Crypto: how to buy, invest and use

Some people ask me about crypto. I want to share what I know and order my thoughts in a simple guide. So you can join the crypto "revolution" by yourself. Everyone reading this should make their own financial decisions. I'm not advising anyone, rather than giving an information.

If you want to invest, there is no limit on the amount. It can be $1 or $100 or anything you want. But there is a common recommendation in any kind of investment. You invest only those money that are free. Making more money out of money that you need at the moment never works. I'll explain why.

If you just want to buy crypto you can skip to the later section. It is possible to buy a stable coin pegged to dollar. So the price will stay the same while you hold. From that point it becomes pretty easy to invest, send to others or pay for goods.

Before investing

First of all any financial market is a completely chaotic thing from a perspective of an average participant. If someone tells you they can predict the price, be ware. No one knows the direction of a price at any moment, unless they manipulate the market somehow. So most likely those people are actually trying to manipulate you to make a decision in their favour.

In order to manipulate the market people use their power. Either monetary, say the money you possess is significantly bigger than an average market participant. Or any other means of manipulating the decision of an average participant, for eg. major news outlet. If you are one of those personas, you probably do not read this article. This also means if you are in a very small market, like a new coin, you have more power to change the price.

It is good to be aware that every market is prone to manipulation. By observing you can possibly utilise this in your favour. Instead of taking a position of a victim when things go mad. For eg. if you observe the market for a long time, you can notice negative news out of nowhere, which are not supposed to be here. Some people will simply panic and sell. But you calmly assess the situation and make your decision based on your timeframe. Sometimes you can just take a profit, a percentage of your overall position to secure yourself.

I personally prefer to invest in projects which have a fundamental value. I’m not a day trader. From my perspective good projects rise in time. And that is my main instrument. If you are interested in trading, you would focus more on the price action. When you are looking for the information on a price of a project, make sure the person you get it from considers both directions for the price at any given moment. It can be a matter of a personal belief that certain things will happen. But do not let someone else to fool you.

Now once you step into the market with the money you possess, price starts to move. If you are too attached to those money, you will have an emotional rollercoaster. Most likely you will make some emotional decisions, which is the worst. Cause that is exactly what bigger players will use to get your money. Once you sell at the bottom, those money you lost go into hands of people who do not act on emotions, but wait for you to panic. Absolutely everyone is prone to emotions. So you want to secure your common sense as much as possible. Hence you should use the money that you are not afraid of loosing. It is 100% that price will go down at some point and up. So you really want to make weighted decisions.

In my case if the project I invest in have a real value, I have less fear of it going to zero. There are many projects around which promise something big and do not deliver anything. So do your own research. If I feel good about the value of a project, I know that in the long term it can persevere. At the same time I know that the value can be well hidden, unrecognised and lost. So the price will always explore both directions. Also a project can fail for any other reasons outside of its goodness. Like the people who make it can change direction in life. So it is good to check the team of the project. It helps if the project is open and have strong community which can push it even if the initial team stops doing so. You do not want to rely on a couple of people in this case. I have an emphasis on the world that I would like to see in the future, what I believe in, this helps to cope with the short-term price movement.

So think of your own values. If you want to trade only, then there is a high chance you would not care about fundamentals but the movement of the price and its history. You may have a general belief in the space at the same time. You may have a personality which relies more on feelings, that affects your trading style. Some people are well at seeing the joke behind the project, which makes it viral. So they do some other impact on the space. Some people flush their money. Some people like to explore strategies. Everyone has a different approach to trading and investing.

What are those crypto coins?

So you are comfortable in investing a certain amount of money. There are many crypto coins. There are many networks to make transactions with those coins. Many coins have their own networks. Just like USD and EUR. The difference is that fiat money use the traditional banking system as a network and there is always someone in power who controls the network and decides how it operates. Like the government or a regulatory institution. We know that they are prone to sole decisions of people in power. While crypto coins are usually not controlled by anyone in particular but by some consensus between participants. This consensus is provided by the computer code, which has no emotions, thus it has no greed. Although the code should be protected from a hacker attack. So there are people who work on a complex cryptographic mechanisms to achieve this. Protected code should never deviate from the consensus. So every participant reaches the consensus which is merely a code which dictates how transactions should be executed on the network.

As you may suggest there are different consensus mechanisms possible. It is something that people explore for a long time. For example several generals need to decide whether they attack a fortress. Or a group of people decide for a voting mechanism to choose the president. Or a group of people decide to discourage or encourage someone to do something within the network. In a similar fashion crypto projects explore different consensus mechanisms. In that sense people explore what decisions they can make as a collective. You can guess that people really want to decide without a corrupted politician in control of their destiny. So crypto is more than just a pyramid scheme, as some media likes to portray it. It is a possible way for people to store wealth and exchange power. That is why a government which consists of people who like to control other people never accepts it in a pure form. They usually want to take control over it and use it as a tool in an already established system. As it gets bigger a fear of loosing the control over people takes place. It is the biggest fear of a narcissist.

Do not take it wrong. Government often wants to support you. It is also a consensus we participate in. A complex one. There are people in the government who actually try to make a good difference to your life. Since they are also citizens of the same country. And occasionally traditional system can sustain you. My friend from Italy in Belgrade had no money, he gave to a friend in need, and spent otherwise. But then out of nowhere he received a payment of 400 euro from the pension fund. When he had almost zero in the bank account. Now he has a perfect opportunity to invest. Cause he had literally no plans on something he totally not expected. He can either spent all of this, or use 10% to invest. So it is also about the personal wealth and loosening the dependence on someone else.

Some crypto coins have a function of a currency. They act as a means of exchange. People want to use them as normal money. Other coins represent a share in a project which makes a difference to the world, just like stocks. Since there are no regulations in the crypto space, it is a wild west and its pretty volatile, the price can change 40 percent in a single day easily. Some coins do hundreds of percents up and down. So there are coins which strive to be stable. Eg. as a currency. And other coins strive to gain price. There are scams and real projects. There are derivatives and all kinds of financial and investment instruments developing around crypto similar to traditional financial market. Many people see the potential value in this. So when it is devalued by someone powerful, like a financial celebrity or a media company, it can easily be a sign of a manipulation. Even governments want to step in. El Salvador is the country which recognised Bitcoin as a national currency. Some countries also consider its usage. Others want to make their own centralised cryptocurrency to take control of transactions and make other cryptos illegal. So there is no doubt that the underlying technology gaining value in the current world.

But it is not a thing completely out of this world. As a citizen of your country you depend on the fiat system and regulations around it. Some people are not able to buy crypto legally because their government prohibits certain exchanges of fiat. Some people have to pay taxes for their gains in crypto. Others don’t have such regulations in place. EU people can order a regular crypto debit card. Other people don’t have a bank. Some people have a bank operating strictly in their country due to sanctions and so on. Everyones situation may differ. And there are also ways to earn crypto for doing work. For eg. a freelance platform which supports crypto payments. But again this may fall under some regulations.

Exchanges

Most of the time people who want to get into crypto need to spend their traditional money in exchange for crypto coins. First of all you don't need to use any exchange. It is always better to give someone cash and ask them to send you some crypto directly. And vice versa.

But if no such people around you may want to use an Exchange. An entity which connects people together around the market. At first crypto exchanges were centralised. That is they provide you with an address for each coin. You have an interface to buy and sell crypto coins. You can ask exchange to deposit or withdraw fiat and crypto. Eg. to send some crypto from the wallet they created for you outside to a personal wallet, they would ask you to do a KYC verification in turn. Like send a passport or a photo of some document and a face. Verify your email, phone and stuff like this. They usually do this to protect themselves and users from some malicious activity. There are many people who prefer to steal your money instead of getting it from somewhere else. So they will try all kinds of schemes. In unregulated space it becomes clear that only you can protect yourself.

It is always a good idea to store your crypto in the own wallet, and use exchanges on purpose. Exchange can be hacked. It can turn into scam. There were cases in history. No one will protect you in such a scenario. Rarely the government would step in and judge the company to return your money. But it is not a rule. In general big reputable centralised exchanges had proven to be safe. So people use them a lot. But if something happens there is usually no-one to protect you. Arguably the same is common to traditional banking system. In a big depression scenario, the bank can use your money and claim bankruptcy. So it would be pretty legal for you to loose your money. There were cases of this in history. And as you know depression is not a common event, but it happens consistently across the history. Just takes years and years until something collapses.

Recently decentralised exchanges emerged. They ask you to connect your own wallet instead, so they can do some limited transactions on your behalf upon your approval. This technology is less common, so most people are still concentrated on centralised exchanges. Thus centralised exchanges have more volume. The more volume is better for you as a trader. In the absence of volume, that is in the absence of other people using the same exchange, it can be hard to exchange your crypto fast. But for the long term investment you do not care about immediate price movements, so it is fine to use any exchange. As long as it is safe and protected from bad actors. You can put an order somewhere to send crypto from your wallet, and receive other crypto in return. And it will eventually be executed if enough people are interested in your offer. When you use a low volume exchange you should be extra careful about the price. Another thing is decentralised exchange usually can not offer you fiat money exchange. It requires them to process payments and do some verifications, which makes them more centralised. So I don’t know if you can buy crypto with fiat on any decentralised exchange at the moment. May be there are some. So decentralised exchanges are more secure but less used. It may change eventually.

How to buy crypto?

I tried different exchanges and I use centralised Binance to buy crypto. Although it is not supported in some countries like US, and in some states of Canada. But there you can use Coinbase, Robinhood and similar. You can buy crypto with the normal card using the app. They will take some commission. Pretty easy way to start. Install the app, do some verification on demand, and you’ll be able to buy crypto.

As I don’t care that much about verifications, I passed most of them so I can buy crypto from other people directly using Binance app on the phone. They have this P2P feature. So there are normal people who were verified by the app as actual people. Those people offer to exchange crypto and fiat directly with them. So I can see the list of people and their offers. I can choose the offer and start a transaction with them. I can send my fiat money directly from my bank account to the account published in the offer. Then I will approve in the app that I sent those money. They will get a notification and release crypto coins to me. Usually it takes a couple of minutes.

If they sent no coins I can create a dispute in the system, which will be resolved by the app staff. So the crypto of the guy I transact with is locked by the app during the transaction, and it will be released to me if I provide a proof of the bank transaction like an actual receipt. And visa versa. But usually there are less disputes since people have their reputation in the system much like eBay sellers. They do money on exchange rates. And that’s how I buy crypto.

What coin to buy in particular is a separate topic. I would just recommend to get some stable coin like USDC. So it will be pegged to dollar, while you hold it. And when you decide to invest in some project, you can exchange USDC to another coin.

What to do with crypto?

I can sell crypto in a similar fashion for fiat P2P. So I send crypto to someone, and they send me money to the bank account. But I started to look more into the usage of the crypto directly since my country was isolated, and I’m somewhere outside of the battle. Few years ago I bought a hardware wallet with crypto. Today I see a growing number of online shops which accept crypto payments. So I made a list of different stores and services.

If you are from EU, you can order some debit cards directly tied to crypto. And use it in the supermarket or online. I think UK, US and Canada have options too. Those card issuers take commission, but it might be a better choice in certain scenarios. For eg. if you travel around different countries. May be at some point you will be able to get a card tied to a stable coin pegged to gold or something else. Sounds better than fiat? I don’t know. Never used it.

Most importantly I believe in the growth of the crypto space. It is an investment vehicle that everyone can use today.