Crypto Starter Pack: How to Start Investing in Crypto
The global cryptocurrency market cap increased from ~$200 billion at the start of 2020 to $2.2 trillion — an increase of 11x in just under two years.
Even at this level, the crypto market makes up less than 2% of the global stock market — which is currently valued at over $100 trillion.
- Professional investors: Institutional investment managers (i.e. pension and hedge funds) are planning to increase their exposure to crypto — with nearly 1/3 planning to add crypto to their portfolios.
- Retail investors: Advisors are getting onboard with crypto — suggesting investors allocate 1-5% of their portfolio into cryptocurrencies.
- Global growth: Global crypto adoption grew by 2,300% since 2019 — with retail investors’ interest skyrocketing.
Crypto is growing incredibly fast — and we’re still in the early innings of growth.
Over the next couple of months, we’ll be going deeper into crypto investing with the Crypto Starter Pack — a series of articles helping The Average Joe dive into crypto…
1. Things to know before investing in crypto
Cryptocurrencies have various similarities and differences with the stock market with similarities including:
- They can be bought and sold on exchanges.
- They have a market capitalization — representing the total value of all tokens in circulation.
- There are higher risk and lower risk tokens — and high volume and low volume tokens (similar to large cap and small cap stocks).
Here’s how they differ:
- Stocks: When you buy a stock, you own a portion of that company.
- Crypto: When you buy a crypto, in many cases, you don’t own a part of that blockchain.
- Stocks: Public companies are legally required to disclose certain information (i.e. financials, shareholder updates, etc).
- Crypto: In most, there are no reporting requirements for crypto projects — making it harder to access the quality of the cryptocurrency and increasing the chances of fraud.
- Stocks: Markets are open on weekdays from 9:30AM-4:00PM ET.
- Crypto: Never closed — open 365/24/7
Must-know #1: Crypto is incredibly volatile.
Cryptocurrencies have seen big corrections of 33%, 39%, 41%, 30%, 84% and 62% since 2017 (data via Ben Carlson) since 2017 — with many single-day crashes of over 20%.
Starting in 2017 — crypto experienced a 361-day bear market where many crypto prices lost over 80% of their value.
Despite these crashes, crypto thrived after every downturn — pushing crypto prices to all-time highs.
Must-know #2: Crypto has only been around for a short period of time.
Unlike the stock market which has been around for over 200 years — lasting through several recessions, wars and technological shifts.
On the contrary, crypto has only been around for just over a decade. The technology behind cryptocurrencies is still in its early days — and it’s still uncertain which cryptocurrencies will be around in 10+ years and how the technological landscape will play out.
This gives crypto lots of growth potential — and investors with many investment opportunities — which also comes with many risks.
Must-know #3: Fraud and hacks are still prevalent in the crypto space
The stock market is highly regulated with organizations like the Securities Exchange Commission (i.e. the police of the stock market) set up to protect investors from fraud.
Given the nature of the crypto market and how early it is, the entire industry is still lightly regulated and prone to fraud. These frauds can take the form of:
- Hackers gaining access to your crypto wallet and stealing your crypto.
- Cryptocurrency scams (i.e. rug pulls) where developers abandon projects and takes off with investors’ money.
But there are many ways to protect your crypto and avoid scams — where we’ll go into more in later articles.
Must-know #4: Don’t invest what you can’t afford to lose
When it comes to any investment, there is always the risk of losing 100% of your money. That risk increases when investing in the crypto market.
In recent months — a cryptocurrency called Squid Game ($SQUID) was created after the popular Netflix show “Squid Game” took off.
The token caught the attention of media outlets — which highlighted its massive rise from a penny to $2,800. Those who bought the token couldn’t sell (a built-in function of the crypto). It turned out the cryptocurrency was a scam — and the project creators made off with nearly $2M. A quick look into the project details revealed several red flags.
It’s lessons like these that remind us: only invest in what you can afford to lose and always do your research.
2. Ways to invest in crypto — For The Average Joe
Similar to the stock market, there are several ways to get exposure to crypto: buying crypto directly, crypto-related stocks and even ETF-like investments (i.e. Coin Sets).
One of the most common ways to invest in crypto is to buy cryptos directly using a crypto exchange (i.e. Coinbase, Binance or Gemini).
The benefits of buying from a cryptocurrency exchange include:
- Ease of use — Centralized crypto exchanges has made it incredibly simple for users to connect their bank or credit card to load money on their accounts.
- Lower chances of running into crypto scams — only select cryptocurrencies are available on these exchanges, which makes it difficult to find fraudulent tokens.
Recent innovations in the crypto market have made it easier to invest. When purchasing crypto on a crypto exchange — investors still have to go through the troubles of figuring out which crypto to invest in. Coin Sets remove this hassle.
Coin Sets are ETF-like investments — which allow investors to invest in a diversified basket of cryptocurrencies based on themes.
The benefit: Instead of researching individual crypto projects, investors can invest in different investment themes (i.e. largest cryptocurrencies, cryptocurrencies related to the metaverse, etc.).
When buying stocks, investors can simply buy an ETF like the SPDR S&P 500 ETF Trust (NYSE:SPY) — which gives investors exposure to 500 of the largest US companies.
Coin Sets are similar products — except for crypto. Mudrex — the creator of Coin Sets — offers various products that give investors exposure to different crypto themes:
- Crypto Blue Chip Coin Set — a portfolio of the top 5 crypto assets by market cap.
- Metaverse Coin Set — a portfolio of the tokens by the projects building the shared virtual reality.
- New Crypto Stars Coin Set — a portfolio of the 10 most promising tokens weighted by market cap.
There are dozens of themes for investors to choose from. See all coin sets here. Given the low minimum investment amounts — ($120 to $300 USDT) — investors can start small, and allocate more as they get more comfortable.
In partnership with Mudrex, we launched our own The Average Joe Coin Set — a crypto portfolio for those looking to start their crypto journey. Here’s what you’ll find in the portfolio:
- Blue-chip cryptocurrencies that have survived several corrections and the infamous 2017 crypto crash — i.e. Bitcoin ($BTC), Ethereum ($BTC).
- Cryptocurrencies with utility — i.e. practical use in decentralized finance or non-fungible tokens. These include Ethereum ($ETH), Solana ($SOL), Cardano ($ADA), Polkadot ($DOT) and Chainlink ($LINK).
- No sh*tcoins — crypto is a long-term game and we hold those with the highest chances of sticking around in 5+ years. Sorry, Elon-lovers — this means no Dogecoin.