January 6, 2023 Whether it was on TV, social media, or perhaps even from that contrarian relative while sitting around a holiday dinner, chances are you’ve heard about the blockchain, cryptocurrency, and how they are reshaping the world as we currently know it.
While many compare it to the technological breakthroughs the world experienced with catalysts such as the steam engine, cars, airplanes, and, more recently, the internet, this relatively new sector is unique in its ways.
For most who venture into this space, it becomes a long journey of many roads filled with excitement, learning, and new experiences.
However, just like anything new in life, it can be more complicated than it needs to be without the proper guidance.
The primary reason cryptocurrencies exist today and why Bitcoin (the first cryptocurrency) was created in the first place was to provide a solution to the failed modern-day financial system.
Bitcoin was created in 2009 during one of the worst global financial crises ever experienced. The founder, who goes by the pseudonymous name Satoshi Nakamoto, created Bitcoin to remove the financial control that large corporations had taken and redistribute it back to the people.
To better understand the best ways to invest in Crypto, it’s essential to form a strong foundation of money, why it was created, how it works, and under what conditions it continues to work.
While the establishment of monetary systems is nowhere as old as human civilizations, one thing is; the barter system.
Well before the concept of currency was presented to the world, individuals bartered goods. A farmer whose main crop was potatoes also needed additional goods like livestock.
Conversely, the person selling livestock would likely need perishable items such as potatoes to help feed his family. The two would then meet, discuss their needs for the other goods, and then agree on a fair exchange for both parties.
This structure worked well until the quantities of the needed product increased to a point where the direct exchange of goods was no longer practical.
For instance, if a farmer from another village, and in some cases even further away, needed a larger livestock order, traveling long distances with a large herd wasn’t feasible.
This led to the creation of currency forged from gold, copper, and silver to create coins.
Logistically, this proved to be a solution. But with time, new problems arose. People began shaving down these coins (but would still trade them at full value) until they acquired enough material to mint new coins.
As a solution, empires began to create their coins, which had their current rulers face stamped on one side. Anyone found trying to decrease the value of the coin would face prosecution.
Once global trade became more popular, promissory notes, the first form of paper currency, were once again created to simplify the transportation of the newest currency and the exchange of goods.
However, it wasn’t long until this method was exploited, mainly by a destructive process of printing additional notes, which frequently led to hyperinflation, a process that still, to this day, plagues nations.
Banks also found ways to profit from this system, creating a new process called “fractional lending.” Essentially, banks noticed that customers would rarely, if ever, need access to all of the funds held in their accounts.
To profit from this, banks began loaning customers’ money to other customers, charging interest, and keeping it for themselves.
Although flawed, this practice did not become futile until the removal of the gold backing from the dollar.
Until 1933, one could trade their dollar into any bank in exchange for gold. But the bank runs of the 1920s-1930s (people fleeing to withdraw all their money from banks, causing it to collapse) spooked citizens into holding and hoarding gold, making the policy untenable.
The president at the time, FDR, declared a mandatory round-up of all gold and gold certificates worth over $100. The people quickly learned how little control they had over “their” money.
And then came the final blow, the collapse of the gold standard. In 1944, The Brenton Woods System was formed when 44 nations met and agreed to a specific set of rules and policies that shaped an international currency exchange rate.
This ensured a fair exchange of value globally, regardless of which nation’s currency you held. Yet, the USD became the underlying link to the other currencies of the world since the US held nearly 2/3 of the world’s gold supply.
But by 1971, due to hyperinflation, President Nixon temporarily suspended the ability to exchange the USD for gold. By 1973, the global currencies were so closely pegged to each other that the Brenton Woods System collapsed.
The term “fiat currency,” paper money backed by nothing, essentially carrying no value, was thus born.
Since then, we have been caught in a vicious cycle of inflation, economic recessions, additional money printing, and the misuse of funds by centralized authorities.
Although the use of cryptography dates back to 1900 BC, it wasn’t until the emergence of blockchain technology (2008) that it found modern-day value.
Cryptography is using (and deciphering) cryptic code, puzzles, or patterns to protect information while being delivered from one party to another.
The blockchain, in a sense, is like the internet made public. All transactions can be viewed by anyone with access to the internet, regardless of where they are located in the world, their social rank (or lack of), age, gender, and profession.
This allows for transparent, traceable transactions, which, unlike banks, are published on public ledgers.
A ledger is a record of transactions used for accounting and tracking purposes. Traditionally, when institutions such as banks use these, they are private and inaccessible to the public, making it easier for unethical practices, as we saw in 2008.
Even then, for those institutions that do not engage in such activities, there is a lack of complete transparency public consumers have in them, especially knowing that activities such as fractional lending are occurring behind the scenes.
Blockchain technology not only restores transparency and solves many other problems but also eliminates fractional lending and redistributes similar wealth-building opportunities to the people.
There are tens of thousands of cryptocurrency projects that all aim to solve various problems that legacy financial companies have failed to. Although it is a relatively new space, we’ve been using comparable technology for decades.
Peer-to-peer transactions (P2P), digital currencies, and encryption may sound like unfamiliar terms, but the world has utilized similar processes for decades.
Have you ever sent someone money electronically? Perhaps you bank online? What about those security pop-ups that ask you to verify a specific image?
Those are all forms of P2P transactions, the use of digital money, and encryption or 2-factor authentication.
As for the crypto projects and companies you have more than likely heard about, for example, Bitcoin, Ethereum, and Litecoin, the ideology behind investing in them versus traditional stocks is quite comparable.
The technology and the behavior of their markets are undoubtedly different. However, the concept of funding an investment account to purchase said assets and performing due diligence on the company, its leadership team, track record, values, and vision for the future are interchangeable.
One thing many people get wrong in general, not just newcomers and not just in the cryptocurrency space, is cultivating an intelligent investors mindset and adopting their habits.
Investing to generate wealth is not a one-time transaction but a lifestyle.
You may have heard the phrase, “Don’t work for money; let your money work for you.” While it would be irresponsible to believe that one could acquire money without working, or at the very least, fail to provide value in return for money, the main takeaway of the quote should be not to squander away your money and instead put it to work for you.
Those willing and able to temporarily delay immediate gratification for future pleasures often go on to achieve their financial goals and then some.
It comes down to those “small” decisions that make a significant difference. Choosing between an $8 cup of coffee versus making a cup at home or living for the weekends where money is most times spent senselessly, wealth building begins with these decisions.
Fear of missing out (FOMO) exists in both markets. It is one of the leading drivers of investment choices gone wrong, not necessarily due to choosing the wrong investment vehicles, but more so making a rash decision based on emotions rather than logic.
Many notable investors over the years have said one of the critical factors to becoming a successful investor is to remove emotions from the equation entirely.
Although the news “can” sometimes be a good source of information, the majority of the time, it can be detrimental to investors as it’s reactionary, and when it comes to investing, the goal is to be proactive.
Another thing to remember is how many people watch and react to the news in similar fashions – simply put, smart money usually goes against the crowd, not with it.
Creating an investment plan or roadmap to follow will help keep you rationally minded. This could be as simple as spending X amount of dollars consistently over an extended period.
You’ve formed a solid foundation of understanding money, the benefits blockchain technology provides, and the habits and mindset of successful investors; now it’s time for what you’ve been truly waiting for.
More research, learning, deep diving, and… research. Otherwise known as the due diligence period.
As you learned earlier, there are tens of thousands of cryptocurrency projects, and investing in even 10% of those is unviable.
There are some opportunities in this space that you will miss out on, and perhaps one of the worst things you can do is chase those opportunities.
Instead, finding projects that align with your values and attempting to solve problems you resonate with could be the best route for various reasons.
This route usually leads to a more seamless and enjoyable investing process because when you perform due diligence, it will be about ideals that fit your preferences.
It can be challenging for anyone to learn about something they are not entirely behind. However, engaging in a common interest can be enjoyable and lead to a near effortless undertaking.
Your due diligence can start by visiting the company or project’s website. Here, you will often find their mission statement, information on their leadership team, technology (and what problem it is solving), roadmap (a timeline for product development milestones their company uses to outline their goals), and other resources such as a whitepaper.
A whitepaper is very similar to a business plan; it reveals much about the project, the people, and the technology behind it.
They can be long, technical, and complex, yet a crucial stepping stone to verifying the legitimacy of the company’s future.
Looking up the background of the leadership team can be done with a simple online search. Comparing their profiles on a professional career platform against their casual ones may indicate their competence and ability to lead.
Of course, this is not always the case; however, if you see something you don’t like or approve of, ask yourself, “from what I see, would I trust this person to oversee my investment?”
If not, you may cut your due diligence short here and seek a new company to vet. If yes, then, for now, you can continue your evaluation process, knowing you haven’t wasted valuable time.
Other social media platforms that offer video streaming or replay services tend to be effective outlets as it’s common to find other individuals sharing their experiences with the same company.
A cryptocurrency exchange is a “marketplace” where you can buy, sell, and trade cryptocurrencies.
Hundreds of exchanges offer different features and benefits to their users. You will find that each exchange lists only a portion of the 10k+ active cryptocurrencies.
Also, not every country has access to hundreds of exchanges, and not every exchange has a license to operate globally. This is primarily due to the individual laws, regulations, and operating requirements each country has in place.
Additionally, some banks prohibit their customers from transacting with exchanges, meaning you may either have to find alternative funding sources or an exchange compliant with your financial institution.
The frequently asked question (FAQ) section of the exchange should list the countries they can and cannot do business with. While they may also offer a list of approved financial institutions, to be 100% certain, you could always contact and verify that information with your bank.
There are also various types of exchanges, for instance, a centralized exchange (CEX) and a decentralized exchange (DEX).
A CEX is operated by a brick-and-mortar institution that facilitates the transactions on their exchange, while a DEX is a stand-alone platform deployed and operated by a technology called smart contracts.
Coinbase, one of the largest cryptocurrency CEX in the world, has many thousands of employees, centralized office locations, and now has the voices of shareholders and board members to answer to.
Instead of relying on human oversight, a DEX is P2P and uses said smart contracts to execute transactions once certain pre-coded conditions have been met. Uniswap happens to be one of the largest DEXs.
While a CEX is usually easier to navigate, most times, it offers human support and, in some cases, insurance on cash funds up to a specific amount; they are also more susceptible to hacks, human error, and fraud.
Dex’s accurately represent what crypto was meant to be, decentralized and unreliant upon the need for human oversight, but they also pose a few barriers.
For one, they can be a bit technical, thus off-putting to newcomers. DEX won’t offer insurance on funds or usually provide customer service support.
After researching and determining which exchange best fit’s your needs, the next step is to fund your account and begin investing!
Even with social proof, it’s good to remember that companies sponsor and pay some reviewers to publish positive reviews on their platforms.
You will also run into groups that try to “pump” the price of certain coins by creating much hype around them. This gets more people to buy in, which continues to cause the price to increase, only for the original “pumpers” to sell their coins, exit the market, and never think twice about the project again.
See if Venture Capital (VC) funding supports the project that interests you. This may provide additional metrics for you to weigh your decision against. You could always research the VC firm and analyze its track record.
Are they connected with any prominent names? What about past projects – how did those perform?
There are handfuls of crypto-centric news sources that provide unbiased and insightful updates on nearly everything going on in the space.
Subscribing to their newsletters (most are free to join) is a great way to get accustomed to the space, the terminology used, and developing projects.
The cryptocurrency sector is vast, so if you ever begin to feel overwhelmed, remember it will take time, possibly even a few mistakes, and experience.
There are also advanced options available to help newcomers gain a strategic edge, such as automated trading. Such services allow even the greenest of users to leverage the experience, knowledge, and, most importantly, success of more advanced investors through copy trading and signal trading.
Copy and signal trading are both forms of trading where experienced traders share their trade setups for those less experienced to copy and essentially trade alongside them. They have proven simple yet effective methods for those new to the space to “learn while they earn.”
And if it makes you feel any better, not one person knows it all in this space – and yet, there are many successful investors with many more to be made.
Yet, platforms such as Cornix exist to help guide traders of all backgrounds and experiences (or lack thereof) to heightened knowledge and profits. Cornix is a great solution for beginners as the tools available have been streamlined, making it simple for those new to the space to operate, eliminating the need for technical background.
It’s easy to use and even walks users through establishing their own automated trading bot in 5 steps. Or, if users want to start by learning from others, they can easily copy the trades from veteran traders and begin earning while they learn the ways of such a unique space.
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