Cryptocurrency
A New Frontier or Just a Fad
You Decide.
What is Cryptocurrency
Cryptocurrency (also known as crypto) is a digital or virtual currency that can be used as a medium of exchange (like money).
Cryptocurrencies use special codes (cryptography) to secure transactions and control the creation of new units. Most cryptocurrencies run on a decentralized system/network using blockchain technology, a digital ledger enforced by a network of computers that makes it nearly impossible to counterfeit.
Because no one person or entity can control them, it is much harder to be regulated or manipulated by a central authority, such as a government or a central bank.
Cryptocurrencies are designed to be secure, transparent, and unchangeable, along with offering benefits such as privacy, and quick transactions.
Cryptocurrencies are very new and considered part of the tech sector, so they are very volatile.
It’s never a good idea to throw all your assets into one sector, especially a very volatile one. If you feel cryptos have a place in your portfolio, then be sure you understand your risk tolerance and have a well-diversified portfolio to sustain you if this technology goes down in value.
Some crypto investors only invest 1% of their portfolios into cryptocurrencies, while others may move this up to 5% or 10%.
Know your risk tolerance, and NEVER invest more than you can tolerate to lose.
This is key to maintaining financial stability and peace of mind, especially in unpredictable markets.
If you are considering purchasing cryptocurrencies
Understand your risk. Cryptocurrencies are very new and very volatile. How much are you willing to lose without it affecting your financial stability? What are the specific risks associated with cryptocurrencies, and how do they compare to other investments in your portfolio?
Understand how cryptocurrencies will play a part in your portfolio. How will they align with your overall investment strategy and financial goals? What percentage of your portfolio will you allocate to cryptocurrencies to balance risk and potential returns?
Understand the utility of the cryptocurrency. What real-world problems does this cryptocurrency aim to solve, and how effectively does it address these issues? How is this cryptocurrency being adopted and used in various industries or sectors?
Understand the exchange you will use to purchase your cryptocurrencies. What security measures does this exchange have in place to protect my funds and personal information? What are the fees associated with trading, depositing, and withdrawing on this exchange?
Understand where you will hold your cryptocurrencies. Will you leave them on the exchange (in a hot wallet), or will you pull them off and take custody of them yourself (in a cold wallet - on hardware not connected to the internet)?
Not Your Keys, Not Your Coins
Invest time into learning how to properly custody your own cryptocurrencies.
“Not your keys, not your coins” or “You don’t hold it, you don’t own it” are widely used sayings in the crypto community. This means if you do not hold your own key phrases for your cryptocurrencies, then you do not fully own your cryptocurrencies. Cryptocurrencies are often bought from exchanges, and many leave their cryptos on the exchanges never taking them off to hold/custody for themselves. There are many reasons for this, but this can leave you vulnerable if the exchange were to get hacked or into financial trouble for any reason.
There are a lot of information and videos out there that can help you decide the best way to hold/custody your cryptocurrencies, and how to pull them off the exchange onto your own device.
Read below about Cold and Hot Wallets to learn more about how to custody your cryptocurrencies.
Definitions to Understand
Central Bank Digital Currency (CBDC)
CBDCs are NOT cryptocurrencies. They are a digital form of a country’s fiat currency issued by its central bank. Although they are both digital currencies, cryptocurrencies are deregulated, untraceable, and outside of government control, whereas, CBDCs are issued, monitored, and regulated by federal governments. CBDCs claim to help promote financial inclusion, simplify monetary policy implementation, and help explore the potential impacts on economies, however, CBDCs are really a more controllable dollar giving the government the ability to enact policies through your money. This means the governments will have the ability to tell you when and where you can spend your money, and they can turn it off at any time.
Do you want the government to be your bank?
Cold Wallet & Hot Wallet
A cold wallet and a hot wallet are two types of storage systems used to store cryptocurrencies and other digital assets. However, they don’t actually store the asset itself. The digital asset stays stored on the blockchain. Cold wallet or hot wallet refers to how your keys to access the asset will be stored.
A cold wallet (also known as cold storage) refers to a storage system (hardware) that stores your private keys offline. Cold wallets are considered to be more secure than hot wallets because they are not susceptible to hacking or other online threats. However, because they are not connected to the internet, cold wallets may be less convenient for day-to-day transactions.
A hot wallet, on the other hand, refers to a storage system that is connected to the internet, such as a software wallet or an exchange wallet. (The exchange is the platform used to buy, sell, or trade the assets.) Hot wallets are more convenient to use for day-to-day transactions, but they are also considered to be more vulnerable to hacking and other online threats. Some hot wallets are custodial, meaning they do not provide you with your own private keys.
The choice between a cold wallet and a hot wallet depends on an individual's specific needs and priorities. For long-term storage of large amounts of cryptocurrency, a cold wallet is generally considered to be the most secure option, while for more frequent transactions, a hot wallet may be more convenient.
Below are a few videos regarding hardware wallets:
16 Things YOU DON’T KNOW About Hardware Wallets from Adam Venture Crypto
ULTIMATE Comparison: Trezor vs. Ledger Crypto Hardware Wallets from Crypto Tips
Cryptocurrency
Cryptocurrency (also known as crypto) is a digital or virtual currency that can be used as a medium of exchange (like money). Cryptocurrencies use special codes (cryptography) to secure transactions and control the creation of new units. Most cryptocurrencies run on a decentralized system/network using blockchain technology, a digital ledger enforced by a network of computers that makes it nearly impossible to counterfeit.
Because no one person or entity can control them, it is much harder to be regulated or manipulated by a central authority, such as a government or a central bank. Cryptocurrencies are designed to be secure, transparent, and unchangeable, along with offering benefits such as privacy, and quick transactions.
Dollar Cost Average (DCA)
This is an investment strategy intended to minimize the impact of volatility. DCA is investing a fixed amount into a particular stock or fund (or even in the market as a whole) at regular intervals regardless of the market’s ups and downs. The goal of DCA is to reduce the risk of investing a large sum of money in a single transaction and to avoid trying to time the market, which can be difficult and often leads to poor investment decisions. This can help lower the amount paid for investments and minimize risk. DCA can take the emotion out of investing making it easier to deal with uncertain markets by making purchases automatic. This is also called unit cost averaging, incremental averaging, or cost average effect. In the UK, it is referred to as pound cost averaging.
Gas Fees
These are transaction fees users pay to process transactions or execute smart contracts on a blockchain network. These fees compensate validators or miners who handle the transactions and add them to the blockchain. The amount of gas fees can fluctuate based on network demand and supply, often increasing during periods of high congestion.
Moon Bags
This is a slang term used by some in the crypto community, but it can be used for other asset categories as well. For this strategy, when an asset you invest in goes up a certain amount, you will then pull out your initial investment and maybe even some of your profits, while still holding some money in the investment. This gives you a “bag” of investments that you own free and clear, like house money. You can then HODL without the risk of losing your initial investment. This strategy can be used to help investors manage their risk by ensuring that they have recouped their initial investment, and they can still potentially benefit from further gains.
HODL
This is a slang term used in the cryptocurrency community that is said to have become popular after a post on the BitcoinTalk forum in 2013 in which the poster misspelled "hold" as "hodl" when they wrote, "I AM HODLING." The post gained traction and became a meme, with the term "hodl" being used as a rallying cry for cryptocurrency investors to hold onto their investments through market ups and downs. It is also sometimes referred to as meaning “hold on for dear life” as a strategy of holding onto a particular asset, regardless of short-term market fluctuations or price declines, with the expectation that the value will increase over the long term. Individuals that HODL are also known as Hodler.
Seed Phrase/Key Phrase/Recovery Phrase
This is a set of words your crypto wallet generates (like a master password) that lets you access your crypto, no matter what happens to the wallet itself. The words in a seed phrase are randomly generated when setting up your wallet. Therefore, this phrase should be written down and kept in a safe place so you can use it when needed. Most importantly, never give out your seed phrase. Phishing scams may try to ask you for your seed phrase, but the only person who should ever have your seed phrase is you. If someone uncovers your seed phrase, they can control all the crypto in your wallet.
Strategies to Consider
Only allocate a small percentage of your investment portfolio to cryptocurrencies. The future of the crypto industry is yet to be seen as it is still very new. This makes it very volatile, and hacks, bad news, and other world events can affect crypto prices in a major way. You do not want this to cause significant financial harm to your future.
Dollar-cost average your way in. This is when you buy a little every few days, weeks, or months. No one knows exactly what the market will do, and this can prevent you from going all in on an asset only for it to lose quite a bit in value shortly after.
Take your moon bags. When an asset (especially a volatile one) goes up, start to take off some profits so you don’t lose all your initial investment.
Strategy From Economic Ninja that could be a great moon bag strategy:
When an investment doubles, pull your money (the money you originally put in) back out.
Then when the investment doubles again, pull 1/2 of those gains out.
Then you can sit back and enjoy the ride. (Investing in cryptocurrencies is a rollercoaster ride. There will be highs and lows, but ensuring you will not lose your initial investment can make the ride much more enjoyable.)
If the investment dips again and drops by 1/2, then you can double your position. (Only if you still believe in the fundamentals of the asset.)
Deciding when to HODL or sell cryptocurrencies is a personal choice, and investors should do their research and due diligence before making these decisions. Some investors will choose the HODL strategy across the board while others may only buy and HODL some assets they believe in long-term, and they will buy and sell others.
Fun Crypto Songs
(Some for the Lovers and the Haters)
Chris Record - OLD SILK ROAD - Bitcoin Rap Remix #HODLGANG
Chris Record - BACK TO MY CRYPTO - Bitcoin Rap Remix #HODLGANG
Chris Record - HODL GANG - Bitcoin Rap Remix #hodlgang
Dogecoin D.R.E.A.M. Official Music Video (Prod. Wonderlust)
JAX - Dear Elon (Take me to the Moon) Full Song (Dogecoin Song)
Or click below for my playlist of all these songs
Let us know your favorite fun crypto songs.