Dear ABBI: How Do I Start Investing in Crypto?
There’s a lot of hype right now around crypto, and I’m just really overwhelmed about where to start. I feel like I need to understand the basics to feel confident enough to invest, but a lot of times I feel stupid asking…so I’m hoping this is the right place and you can answer some of my questions:
- What are cryptocurrencies, and how do they actually work?
- What are the different types of crypto available for investing, not just Bitcoin?
- What determines their value?
- Is my investment secured or all at risk?
- What’s the best strategy to start investing?
I think there is a lot of mystery, misunderstanding and volatility surrounding cryptocurrencies. It’s not for everyone but could also be fun and lucrative!
Crypto Curious Cat
Dear Crypto Curious Cat,
I’m so excited you are taking the initiative to ask these questions. First off, there’s no such thing as a “stupid” question. The crypto space is full of jargon and memes that are not intuitive at all (DeFi, dApps, staking, WAGMI, HODL… what?!) Even though the learning curve is steep, as long as you are curious and committed to learning, you’ll become a Bad Bitch crypto investor in no time.
Before I get into how you should think about investing, let’s talk about what cryptocurrency is and why it’s important for women to get involved. In its simplest form, cryptocurrency is a form of digital payment that uses blockchain technology to process transactions directly between two parties without the need for a central monetary authority. Why is this important? Because institutions have historically manipulated our economy with little regard for the people—for example, the Fed has printed almost 80 percent of all U.S. dollars in existence in the last two years, leading to massive inflation for all of us. Our current centralized system is one where the only people getting rich are the men at the top.
In contrast, cryptocurrency is decentralized, meaning it removes the middlemen (aka the institutions) and allows for anyone to gain access and participate without needing to go through a bank; however, while equal access is the ideal state, the reality is the majority of investors getting rich though crypto are still men. In a 2021 U.S. crypto report, 74 percent of crypto owners are men and the “average” crypto owner is a 38-year-old white male who makes over $100,000 a year. Déjà vu, anyone? The last thing we want is another boys’ club.
If this truly is the beginning of an entirely new digital economy, we need more women investing in crypto because we cannot be sitting on the sidelines as we have in the past. We need to get in the crypto game now, while it’s still early, so we can make sure women have a seat at the table in the future economy. Fortunately, more and more women are getting the message. While only 26 percent of women are current crypto owners, 53 percent of women are “crypto-curious” and that number is only growing.
Since you’re crypto-curious, let’s get down to business!
Should You Invest in Bitcoin? How Do You Choose Which Cryptos to Invest in? How Risky Is It?
There is no cut-and-dry answer. The reality is that crypto is still in its infancy and very volatile. Crypto prices can move up and down drastically due to subjective factors like positive or negative news, government interference and even a tweet by Elon Musk. It doesn’t mean Bitcoin or crypto are bad investments, it just means it’s risky (like all investing), and you should never invest more than you can afford to lose.
With that in mind, here is how you can get started as a Bad Bitch crypto investor!*
How to Get Into Crypto
The most stable bet for beginner investors is USD Coin (USDC). USDC is called a stablecoin because it’s pegged to the U.S. dollar: $1 = one USDC. While you won’t get significant ROI, you can earn interest just by holding USDC on certain apps. USDC is good practice to get familiar with buying crypto on exchanges with a significantly decreased risk of losing your investment, as compared to other cryptos.
Next, let’s talk about Bitcoin (BTC), the granddaddy of cryptocurrency, the first cryptocurrency created and the one for which blockchain was invented. No matter how volatile the market, Bitcoin has always prevailed even while many other hyped-up cryptos have fallen away. For that reason, Bitcoin, out of all the cryptos, remains a good first investment for new crypto investors.
If you’re interested in diversifying your crypto portfolio, which is always a smart strategy, here are a few of the most popular alternative coins (“altcoins”) of 2021:
- Ethereum (ETH) is the altcoin that came after Bitcoin, and it had a field day in 2021 due to the NFT boom—the majority of NFTs are built on Ethereum. Because of increased demand for NFTs, Ethereum was catapulted into the mainstream conversation as a popular investment for new and seasoned crypto investors.
- Solana (SOL), an Ethereum competitor, also emerged into the spotlight this past year. Solana made improvements to Ethereum’s technology, and as a result, captured some of the NFT market share.
- Avalanche (AVAX) is another Ethereum competitor that rose up focused on better transaction speeds, lower costs and eco-friendliness.
- Polkadot (DOT) gained popularity because of its ability to unite multiple blockchain systems into one network.
And there are many, many more. As of January 2022, there are over 16,500 cryptocurrencies! So before investing in any crypto, I highly encourage you to do your research. As you are investigating different cryptos, here are some key questions to ask yourself:
- “Do I believe this crypto has long-term potential to grow?”
- “Are there a lot of apps being built on top of the crypto ecosystem?”
- “Is there a robust community and audience around it?”
- “Are there active discussions about this token on Twitter or Discord?”
- “Do the founders do what they say they’re going to do?”
You can figure out these answers by going to their respective websites and Twitter pages, participating in their Discord groups and speaking to other investors about why they are investing in specific cryptos.
Once you’ve done your research and you’re ready to get started, you can invest in Bitcoin and many popular altcoins via cryptocurrency exchanges like Coinbase, Voyager, Gemini and OKCoin (the only major exchange with a female CEO).
Note that we are entering a period of decreasing prices right now. Crypto enthusiasts interpret it as an opportunity to buy crypto at a discounted price. The slang for this is “buying the dip.” Should you buy the dip? That’s up to you. Remember, always make sure you feel good about how much and what you’re investing in.
Overall, the best strategy for new investors is dollar cost averaging (DCA), whereby you automatically invest a set amount of money on a regular basis—say $100 per week or per month. So instead of trying to time the market and getting unnecessarily stressed about the fluctuations, you auto-invest it and forget it.
I hope this helps! I’m excited to hear what you discover as you continue learning. And if you’re interested in diving in deeper, sign up for my upcoming Bad Bitch Bitcoin Bootcamp where you can learn about crypto with a group of Bad Bitch investors! It is always more fun to invest with girlfriends.
ABBI aka Lisa Carmen Wang
*This does not constitute financial advice.