How to Invest in Crypto for Beginners

In this video, I give my 2 Dogecoins worth of advice when it comes to investing in crypto. Remember, I'm not a financial advisor, obviously.

intro

If you’ve been watching my channel for the past year and a half or so, you’ve probably noticed I don’t talk a lot about crypto… and the reason being is while I find it interesting, it can also feel like a complex rabbit hole to dive into with a lot of jargon to learn along the way.

In the world of crypto, it seems like you are either crazy about it and it’s all you talk about, or you aren’t a fan of it at all and avoid it like the plague. I’m somewhere in the middle, where I bought my first cryptocurrency on Coinbase in 2017 or so when Bitcoin had a crazy run going from about $1,000 earlier in the year to over $16,000 by December. Just about everyone seemed to be talking about crypto and Bitcoin around this time.

Experiencing a dash of FOMO, I bought $750 worth of Ethereum in December of 2017, when it was about $800.

And that was it. I just held on to it for several years, watching it drop down to around $100, before more recently breaking $4,000.

I have since been interested in trying to day trade with crypto, but here in the US, we can’t use much leverage to trade it, and the fees involved have dissuaded me from even attempting it.

I’ve done a little more dabbling with Ethereum in the NFT world, but honestly, not much more than that.

What’s the Point of This Video?

So you may be wondering why a crypto noob like me is even making a video about it. Well, sometimes when crypto is explained, I find it to be overly-complicated or overly biased – either a crypto perma bull or they want you to sign up with their affiliate link or whatever. Right now, I am most interested in crypto as an alternate form of investing. Something less correlated with the stock market and even a hedge against inflation.

So I’m not really going to get into the minutiae of the blockchain or decentralized finance as a whole. Instead, I want to cover the basics on some of the most popular cryptocurrencies, getting set up with a broker, and making your first investment. And I do not care one way or the other if you like or dislike crypto. I’ve got no affiliate links for crypto platforms. For me, I just have a very small percentage of my investments allocated to cryptocurrency since it’s relatively new and lacks regulation. I personally wouldn’t put any money I couldn’t afford to lose into crypto, but that’s just me.

Bitcoin

Bitcoin was the first decentralized payment system on a decentralized peer-to-peer network, meaning you don’t need a third party – like a bank – to facilitate the transaction. While originally invented to be used for daily transactions to circumvent traditional banking infrastructure, Bitcoin has now become a store of value and a way to hedge against inflation.

Institutional investors have since hopped aboard the bitcoin train, with the first Bitcoin exchange-traded fund being launched on the New York Stock Exchange,

And this might provide additional confidence for crypto bulls: According to a recent study, seven in ten institutional investors globally plan to diversify into digital assets in the near future, with current adoption rates among institutions in Asia at 71 percent, Europe at 56 percent, and the U.S. at 33 percent.

Bitcoin recently hit an all-time high of $68,521 and has since cooled off a bit, now just under $60,000, but in July of this year, it dropped to about half at $29,000. Obviously, there’s a fair amount of volatility at play here, so if you are looking to invest in Bitcoin, you should know what you may be in for.

Ethereum & More

Ethereum is the 2nd most popular crypto and really, it’s a decentralized protocol with smart contract functionality and allows for decentralized applications to run on it, which can all sound a bit confusing if you aren’t familiar with the terminology and is beyond the scope of this video and honestly my understanding of it. Ether is the native cryptocurrency that runs on Ethereum and similar to bitcoin, it’s deflationary and a store of value.

Ethereum also hit all-time highs recently, breaking above $4800, and has since sold off a little and is hovering in the $4300 range.

So Bitcoin and Ethereum are the most popular in the crypto space, but there are over 14,000 different altcoins like Solana, Cardano, Dogecoin, Shiba Inu, Litecoin, and all sorts of others.

Year of the Memecoin

It seems 2021 has been the year of the meme coin, first with Dogecoin rocketing up from around 5 cents to a high of 74 cents. Since Dogecoin’s success, there have been a lot more meme-sounding coins popping up, especially now the even meme-ier Shiba Inu token which is up 62 million percent over the last year. Yeah, that’s right, 62 million percent.

These meme-y returns on investment are definitely enough to intrigue someone like me, but they can come with even greater risk than your blue chip crypto names. For instance, there was a very short time when Safemoon was being pumped as the next meme coin. It wasn’t listed on common crypto platforms, so you had to go through a bit of a convoluted way to buy it.

Back in April, I put a small amount of money into it, just in case it took off. I was up 120% on it before it came crashing back down. I didn’t want to sell because when dabbling in meme coins, I’m looking for it to go to the moon, so I wanted to give it a chance to get there. I haven’t really paid attention to it since it dropped back down and hype seemed to die.

Right now, I’m holding about 48 million Safemoon tokens worth about 150 bucks. As far as I know, it could drop to zero, which is why I have very little money invested in it.

If you do want to find the next Shiba Inu or Dogecoin, treat it as a lottery ticket. Assume you’ll lose the entirety of whatever you invest, because the fact is, the vast majority of these types of coins will be worthless. So, as always, use money you don’t rely on to live.

Crypto Exchanges

In order to start buying crypto like Bitcoin and Etheruem, you first need to open an account with a crypto exchange. Your options will likely depend on where you live – here in the US, some exchanges won’t allow US users. I also have heard mixed reviews about every single crypto platform out there. Some have horrible customer service, some get hacked, some have high fees – there is just a plethora of factors to consider. I would recommend doing your own research before opening an account just to make sure you feel good about where you’ll be putting some of your money. Here in the US, Coinbase is probably the most popular.

On a platform like Coinbase, buying crypto is super simple. Once you link your bank account, you can just click the Buy / Sell button, select what asset you want to buy, and the amount, and then you can simply click to buy using money from your bank account. Here on Coinbase, if I wanted to buy 1 ETH, Coinbase will charge me about $63.

There are other platforms like Gemini, Binance, and Kraken, each with their different fee structures, security, and features.

You may have also noticed stock trading platforms like Robinhood and Webull have also started to incorporate crypto trading – but right now, these platforms treat crypto more like buying shares of a company.

When you buy crypto on these apps, you really aren’t holding the coins in a wallet where you can move them around freely from wallet to wallet… it’s just attached to your trading account and your only choice is to buy and sell. So while you can take part in some of the upsides (or downsides) as the price of the assets moves in either direction, it’s not really the same thing as buying it on an exchange like Coinbase or Binance.

Wallets

Really quick, I just want to touch on wallets. Crypto wallets are kind of like the digital version of a real life wallet. They store a collection of private keys, which essentially says you are the owner of the digital assets you bought. Exchanges like Coinbase will allow you keep your crypto in the exchange wallet. This comes with some added risks if the exchange loses funds, shuts down, or has security breaches, so most crypto investors will tell you to move those funds off of the exchange to a private wallet.

So a wallet is essentially just a way for you to store your crypto.

For example, I could buy 1 ETH on Coinbase and then send it to my wallet elsewhere. Your wallet can be completely offline - called a “cold wallet” – which is the safest route, or it could be kept in an online wallet called a “hot wallet”.

Cold wallets are essentially a flash drive. Once you send your crypto to this wallet, you can put it in a safe in your basement or whatever. A hot wallet is something like Metamask, which runs as a browser extension and would be considered less safe.

So the ideal situation would be to buy crypto from a well-established and legitimate exchange and then transfer that crypto to a cold wallet that you then keep in a secure place.

Rug Pulls & Scams

So one thing that hurts the reputation of cryptocurrencies is the scamcoins and rug pulls that go on with unscrupulous projects.

A rug pull is when the developers of a crypto project abandon it altogether and run off with the money. If they are able to get enough hype and investors swapping out their ETH or other established coin with value for their crap coins, they can then sell their worthless coins and run off with the valuable coins.

That’s the basic gist of a rug pull, but identifying them deserves a video of its own by someone smarter, so see this link if interested.

The other thing worth noting is that you’ll have a seed phrase associated with your wallet that is essentially your password that gives control over your wallet. The seed phrase itself is a series of words generated by your wallet upon creation, which you then need to write down on a piece of paper and store it somewhere safe. If you lose this seed phrase, you can lose access to your entire wallet, so never give that phrase out to anyone, ever.

I’ve seen a lot of scams where you’ll have a website that looks exactly like a legitimate platform like opensea – except it’s not. You’ll then be prompted to sign into your wallet and enter your seed phrase on this fake website, and next thing you know, all of your crypto will be gone.

Regardless, keep that seed phrase close to your chest and do not let anyone else have it.

Final Thoughts

My hope with this video was to introduce you to buying crypto as simply as possible without overcomplicating it. I personally think investing in crypto provides a pretty solid way to diversify my investments so it’s not all in the stock market or real estate or sitting in an obscenely low-interest savings account.