A beginner’s guide to surviving crypto

Dog-themed coins, TikTok investors, incredible gains, staggering losses. It’s been a wild couple of weeks in crypto land, and if you’re one of the many who have just joined us: welcome! Don’t let the red charts ruin your day and instead take a moment to understand what you should do next.

Crypto adoption is proceeding at a staggering rate. In a survey conducted last year, Gemini found that 63% of adults in the US were curious about crypto assets, while 13% were planning to buy crypto assets in the subsequent 12 months. It might be fair though to say that these figures need readjusting; the number of users trading cryptocurrencies on Robinhood rose by more than 550% in the first quarter of 2021 alone. More users also mean more money: daily trading volume in crypto assets has increased from around $200 billion in December 2020 to $400–$800 billion in May 2021.

If you’re among those who recently joined us: welcome! Regardless of your reason for purchasing a crypto asset, you’ve made a decision to join a financial and technical revolution that will reshape the world as we know it. If this kind of statement sounds too idealistic for you, don’t worry — there’s also a bit of money to be made along the way, if you play your cards right.

Playing your cards right is the secret to success in crypto, and don’t be fooled by the influencers telling you how easy it is. Despite what some critics might say, the crypto industry isn’t a magic casino where profits just appear out of nowhere, and it certainly isn’t a Ponzi scheme. Yes, it is possible to make very profitable investments, and many would argue that it’s easier to do here than if you were investing in traditional markets. But like any marketplace, there are snake oil salesmen lurking to take advantage of the less experienced.

This article serves as a brief introduction to some of the things you’ll notice around the crypto space and includes a few tips to make sure you stay above the water. It is far from complete and is definitely not financial advice, but feel free to use it as a base from which you can further develop your own knowledge.

Glossary of crypto terms

Talking the talk is a lot easier if you speak the language. Here is a short glossary of common terms you’ll hear in discussions of crypto assets

  • HODL: A misspelling of ‘hold’. HODLing means buying a crypto asset and not selling it, especially when the market takes a dip. HODLers believe that their assets will increase in price over time and prefer to avoid high-risk activities like active trading.
  • Market cap: Short for ‘market capitalization’. This refers to the value of a project or company. Amazon, for example, has a market cap of around $1.6 trillion — this is effectively what the company is worth. If Ethereum has a market cap of $460 billion, that means that the market thinks the project and ecosystem are worth that much. Market cap is calculated by multiplying the value of a token by the available supply. For example, if there are 19 million bitcoin in circulation at a price of $54,000 per bitcoin, the market cap of Bitcoin would be around $1.04 trillion.
  • DeFi: Decentralized Finance. Often contrasted with ‘traditional finance (TradFi)’ or ‘centralized finance (CeFi)’, DeFi refers to the array of financial products available on blockchains. Imagine taking a loan, but instead of going to a bank and signing paperwork, you could simply connect to a DeFi lender and get the funds you need instantly — this is the power of DeFi.
  • Bullish/bearish: these terms refer to market sentiment. Bulls believe that the market is going to go up, while bears believe the market is going down. You can be both bullish and bearish on different timescales: for example, a trader might be short-term bearish (the market is going to go down over the next week), but long-term bullish (after a dip, the market will keep going up).
  • Whale: Someone who holds a lot of a certain token, normally enough to influence price if they decide to sell.
  • FUD: Fear, Uncertainty, Doubt. This normally refers to news that creates panic in the market, which sometimes results in selling. FUD is sometimes used to dismiss news that is either untrue or overstated, although FUD can have a serious impact on the market, particularly on small projects.
  • DYOR: Do Your Own Research. The rallying cry of crypto, and generally good advice to take anywhere in this space. Never believe what someone is telling you on Telegram, Twitter, or even in person: always do your own research into a project and be sure of your decisions before you invest.
  • Pump and Dump: A tactic used by whales to make a quick buck. They’ll start by accumulating a low-value token at a low price, and at a certain point move to drive the price upwards. Unsuspecting traders will try to hop on for the ride, only to find that they’re buying the whale’s tokens at an inflated price. Once the whale has offloaded as much as they can, the price quickly plummets, leaving many with a load of tokens they paid way too much for.
  • Rug: Short for ‘rug pull’. A type of exit scam where a developer will ‘pull the rug out’ from underneath investors, often by stealing tokens from liquidity pools on exchanges. They’ll then dump whatever tokens they have on the market, making a bit of money and crashing the price in the process. This type of scam is unfortunately common, so always be aware of it when investing in new projects.

Advice from the trenches

  1. It’s wise to learn from your mistakes, but wiser to learn from the mistakes of others — so we asked around the office to see if any crypto veterans had advice for newer entrants. This is what they said (and, again, none of which is financial advice).
  2. Take a moment to understand the difference between trading and investing. Be sure about your expectations, and the risks they involve. For many, simply buying and HODLing is a better strategy than trying to time dips and peaks. There are many traders and algorithms out there that are faster, more experienced, and have access to more information than you, and it’s extremely difficult to beat them.
  3. Be honest to yourself about your losses, because you will lose at some point. Don’t try to sugar coat them or blame some other force. Reflect on what you did, and what you could do better next time.
  4. Look at market cap, not price, and be realistic. Why is this important? Many meme tokens will have an enormous supply, sometimes more than one quadrillion tokens. These tokens are very, very cheap to buy — you can pick some up for just $0.000000001 or even less. But where does the price go from here? Telegram groups are full of people dreaming about what will happen when the price reaches $0.01, but for a token with a supply of one quadrillion to reach a price of $0.01, the project would need to be worth $100 trillion. Ask yourself: is your meme token more valuable than the GDP of the entire planet combined?
  5. DYOR. Number four on this list doesn’t mean number four in importance — doing your own research is crucial if you’re to succeed, or even survive, in the market. Always make sure you check out the team, fundamentals, and any recent news before launching into a project, lest the dip you think you’re buying be the first step in a downwards cascade after a rug pull.
  6. Never put in more than you can afford to lose. Everyone has different risk tolerance, and the amount that we’re willing to lose is different for every individual. Every time you convert a bit of fiat currency into crypto, stop for a moment and imagine what would happen if that amount went to $0. If you couldn’t deal with the consequences, don’t make the transfer.
  7. Don’t panic when prices are down. The market is highly volatile and comes in waves, with highs and lows a natural part of the cycle. If you’ve done your research and are sure about your investment, a small dip shouldn’t scare you into selling at a loss. You’re still early in this market, so use this as an opportunity to familiarize yourself with the space, and focus on projects with real utility and strong teams that you believe in. Next time, buy the dips, and you’ll start from the other side of the volatility cycle.
  8. Take profits when prices are up. We’re in a bull cycle, but remember that it will end at some point. Knowing when exactly this will happen is the billion-dollar question, but understand that it could be at any moment. When it does happen, many assets will sharply decrease in value. It seems counterintuitive to sell when numbers are up and you want to believe that they’ll keep going up, but doing so ensures that you’re actually profiting at the end of the day. If you’re looking for long-term investments, imagine how an asset will perform when the charts run red and the euphoria is gone. Will the developers and community still be there, keeping its core value intact? Or will they abandon ship, committing it to the murky depths to join the remains of thousands of projects before it?
  9. Don’t expect to become a millionaire overnight. Those quitting their jobs and buying Lamborghinis in 2021 didn’t make their first trade this year — the majority began trading and accumulating assets well before prices started climbing late last year. Furthermore, survivorship bias is rampant in cryptocurrency. We hear about the winners much more often than the losers because those are the stories that sell. Just like in the previous point, understand that this cycle will end at some point, and make sure that you’re still solvent when it happens. Then, when the market begins its slow recovery, position yourself to take full advantage of the next bull run. As Warren Buffett famously said:

“The stock market is a device for transferring money from the impatient to the patient.”

If this all seems overwhelming, don’t worry. Everyone began somewhere, and with a little bit of guidance, anyone can get the knowledge needed to succeed in crypto. Just remember to keep an open mind and to always invest with your head.

And if you want to learn more about cryptocurrency investing and technology, make sure you check out Xpressify.

Xpressify a decentralized marketplace for ideas, education, and human capital. We give you the tools you need to to get up to speed as a beginner and to stay on top as an expert, and to even leverage your knowledge to get paid. From blockchain basics to coding and development, you’ll be able to find everything you need to stay ahead in the rapidly-developing crypto space, and have the proof of your learning journey maintained immutably on-chain.

Be sure to keep up with Xpressify on our social media channels as we announce exciting developments along our roadmap, and be sure to check out our Whitepaper for more information on what we’re going to achieve together.