You’ve done your homework – or so you think. And now you’re ready to buy your first crypto coin. Your reasons aren’t really important. Maybe you’re looking for an investment community. Maybe you’re a (slightly) gray cypherpunk hoping to keep the dream of the 1990s alive. Maybe you just don’t want the next bull run to leave you behind and look to buy Bitcoin while it is still on a downtrend.

Slow down. There’s a lot to consider before you jump into the heady crypto world. This is a comprehensive list of all the things you should consider before you click that “buy” button on your favorite exchange.

Know Thy Coin

This means a lot more than visiting the coin’s website or taking a look at whatever folks are saying in online forums. Really, take the time to study your coin – even the ones that cost fractions of a cent – before you buy. That means reading the white paper, and that also means reading a competitor’s white paper. You may find it a bit painful at first to sort through all the acronyms, but it’s really worthwhile.

You’re going to want to know:

  • Who is leading the development team.
  • How that team creates new coins.
  • What the possible end use-cases are.

And it really helps to understand the technology behind how it all works. Why is this vital? Can’t you just skirt by checking the current price, volume, and supply on a site like CoinMarketCap?

That should definitely be a part of your research, but in the Wild West of cryptocurrencies, it pays to examine every angle. Frankly, there are 1,600 coins – at least – floating around out there. Not all of them are legitimate projects, and not all the legitimate projects make great business sense. Just as you wouldn’t invest in stock without knowing a company inside and out, you shouldn’t jump into crypto investing without a solid understanding of how your coin aims to return your investment.

Understand the Market

This means a lot more than figuring out whether the market as a whole is in a bull or bear cycle. Take the time to read up on something called technical analysis. This is the art of reading pricing charts to get an idea of where the market is going next. It’s dense, dry stuff at first. You’re going to see a lot of talk about candles and sticks, and you’re going to hear some funny names for different patterns, like the inverse hammer and hanging man. Don’t give up.

A solid background in technical analysis will pay dividends before you buy your first coin. Why is that? Assuming you’ve discovered a really blockbuster coin with a rock-solid use case and a stellar leadership team, sometimes it’s just not a great time to buy.

Even true crypto believers shy away from jumping in at all-time highs. Most read the charts and look for great local opportunities. Maybe your coin is in a temporary downcycle, or an impending announcement has the price rising a lot faster than it would otherwise. Timing your buy is an important part of investing in cryptocurrencies due to the wild volatility that the market usually displays. Percentage swings in the double-digits – every day – are not unusual. Don’t ignore the technical indicators and end up holding an unusually heavy bag.

Know Thyself

It goes without saying that you shouldn’t invest more than you’re prepared to lose. That’s become the golden rule of crypto investing due to the aforementioned volatility. If your coin of choice goes completely belly-up in a week, will you still be able to pay your bills? Will the loss unduly burden you?

And – for heaven’s sake – you didn’t buy the coin on credit, did you? Don’t laugh – in the heady December 2017 price run-up, many investors did that very thing. The thinking was that rising crypto prices would outpace credit card interest payments. It seemed like a fine and dandy scheme for printing money, courtesy of Visa and MasterCard. When the market almost collapsed in January, many of these investors found themselves in a morass of debt with no real options. Worse – concurrent changes to the U.S. tax code imposed stiff capital gains penalties for cashing out early.

Credit card companies, for their part, conspired with banking partners to eliminate the possibility of buying crypto on credit. This was bad for investors, bad for credit card companies, bad for banks, and bad for the market as a whole. A little caution in the crypto world goes a long way.

A corollary to knowing thyself is knowing the applicable laws in your country:

  • What are the tax laws concerning crypto, like where you plan to buy?
  • Is it even legal to buy crypto?
  • Failing that, do you have a good, legal way to sell your crypto should the price rise to an acceptable point?

Before You Click

Investing in crypto is fun and profitable. Moreover, you are tracing the bleeding edge of computer technology as blockchain really comes into its own. However, it’s essential that you don’t begin the process blind. Really dig in and study the projects you’re voting to support with your fiat currency.

Remember to search for the bad news as well as the good. Quite a few coins – and exchanges – have flown several red flags before their eventual downfall, taking clueless investors down with them.

Equally important is understanding the gory but necessary details of technical analysis charts and never investing beyond your means. Sorting through the mountains of information available on technical analysis is challenging, but you’ll catch on quick and avoid foolish buys. And it’s always important to know exactly how much you can afford.

Above all, do not succumb to the dreaded FOMO – fear of missing out. That includes chasing seeming no-fail bull runs on small coins. In fact, creating those kinds of bull runs is a favorite tactic of market manipulators engaging in so-called pump-and-dump schemes.

Know your coin, know your market, and know yourself, and you’ll find it hard to go wrong in crypto.