The first step in making money with cryptocoins is to have your fiat finances in order. You aren’t planning to invest money you can’t afford to lose, right? Even though it’s fairly easy at the moment to make some profits in cryptos, it’s even easier to lose it. So don’t take unnecessary risks, make sure you’ll still have a home, a bit of electricity and can afford food if you lose your cryptos. In other words, prepare to fail.
Our goal is to apply long-term do-it-yourself economical money strategies to earn a simple, down-to-earth, solid income from cryptos so let’s review some of the practical tricks we should set up with fiat before getting into cryptos. First, you probably want some form of income or revenue. I can’t help you with that; I haven’t held a full-time job in decades. But earning some money in a job you don’t mind doing for several hours a day is a good thing. Put that money in a low-cost bank or credit union account, if possible one that earns a bit of interest. Consolidate all your accounts and debts. Pay off your credit cards and set up automatic payment as soon as possible. Keep the minimum of credit cards possible (keep one with the best refund or rebates possible). Pay off your other debts like your car and house (depending on the terms) – get rid of insane expenses like extra cars if possible. When you’re making extra dollars every week or month instead of throwing them away in fees, set up automatic investments in low-fees robo-advisors or long-term self-managed accounts. Depending on on your age and income, start with your RRSP or TSAF. Diversify and invest in a range of different investment types according to your risk comfort levels. Save and wait for a few years. Reap the benefits.
Investing in cryptos in some ways is even easier than with fiat, and in some ways much more costly and confusing. The biggest difference in a way is the time factor; cryptos are so volatile you can make or lose in one day what it would otherwise take a year to do in fiat. Because of that time compression, any trading in crypto is akin to day-trading and you have to watch it like a hawk. You really have to hope for big wins but prepare to cut losses fast. In other words you want to set up a investment or trading system where you your gain/loss potential is imbalanced towards gains. You can only do that by expecting and preparing for losses, setting a line for how much loss you’ll accept and having the emotional detachment to actually cross out that bad investment off your balance before it starts rotting and eating into all your budget.
If you don’t know how investing works in the “real world” of fiat money, you will probably get very confused at first with Cryptocoins. On the other hand, the first thing to know is that you don’t have to “play” with whole Bitcoins at a time, Bitcoin (and most other cryptocurrencies) can be broken down to 8 decimals, so you can LEARN how to trade both cryptos and fiat and invest very cheaply. Some things you can only learn by getting it wrong once or twice; you don’t want to do that by losing 120,000$ like I did. I could have learned the same lesson with 120$ lost only. And those were Ethereums, it’s probably worth much more than that today.
This is what I mean when I say the first step in investing in cryptocoins is planning to fail. You don’t aim to lose your money, but you can’t go in with your eyes closed either. Spend some time summing up and accounting your money, decide how much you can afford to put in cryptos, and convince yourself there’s a very good chance you will lose all of it to change, bad investments, scams or bugs in the software. Once you’re happy with how much you’re willing to put into this experiment and how risks and news affect you and your decisions, you can move ahead to the next step, buying cheap bitcoins and “getting into the game.”. We’ll get to that in the next post.