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(ARTICLE) The Godfather’s 24 Rules You Need To Know BEFORE You Buy Crypto

Added 2021-12-15 13:15:38 +0000 UTC

I am no crypto expert, however following these tips has helped me so far when it comes to investing into crypto currencies.

1. Know the asset you are investing in.

If you decide to buy Bitcoin, read about Satoshi Nakamoto’s white paper first, learn how blockchain technology works, what is a public and a private key, what is proof of work, etc.

If you are buying Ethereum, learn about smart contracts, how initial coin offerings and decentralised finance platforms work, etc.

There are a lot of free resources on the internet with easy-to-understand explanations.

2. Know the crypto regulations in your country.

What kind of cryptocurrencies are you allowed to buy and hold in your country?

What kind of documents do you need to provide when buying crypto?

How does the crypto tax regulation work?

When you want to sell, always contact your crypto broker/exchange in advance to ask for the cash-out procedure, contact your bank in advance to ask what you need to provide in case you have a large amount of money flow into your account.

Remember, always research these things in advance, even if you do not plan to sell immediately because it probably takes a very long time for those institutions to check and verify everything.

3. Do not invest more than you can afford to lose.

Do not use your emergency fund or your savings to invest because crypto prices are very volatile and you might not get your money back when you need it urgently.

Invest an amount that will not put you in a difficult situation if you lose it.

4. Never go all-in.

After you have decided the total amount, you want to invest, for your first-time investment only spend part of it to buy whichever cryptocurrency you have researched and think is promising.

Always have some cash at the side to buy the dip.

This also reduces your risk of losing all the money when your expectation does not work out.

5. Keep your cryptos in your hardware wallet

And keep your private keys and seed phrases safe. Never leave your crypto in exchanges, because they might get hacked or go bankrupt.

In those cases, you will lose everything and never get it back.

This is how I lost £14,000. My crypto wallet got hacked because I didn’t prioritise security.

6. Keep your private keys and seed phrased safe.

Never save your private keys and seed phrases in your laptop or your phone, because they might get hacked as well.

You can write them down on paper and put it in a place only you can find.

7. Do not day trade.

Unless you are a very experienced trader, it is not a good idea to day trade, because you are trading against countless bots and whales who can influence the market.

Chances are that you will lose a lot of money.

Whales = large financial institutions who can influence the market due to the amount of money they are putting in and taking out of the market.

8. Do not leverage trade.

Lots of platforms provide high leverage trading, which makes the gains look very attractive. But unless you have a lot of experience in leverage trading, chances are your position will get liquidated.

9. Accumulate knowledge

Accumulate knowledge about the crypto/blockchain space, such as new protocols, new developments, new projects, new regulations, and so on.

Blockchain and crypto are still at the early development stage.

That is also why there are a lot of opportunities in this space.

The market changes very fast, there are lots of news and developments every day.

That is what makes the whole space exciting and interesting.

Spend some time to read the news, you do not need to read every detail, but just the headlines and summaries are enough.

10. Focus on the long term

Long-term means anything from a year to 5 years, or even more.

Let’s look at Bitcoin which has the largest market cap at the moment. It just declined in the month.

Thousands of traders got their positions liquidated during a short period of time.

However, if you zoom out to look at the long-term price development, you will see that anyone who held Bitcoin for more than 4 years is in profit.

11. Do not panic sell

Don’t quickly sell when you see the price is experiencing a fast drop unless you are already in significant profit and thinking about exiting.

Normally whales use this strategy so that they can get cheap coins.

Do not fall for that trick.

Also, negative news affects the price of crypto, such as bankruptcy of exchange, a new disease, some country bans the use and mine of crypto.

In the past, prices tend to recover after some time.

12. Do not buy when the price just reaches an all-time high.

Because all the people who bought at low price earlier are aiming to sell their coins at this level to take profit.

Normally, after prices experience serious growth, either a huge downtrend will follow or a price correction will happen.

13. Do not buy when the price is in a downtrend.

Because the price is likely to get lower and lower. It is better to wait until the price has stabilised, then place a buy order.

14. Do not give up when the price reaches the bottom

it is normally when the accumulation starts.

15. Accumulate periodically

The price of most cryptos out there follows the price of Bitcoin.

Nobody knows whether the price of Bitcoin will increase or decrease tomorrow.

A lazy strategy would be spending a small proportion of your monthly salary to accumulate on a specific day every month.

16. Set a realistic profit target and exit strategy.

Remember that you are not there to maximize profit, but to increase your fiat buying power.

It is impossible to buy exactly at the bottom and sell at the very top, all we do is to buy low sell high, to make a profit during the uptrend development.

Fiat currency = the money we use in our day to to day lives (£€$)

17. Take initial investment out once you are in profit.

This way, you get your money back, even if you lose, you are only losing the profit you have made.

18. Know the risk-reward ratio.

A coin is more likely to go from £1 to £2 than from £1000 to £2000, even though the increase is 100%.

If your profit goals have been reached, there is no point to wait for some coin to go from 3k to 6k, while it could actually reach 6k, you are also taking a risk of losing your profit because the market is unpredictable.

Note : If you are new to crypto I would recommend you to start with the established coins and projects such as Bitcoin and Ethereum. Only after you gained some experience you should focus on other, smaller coins.

19. Diversify.

Do not put all your eggs in one basket.

In order to reduce risks, focus on large-cap cryptos which actually have real use cases.

It also does not hurt to diversify into other assets, such as index funds.

20. Do not follow random social media account recommendations and buy a token or coin you don’t know.

A lot of people post on social media saying

“X coin will moon by the end of this month”

“Y coin is the next unicorn”.

Do not follow any of these advices until you have done your own thorough research.

21. Do not follow everything said by big influencers.

Many of them want to get clicks and views and increase their followers.

As a result, they always tell what people want to hear.

For example, after a huge price drop of Bitcoin, some of them say “Bitcoin will moon tomorrow”, just because a lot of people whose portfolios are in the red want to hear it.