracts while providing a place for developers to create decentralised applications. These unique utilities have proven to be useful to a large number of people and industries, thus making it one of the most stable and valuable cryptos on the market.

Look into the community

The value of any cryptocurrency is dependent on its use case (how it will be used and by whom). Having a real use case means the coin will have a group of people it serves, and thus a community around it. The community (miners, developers, supporters and users) add value to a coin by adopting its use case and increasing its overall legitimacy and popularity.

Research the company and its history

The company offering the coin (and the team behind it) is another crucial element that you should be informed about before investing. Look for a reputable and experienced development team that have had past successes with other projects.

Digital Surge makes this process as easy as possible by providing you with links to the official website of every coin on the chart page of any cryptocurrency we offer.

For the safest returns, invest in coins which have been around for some time and have a proven track record. Most relatively stable altcoins are in the top 100 list of cryptocurrencies by market cap.

Be informed about the Initial Coin Offering (ICO)

ICOs are where the team behind a new coin explains why it is likely to be successful. This is the most common way for companies to roll out a new coin and raise money for their project. Investing in a coin during the ICO is a good way to get in at ground level and see the biggest gains possible. However, ICOs are susceptible to scams and many coins don’t even make it past this stage. Companies usually release a “white paper” along with the project, outlining the plan and technology behind the project.

Read and assess the white paper

A white paper offers a comprehensive explanation of a particular crypto coin. It’s main purpose is to highlight the coin’s purpose, utility, future prospects and underlying technology. Given the lack of data you can analyse during an ICO, reading the white paper of a coin is a good way to assess whether or not it is a worthwhile investment. If a coin’s white paper is not up to scratch, there is a good chance it is a bad investment, or in some cases, just a complete scam.

Evaluate the market cap

This deserves its own article, but the market cap (market capitalisation) is a good indicator of the stability and growth potential of the crypto. It is calculated by multiplying the price of a coin with the total number of coins in circulation – the higher the amount (in comparison to other coins), the safer the investment. Investing in a coin based on market cap rather than the price of the coin is a good tip for beginners, but there are many factors to consider when evaluating a market cap.

Ideally, your investment portfolio would contain a blend of all three (large-cap, mid-cap, small-cap) investment types, with the majority of your assets being dedicated to more stable, large-cap investments. This is also known as diversifying your portfolio and can help minimise your overall risk and give you the best of both worlds (stability and high potential for growth).

What does a good investment look like?

A solid crypto coin will generally have a diverse community behind it, a well-known team of developers, and a well-written whitepaper. For any altcoin or crypto to truly succeed, it should possess a unique function or significantly improve an existing technology in the market. If it can solve a problem or streamline a process in the world, there is a good chance that it could be worth a lot of money in the future. Additionally, market cap, trade volume (how much the coin is being traded) and a coin’s track record will often indicate whether or not a particular crypto is a good investment.

What are some of the most important tips for crypto investing?

Diversify your investments

A good strategy for reducing risk and maximising profit is to spread your investments across different cryptocurrencies (and other types of investments). This is much better than investing in just one coin as it is highly unlikely that all cryptocurrencies will simultaneously crash.

Smart cryptocurrency investing is the same as trading the stock market. You need a risk management strategy and you should never put all your eggs in one basket. If you're a loyal Bitcoin supporter, try investing in a few other altcoins so your portfolio is a bit more spread out and less vulnerable to risk.

Follow the 80/20 rule

Having a blend of the largest, most stable cryptos along with some medium-sized to small cryptos (by market cap) is recommended. An 80/20 blend of large-cap to mid to small-cap is a good rule to follow if you are new to crypto investing. This will also minimise any liquidity issues of your portfolio.

Following this rule will allow you to make sizable profits from any sudden surge in the small to mid-cap cryptos, whilst also having a large part of your investments in stabler coins.

Don’t succumb to FOMO

Learning to recognise when you are basing a decision on FOMO is essential to being a good crypto investor. This is probably the number one error that both Bitcoin newbies and seasoned crypto veterans are susceptible to. The most successful investors understand that they cannot catch every positive move the market makes. Instead, they play it cool and bide their time until the market conditions are favourable (e.g. the price has reached its low and is primed to move up again), and then they strike.

Choose the right online crypto exchange

Choosing the right exchange platform before starting your crypto journey will save you a lot of trouble (and money) down the track. Be sure to select and exchange with low fees, personalised customer support and an easy-to-understand interface. Some larger crypto exchanges do not offer great customer support, limit which coins they support, and make things a little hard to understand with all the bells and whistles they offer. At Digital Surge, we provide the best value of any exchange in Australia in terms of low fees, number of coins offered, and customer-support. But don’t take our word for it, see what our customers have had to say.

Get some guidance

The world of crypto can be daunting if you’re just getting started. While this is to be expected, we cannot stress how valuable advice, investing tips and expert guidance can be for new investors. Trading with a platform like Digital Surge gives you access to a wealth of first-hand knowledge, a responsive live chat, personalised customer-support and expert trading advice you will be hard-pressed to find anywhere else.

Start off small

Test the waters before diving in head-first. While it is possible to see some great profits early in your investing career, everyone will see some losses at some point and this is most likely to happen when you are inexperienced. Start slow and exercise patience and caution. Your no. 1 priority at the start should be getting the lay-of-the-land and learning as much as possible so you can take full advantage of bigger opportunities when they eventually come along.

Invest safely & responsibly

It must be said: only invest what you can afford to. The monetary revolution is just beginning and crypto is still in its early days. This means crypto’s future is still uncertain and should be seen as an ‘extra’ investment or hobby rather than a long-term wealth creation strategy. While there is undoubtedly profit to be made, crypto should really only just make up a small portion of your total investment portfolio.

Although a trusted exchange like Digital Surge provides users with a safe trading environment, we encourage all users to remain vigilant of potential scams and frauds. Some of these include unsafe exchanges, “pump & dump” schemes, fake coins, email scams and password hacking. This is why research and choosing a secure exchange with multi-layered security and personalised customer-support is essential to safe and stress-free trading.

When is a good time to buy?

What constitutes a “good” time to buy a cryptocurrency depends on the kind of trader you want to be. Some people are in it for the long-haul and buy to hold, some want to make profits in the short term, some do a bit of both.

There is no general rule for when to buy a crypto, however, a good time is usually when the price is stable at a relatively low level, or when it is in a dip and you are confident it is going to rise in the future.

The art of trading requires you to judge when a crypto is in bubble mode (drastically rising prices that do not reflect the intrinsic value of the investment), and when it has reached its bottom after taking a big dip. These questions can never be answered with certainty and it is impossible to really ever be sure. Many times, a coin begins to ascend, eventually reaching what is deemed to be the peak of the bubble, only for it to continue rising far beyond what anyone predicted. This happens pretty regularly in crypto.

For instance, when crypto was just starting, many people refrained from buying Bitcoin at $1,000 or Ether at $100, as it appeared to be way too expensive. A few months later they realised that it actually would have been a great time to get into the market.

Giving advice about when to buy is difficult to do as everyone has different predictions, trading strategies and risk tolerances. However, we can give you a few general tips on timing and two of the main strategies people tend to lean towards.

A few tips about timing your trades:

Crypto is its own game

Don’t compare crypto bubbles with traditional financial bubbles. The crypto market is extremely volatile and what might seem like a bubble may just be daily volatility or even just the start of a rise that never really pops.

Don’t make decisions based on emotions or FOMO

Take your time to watch the market and understand the technology behind your targeted investments. If you are reacting to every dip in the market you will be worse off than if you actually take the time to get informed about certain coins and their market movements.

Like every market, crypto trading has patterns and tendencies. Being able to identify subtle changes and consistencies is important in a market where volatility is to be expected.

Generally speaking, market trends begin slowly and gradually pick up as more and more people get pulled in until it hits a point where it becomes a frenzy which then sky-rockets its value until a peak is reached. This is often followed by a sharp drop and a subsequent stabilisation of some kind. Being able to identify these kinds of patterns will help you avoid entering the market at the wrong time.

Don’t sell too early

Buying and holding is a great strategy. Remember, you only lose when you sell! It has also been revealed that the majority of Bitcoin’s largest investors are long-term investors who don’t intend to sell anytime soon. Keep in mind, the crypto revolution has just begun.

What are some common strategies for timing the market?

Buying on the dip

Given the volatility of Bitcoin and other cryptos, dips in price are practically inevitable, and for many, this presents an opportunity. While it may seem counterintuitive to buy when the value of a coin is low and not showing signs of rising anytime soon, if you understand the volatility of the market, this becomes a great window to invest.

Buying and holding

This strategy is ubiquitous in the world of crypto and traditional investing. Although holding is referred to as “HODL” in the crypto community, the idea of buying and holding is a popular long-term strategy that minimises risk and is a good option for pretty much all kinds of investors.

In order to make this strategy work for you, you should inform yourself as well as possible so you can make up your own mind on what currency you think will succeed in the future and what would make a good long-term investment. This kind of investing may not provide the kind of quick returns crypto has become famous for, but having a mix of both long-term and also more high-risk/high-reward investments is a good way to diversify and enjoy the best of both worlds.

What is a fundamental/technical analysis?

Fundamental Analysis

In simple terms, a fundamental analysis is the process of evaluating various aspects of an asset in order to recognise when it has intrinsic value that is not reflected in its current market price. Identifying projects you believe have a strong chance of success, but have not yet reached their full potential can reap some big rewards. If you want to take your investing a little more seriously, we recommend learning how to perform a fundamental analysis which we break down in this guide.

Technical Analysis

The ying to fundamental analysis’ yang. Technical analysis is concerned with price and volume data. It looks at what is happening rather than why it happens and does not take into account every variable that could influence its price (unlike a fundamental analysis). It is essentially the study of statistical trends, collected from historical price and volume data, in order to identify profitable trades.

Technical analysis relies on the idea that market movements are not random and that history repeats itself when it comes to prices and trends. Based on this, technical analysis looks to identify and isolate these trends to make smart, profitable trades. Like fundamental analysis, technical analysis can be applied to any investment with historical trading data such as cryptocurrencies, forex, commodities and traditional stocks.

What is a bull/bear market in crypto?

Many of the terms and concepts from traditional investing also apply to crypto. Learning these terms is a great idea if you plan on investing in markets outside of crypto.

A bull market is generally a good thing that signifies a rapid and significant upward trend of the market. Getting in early and then selling when you think prices hit their peak is a good way to take advantage of a bull market. Additionally, people who are outside the realm of crypto may even take notice of how much prices and investments are skyrocketing, compelling them to invest, which in turn drives the market up even more. We experienced this towards the end of 2017, as a lot of new money was pumped into Bitcoin and crypto.

But beware, if you are new and coming into the market during a “bull run”, you should be very cautious. Many investments will have inflated prices and as the old saying goes, “what goes up must come down”. This was exemplified in a big crash in the market in early 2018.

During a bull market, we recommend looking for projects whose value has yet to be reflected in their current market price. Buying cryptos that have already rocketed up is a good way to catch them right before they fall back down. Doing an analysis of the long-term price charts, as opposed to just looking at the recent trade volume and price changes is a good tip for both new and experienced investors.

A bear market is the opposite of a bull market and signifies a rapid downwards trend. While a bear market presents other types of opportunities, it may be in your best interest to reduce many of your positions on current investments, especially for those coins that aren’t stable and may be inflated. By selling before the crash and taking your profits, you may even be able to reinvest at a later date and get back the coins you had for a much lower price.

It is worth noting that while holding a crashing coin can be hard to watch, many of the stabler crypto coins (Bitcoin in particular) have seen many crashes that have been followed by a swift recovery. Bitcoin has recovered from every crash it has had and it is important to remember that you only lose when you sell. If you have faith in the value of your investment, holding may be your best strategy.

You can never be sure when a coin has reached its peak or its bottom. Being able to predict these movements is the art of crypto trading. Doing your research and performing a fundamental and technical analysis will increase the likelihood that you can predict future market trends accurately and make the most of whatever state the market is in.

What does going long/short on a trade mean?

The crypto market is one of the most volatile investment environments out there. Having a long/short strategy allows you to take advantage of this volatility.

Taking a long position is a strategy that is fairly easy to understand and resembles the classic “buy low sell high method”. You buy a coin with the belief that its value is going to increase over time, and then sell it when the price has increased. For this strategy to work, it is important to understand the technology and company behind the coin as you will want to be choosing coins that are likely to be around for a long time.

Short selling is the counter strategy to going long, and there are many ways you can implement this strategy. At its core, the concept of going short is essentially borrowing a certain amount of a coin, let’s say two Bitcoins, from your exchange or trading agency, with the agreement that you will pay them back the same amount of Bitcoin. After borrowing the two Bitcoin, you then sell them for their current price, say $10,000 and then you wait. If your prediction is right and the price drops, you will be able to repurchase those two Bitcoins for less than what you sold them for, giving them back to the place you initially borrowed them from while keeping the profit you made.

What is arbitrage in crypto trading?

As cryptocurrency is a global phenomenon that is still in its early stages, there can often be significant price differences between online exchanges. This presents an opportunity. Cryptocurrency arbitrage is a common strategy used to take advantage of those price differences by buying a crypto where the price is low and then immediately selling it on a different exchange where the price is higher.

While arbitrage has its risks and potential downsides, it has proven to be an effective way to turn a fast profit and make the most of the crypto market’s volatility. Additionally, given the vast number of exchanges out there, there is significant potential for price differentials. This strategy is not for everyone and although the jury is still out on whether it is a sustainable way to make money, there is undoubtedly profit to be made through arbitrage, especially while the market is in its infancy. It is also worth noting that Digital Surge allows you to set up “arbitrage or trading bots” to automatically carry these kinds of trades out for you.

Is crypto investing safe?

Like all investments, there are no guarantees when it comes to crypto investing. Additionally, as crypto is a relatively new industry with a lot of potential and the power to subvert many of our financial systems, it has naturally attracted a lot of scammers and fraud. We recommend trading with caution and being critical about what you do in the crypto space. There is no shortage of crypto horror stories (usually occurring on shady exchanges), and being vigilant and educating yourself on some of the most common scams can save you a lot of grief down the track.

That being said, as the crypto industry grows, more and more secure, trusted exchanges are popping up that prioritise the safety of their user’s assets and information. Choosing an exchange with regularly updated, multi-layered security, two-factor authentication and personalised customer-support is absolutely crucial. Digital Surge has all of these features and prides itself on providing everyday Australians with a safe and secure place to trade and store their crypto. We use a blend of cold, offline wallets and hot wallets to give our customers the best of both worlds when it comes to making trades and storing their crypto. When trading with us, you can rest easy knowing your crypto is stored safely and your personal information is protected and kept private.

What are some of the most common crypto scams?

We’ll get into the details of the most common crypto scams in another article, but a few of the potential scams and dangers to look out for include: fake exchanges and wallets, pump and dump schemes, mining scams, malware, email scams, Ponzi or pyramid schemes, imposter websites and traders, fraudulent ICOs, and even fake news and bad social media updates. You can read more about these scams and how to avoid them here.

While it is useful to know what dangers are out there, if you choose a trusted and secure platform and exercise a little bit of common sense, the chances of you running into security issues are very low.

Where should I store my crypto?

When it comes to storing your crypto, you need to decide what kind of “wallet” you want to use. Here’s the essentials on crypto storage:

When you own crypto, what you really own is a private key (a secret string of numbers that can be used to open a wallet and access your assets). This is paired with a public key, which is also an address in the form of a combination of numbers and letters where you can receive digital currencies and access them using the private key.

A wallet is a place to securely store your public and private keys. The main distinction between the different types of wallets is whether they are hot or cold.

- A hot wallet is connected to the internet and can be accessed and used for trading and purchases at any time. These include cloud wallets, most mobile, and software wallets, and exchange wallets.

- A cold wallet is not connected to the internet and allows you to store your funds offline. Some cold wallets can be connected to the internet and turned into a “hot wallet” to sign transactions, and then back again. These include hardware wallets, offline paper wallets, and USB and other offline data storage devices.

If you are looking to do some serious, high-volume trading, we suggest you check out our crypto cheat sheet or do some further research into different kinds of cold, offline wallets, which are generally a safer option.

*Note - While many online guides will advise you to keep your crypto off the exchange you use (which we do recommend for very large amounts), Digital Surge offers all customers a free personal wallet that suits most trader’s security needs. We securely manage this wallet and store the vast majority of assets in cold offline storage. When you want to make a withdrawal, we make it happen using our hot wallet, giving you the best of both worlds – security & convenience.

Is investing in crypto fun?

|We know first-hand that it definitely can be. The crypto market is the wild west of trading and the technology behind it is truly fascinating. One of the coolest parts about investing in crypto is that by doing solid research on the technology and people behind the coin you can get an edge on the competition and potentially make a lot of money in a short amount of time. For those interested in new and innovative technologies, crypto investing can be very exciting seeing as a coin’s intrinsic value is based on how it will solve an existing or future problem in the world, and whether or not it will be adopted by people, businesses and governments.

Final thoughts

At the rate things are going, cryptocurrency and blockchain technology are going to play a pivotal role in the future. At Digital Surge, we believe crypto is the finance of the future and that everybody should try and familiarise themselves with this innovative new technology. Dipping your toes (or diving head-first) into crypto investing is a great way to do this while making some money on the side.

If you want to get some more in-depth investing advice, check out our article on how to perform a fundamental analysis. Need a quick crypto refresher course? Our education hub will have you up to date in no time. If you’re ready to start your crypto journey, click here and you’ll be trading in minutes.

Okay, that’s all for today. We hope you’ve found this guide useful and are a little more confident about entering the exciting world of crypto investing.

Don’t hesitate to contact us through our live chat if you have any questions or require some clarification about something. We’re more than happy to help.

See you around. Happy trading!

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