If you deal in cryptocurrency then you will be very familiar with people coming up to you and asking a whole range of questions about it. While it is true that cryptocurrency trading and investing is more widespread and accepted now than it ever has been, there is still a huge amount of misinformation out there, not to mention a real lack of learning. Now, in fairness, some of the finer points surrounding crypto and digital finance can be a little tricky for rookies to get their heads around, which is why your friends and family will always come to you for answers to their questions.
And while there are those people at dinner parties or at the bar who we would rather not spend our precious free time on as we break down how they can get involved, it’s different when a good friend asks for your help. Where it can get a little tricky is in trying to think of how to advise someone who is starting from scratch. After all, if you’ve been doing this for a while you will have figured out your own strategy and goals. You will have taken some risks, seen some downturns and some big upswings, and the trends that are around now may be quite different to the ones that you would have seen when you were just starting out.
With that in mind, here is a handy primer to help you help someone get their heads around crypto trading and investment. Also, read Sortter’s guide to learn how to start day trading cryptocurrencies.
Remember To Start Simple
As we mentioned, one of the main reasons why we all get those basic crypto questions fired at us is because a lot of people find this a tricky subject to get their heads around. So, the first thing to remember is that you may need to be patient. The second is that you may need to dispel a lot of myths and misinformation if you want them to get up to speed quickly. And finally, remember to keep it simple at first. Break down the basics of what cryptocurrency is and how it works. Explain, patiently, that Bitcoin and crypto are not one and the same thing. Try to avoid using shorthand and jargon at first.
The best way to start is perhaps with the Bitcoin example. After all, if they have only heard of one form of cryptocurrency, it’s Bitcoin (thanks, Silicon Valley). Break down the idea of decentralized finance built on blockchain technology, and gradually start to build the ideas of what makes crypto so special and unique.
Work With Them To Figure Out What They Want From This
Now, if your friend is genuinely serious about getting into crypto, then there is a good chance that they already have some idea of what they want and how they are going to go about it. On the other hand, there are plenty of people out there who have noticed that everyone is talking about crypto, and they just want to get on the bandwagon. So, once you have explained the absolute basics, it’s time to work on a plan.
Does your friend just like the idea of using cryptocurrency as a way to avoid payment fees, for example? In that case, your lessons are going to be pretty short and a lot easier for you! However, if they want to trade on its value, then it’s going to take a little longer.
Help Them To Create A Solid Plan
If your friend is serious about putting an investment strategy together, then they are going to need to learn more about how this market works. One of the most helpful things that you can do for them is to help them avoid many of the classic mistakes. First, find out how much money they are planning to invest and what their absolute limit is. No one wants to be a part of their close friend losing more money than they can afford, so it is important to emphasize the volatility of the cryptocurrency market. Helpfully, there is pretty much a new story every other day about crypto value skyrocketing or plummeting, so that will help drive that point home. You should also remind them that patience and nerves of steel are going to stand them in good stead!
Help Them Find The Right Trading Platform
Once you have a clear idea of what your friend’s goals are, you should be able to help them find a trading platform that works for them. There are so many to choose from these days and they all come with their own quirks, pros and cons. As a seasoned crypto trader/investor, the platform that you use may not be suitable for someone just starting out. Remind them that some platforms are aimed at experts, and others offer beginners more security. Help them to look out for those pesky fees that could take a chunk of their pay-out.
Show Them That New Opportunities Are Everywhere
Now, depending on what your friend’s goals are this may be more or less relevant, but if they have told you that they want to dive in and start making the most of their crypto as soon as possible, then you should do your best to update them on the latest trends in decentralized finance. Yield farming is a great example of how investors with crypto to play with can start to build on their assets. You will know that there are platforms out there who are offering tokens as a way to entice new users. You will also know that there are people out there who are becoming lenders to people who need liquid currency in exchange for staking their crypto assets. Once you’ve explained the concept of yield farming, show them how there are tools and resources out there to allow them to deposit crypto assets and stake crypto assets, and to monitor and grow their digital asset yields. Unagii offers vaults and stake interfaces to take the pain out of the process.
Remind Them That Security Is Everything
One of the big myths that your friend may still believe is that cryptocurrency trading and investing is not as safe as other forms of investing, which we all know is incorrect. However, given the massive boom in cybercrime over the course of the pandemic, it definitely pays to be careful. While crypto trading is inherently transparent thanks to blockchain technology, crypto is a big target for theft because of its value.
When you are breaking down the essentials of crypto trading for your friend, you need to stress that they need to look after their own security measures. A lot of these are sensible and good practice for anyone trading online, such as using a two-factor authentication on any accounts associated with the trading account and a password generator. Others are more crypto specific. Explain that they will need to invest in a secure hot wallet for trading crypto, and that they should also think about buying an offline cold wallet if they want to keep their assets even more secure. You should reassure them that what they are doing should be completely safe so long as they take the proper precautions.