1) Learn and understand the basic concepts of economics
You have to learn and understand the basic concepts of economics, for example, the law of supply and demand, the functioning of money, inflation, and central banks. The supply of a good is the quantity of a product offered for sale by sellers for a given price.
Demand is the quantity of a product demanded by buyers for a given price. Apart from special cases, the more the price increases, the more the quantity supplied increases and the more demand decreases. The price of a good is considered to be an equilibrium quantity depending in particular on supply and demand.
This empirical principle is called the law of supply and demand. This law is often generalized by a market law, a name used to designate the law that governs a market, with or without State intervention.
2) Learn and understand blockchain technology
It is important to learn and understand blockchain technology and the main projects behind the biggest players in the market. For example, Bitcoin is like digital gold (a store of value against inflation or uncertainty)
3) Learn and understand the basis of mining and market cycles
For example: halvings, accumulation, bull run, and bear markets.
In English, halving means dividing by two. And that’s exactly what’s happening. Miners receive a set number of bitcoin as a reward for their work on the blockchain and mining a new block. This amount was set from the conception of Bitcoin by Satoshi Nakamoto. In the early days of Bitcoin, a miner received 50 Bitcoins for each new block. But this situation has since changed: during the first halving, in 2012, the reward granted to miners increased to 25 bitcoins. In 2016, during the second halving, it increased to 12.5.
Since the last halving of 2020, miners “only” receive 6.25 bitcoins for each new block. During the next halving, which must take place in 2024, the remuneration will increase to 3,125 bitcoins, and so on.
4) Warning: The cryptocurrency market is not regulated
This means that the police of the French stock market (AMF) are not present. This implies that the market is extremely manipulated by whales (institutional investors who have a lot of media and financial resources). Their job is to make money and to have winners, you need losers.
When Musk has fun tweeting, prices fall or rise by 15%. Banks hunt to stop losses and cause crashes to buy lower from individuals who panic and sell. Since this market has become manipulated, it is increasingly difficult to make expectations and think logically. This is why, in my opinion, a strategy is preferred.
Have an investment and risk management strategy!
5) Adopt the right psychology
You have to adopt good investor psychology. This involves learning to control your feelings. Be aware that the “whales” try to manipulate you every day, detach yourself from news and short-term variations. Be greedy in times of fear and be wary in times of euphoria. “The Fear Of Missing Out” (FOMO) is the fear of missing out, be careful not to buy when prices rise and sell when prices fall purely out of emotion.
6) Have good money management
No “all in” is the basic rule in investing! You need to think about your stress resistance. Most financial advisors recommend 5 to 20% of your total capital. If you can collect a -90% on your accounts for a few months during a possible bear market and fluctuations of thirty percent on certain days, then you are ready.
7) Find your investment strategy
To do this you need to think about your investment horizon over time. Are you more short-term, inter-cycle, or long-term? If you are short term you should use leverage, stop loss, and take profit while being aware of the risks.
If you are inter-cycle, you invest in interesting technical points and you monitor entering and exiting on the same market cycle.
Finally, if you are long-term over years, you should opt for an accumulation of tokens over several cycles and rarely sell while carrying out Dollar Cost Averaging (DCA): buy and accumulate a fixed amount each month, regardless of the price.
8) Think about future potential
Think about the valuation over time of projects and crypto as a whole. The more you research, the more you understand that these projects have a future (depending on the projects of course) and therefore you are more confident in your investments. Imagine investing in the internet in the 2000s.
9) Watch out for the LEVERS!
It is a way to amplify the rise or fall of an asset with the same capital. For example, if you invest $100 on Ethereum with x4 leverage, your capital will vary with the same intensity as if you had invested $400 (a variation of 1% will result in a movement of $4 instead of $1).
Imagine that the placement increases by 25%. Great! You have won 100% (because 25% x4=100%). But if the investment suddenly loses 25%, you also lose 100% so you are liquidated, you have lost everything! This kind of sudden crash often appears in the world of cryptocurrencies and it is impossible to predict it.
10) Be careful with trading!
Trading is different from investing because it is based on purchases and sales over very short periods while investing takes place over periods of several months or years.
According to the French stock market police (AMF), individuals practicing trading lose out in 95% of cases on the stock market (which is regulated). Imagine then in an unregulated market which is that of cryptocurrencies.