1-Sentence-Summary: Cryptocurrency Investing For Dummies is a hands-on guide on how to get started with investing in digital coins by placing a trade using a broker what they represent, and how to pick the right ones from the batch of cryptocurrencies available on the market.
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Favorite quote from the author:
Cryptocurrencies — you must’ve heard about them! As you might’ve noticed, people are starting to become more and more interested in digital coins. And so the thought of them being just a fading trend becomes less realistic. Platforms are starting to be created with crypto at their core functionality, and so their utility becomes more palpable.
Needless to say, cryptocurrencies are here to stay, so there’s no better time to learn more about this topic than now. Why? Because people are becoming more and more interested in decentralized payment systems instead of banks, in user-centric platforms instead of the admin-based ones, or in paying for things online faster and with less commissions.
As such, crypto allows for all of these to be possible and many more! This breakthrough innovation technology makes our economies run safer and faster. Therefore, investing in this new class of assets is worth at least a try. So where to start? Fortunately, Cryptocurrency Investing For Dummies by Kiana Danial steps in to help you answer that question and all the others that will follow.
Here are my three favorite lessons from this book:
- Always assess the risk and be ready with an emergency fund on hand.
- Understand the principles behind blockchain technology and smart contracts to spot valuable investments.
- Diversification can prove to be very rewarding in times of financial turbulence.
While there are many more aspects to consider and explore when it comes to cryptocurrencies, these lessons will help you get an idea about them. Let’s start with the first one!
Lesson 1: Investing in crypto is very risky, so prepare emotionally and financially for that
Volatility is probably one of the first things to consider when investing in cryptocurrencies. Their price fluctuates drastically even during days, nevertheless months or years. As such, you have to filter the emotional factor of investing out and focus on the long term. Not only is it good for your health, but your wallet too. In time, powerful and reputable projects will show their worth.
A coin’s value is determined by the market sentiment. If people sell more than they buy, the price will drop, and vice versa. However, the market is not always rational, so it will often overlook the bigger picture and react strongly to news, events, and more recently, tweets. However, the intelligent market participant knows that if their coin’s prospect hasn’t changed, there’s no need to panic sell.
This leads us to the next idea ― always put your money into valuable assets, such as coins that have a good management team behind them, a utility factor that proves how they bring a solution to a relevant problem and have a finite supply. Essentially, you don’t want to risk your hard-earned savings to invest in a non-valuable cryptocurrency, as you’ll potentially see significant drops in its price in the blink of an eye.
Therefore, it’s wise to invest only the amount of money that you can afford to lose. Ideally, you should build an emergency fund that could cover between three and six months of expenses, and invest the rest. Assess the value of a coin properly and don’t react to the market sentiment. As long as your token hasn’t changed its fundamental value, all should be fine in the long haul.
Lesson 2: The blockchain technology and smart contracts solve real problems
Blockchain – what is it? This disruptive technology set the foundation for all cryptocurrencies and most importantly, for Bitcoin. Bitcoin was the first cryptocurrency and it is still the most popular digital coin on the market. So how did it gain such popularity? Well, people started to acknowledge the cleverness behind Bitcoin as they discovered the blockchain.
This is a decentralized digital system that allows users to trade and store information securely and efficiently. Information is placed in a block and stamped with a date and time. Once the block is filled with data, it is added to the previous block, thus forming the blockchain. This leaves no room for centralized entities to manipulate data and errors to occur, as it is based on a user-centric approach.
You can already see how the blockchain is solving a real-life problem and makes it almost impossible for people to commit fraud or errors. Then, smart contracts come into play. Just like regular contracts, they are an agreement between two parties to commit to a certain action. Smart contracts help users meet their contract’s terms and conditions by automating its execution.
Lesson 3: Use diversification to your advantage
Diversification is the best tool for minimizing losses that you have on your hand. Why is that? Well, as you buy more classes of assets, and even more assets of the same class, the risk of them falling at the same time lowers. Therefore, if one of your investments goes wrong, there’s always another going better to average the loss.
By diversification, the author means buying non-cryptocurrencies as well. The crypto market is highly volatile, so the risk of having your investment’s price drop double digits percents exists. Therefore, to avoid huge financial losses and not miss out on other markets, you should consider stocks or ETFs, bonds, or even real estate. You cannot go wrong with all of them, right?
Even if you are a high-risk high-reward investor, you should always aim to secure your assets first. As such, it’s important to create a safe online wallet as well. Wallets exist to help you store your cryptocurrencies in a safe manner and retrieve them when you need them. Aim for reputable platforms with millions of users and read the reviews before you put your money in a specific wallet app.
The Cryptocurrency Investing For Dummies Review
If you’re eager to learn more about what’s going on in the new digital economy and discover how cryptocurrencies work, Cryptocurrency Investing for Dummies is the book for you. The author talks about the beginnings of digital coins, how to assess their value, how to place your first trade, and what to expect from investing in these tokens. In other words, this book compresses all the necessary information one needs to start their investing journey in the crypto world.
Who would I recommend the Cryptocurrency Investing For Dummies summary to?
The 22-year-old who is passionate about investing in new technologies, the 45-year-old fund manager who wants to expand their traditional portfolio to include cryptocurrencies or the 30-year-old full-time trader who wants to diversify their investments.
Last Updated on October 5, 2022