Retail is soon going to be waking up to the biggest wealth transfer in history, and the majority of these new traders and investors are going to get stung. Here is some advice if you are one of the newbies to crypto.
How to make a start
First of all, when entering the world of crypto, you will soon realise that this is a financial playground that is not fully controlled by banks, governments, or Wall Street. At least not yet.
Unlike the stock market, you don’t need a broker to make trades for you. You can just set up a wallet, transfer some funds to it (your bank allowing) and then set up an account at a cryptocurrency exchange. There are many of these exchanges, spread across the internet, and based in various jurisdictions that might require some basic KYC (Know Your Customer) details, before you can start trading.
Many countries still negative on crypto
You do need to bear in mind though that a lot of the exchanges can be problematic depending which country you are based in. For example, would-be traders based in the UK are not allowed to access many crypto exchanges, due to geolocation restraints imposed by the FCA, the country’s regulatory watchdog. It may take a change of government before UK citizens are able to avoid this kind of censorship in the future.
When, and if, you are able to sign up to a crypto exchange, and you are then able to see the huge amount of cryptocurrencies on offer, you are perhaps going to be confused as to just what to buy.
Beware crypto influencers on social media
Warning! If you follow any of the many ‘crypto influencers’ on YouTube and other social networking platforms, you are likely to be presented with all sorts of glittery cryptocurrencies that could make you into a millionaire overnight – or so the influencer would have you believe.
What these people don’t say is that very often they are actually paid by the crypto projects that they are extolling the virtues of. The more people they can get to buy this or that cryptocurrency, the more exit liquidity there will be as the influencers themselves, together with the project founders, sell their tokens to the naive retail investors who have been convinced into buying them.
Do your research
Now, before going any further, it does need to be said that there are valid cryptocurrencies out there that do have some decent fundamentals. For example, Bitcoin has an extremely compelling use case as a store of value, while Ethereum, Solana, and Sui, are other layer-1 blockchains that could be the financial platforms of the future. There are all sorts of cryptocurrencies that seek to disrupt many other niches in the business world, but if you are looking to invest in them, you will need to do a LOT of investigation into their potential.
Memecoin mania
Many new retail traders are bound to be attracted by the bright lights of the memecoins. Yet again though, this particular niche in the world of cryptocurrencies carries the most extreme warning level possible. To put this into perspective, memecoins have absolutely nothing backing them at all, except faith that they will go up in value as more people jump onto the latest pump to the upside.
There is no doubt that you will come across this or that story of traders who made millions by backing one memecoin or another. Yes, this has happened, but how many traders strike it rich here? Not many.
Armed with a good knowledge of trading, and probably gained over a period of a few years, there is the possibility that some success could be achieved here. Without this, it is a case of pinning the tail on the donkey.
The safe bet is Bitcoin
When all is said and done, the good, safe bet, is probably Bitcoin. Yes, there can be wild swings still to the up or downside, and there are bear markets at the end of the normal 4 year cycle, whereby Bitcoin can lose more than half of its value.
However, if investing in Bitcoin, your time horizon needs to be at least a few years. It is 100% certain that the purchasing power of your fiat currency will go down over time, and in these worrisome times, this is likely to be at an accelerated rate.
Over a long enough time frame, Bitcoin has been proven to increase in value against just about every other asset. Buying and holding it is probably a far less stressful pastime than trading altcoins or memecoins. Think long and hard about this.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
