How To Invest In Cryptocurrency For Beginners In 2022 | THE TOP COINS TO BUY

What's up, Graham? It's guys here. So we gotta have a serious talk about cryptocurrency because recently it came to my attention that 55% of Bitcoin holders are brand new, having just made their first investment this year.

Even though there's a lot of opportunity to make a significant amount of money, the reality is there's a lot of bad information out there. When you combine that with very little oversight, it's easy to get carried away and lose money. Now, don't get the wrong idea because I don't want to take away from the stories where people turn 17 into 5.9 million or where yoloing everything into Dogecoin becomes a multi-million dollar windfall.

But throughout speaking with and interviewing dozens of people who have made a significant amount of money with cryptocurrency, I have noticed a recurring theme that almost all of them implement. If you follow a very simple blueprint, I have a feeling you will come out ahead, profitable. So, with that said, here are the top six ways that you could effectively build wealth with cryptocurrency, regardless of where you're starting, how much you already know, or how much you plan to invest.

And just to make it more exciting, we should put rocket emojis on the screen because nothing says profit more than a rocket emoji. Although really quick before we start, if you appreciate information like this, feel free to do me a quick favor and hit the like button. It helps out my channel tremendously, and it gives me a good indication if these are the types of videos you want to see more of. So thank you guys so much for doing that, and with that said, let's begin.

First, when it comes to cryptocurrency, with risk comes reward. I'll be the first to say that if you're enamored by stories of huge Wall Street-sized gains that offer life-changing amounts of money seemingly overnight, it could happen. But you'll need to be completely fine with the strong likelihood that most likely, you're going to lose a significant amount of money in your quest to find the next big thing.

Hope it pumps and then pray you sell in time to buy that Lamborghini Aventador SVJ. In fact, a recent analysis shows us that had you invested an equal amount in the top 200 coins, only five of them had a return above 10,000%. This means if you're blindly throwing your money into different projects, you only have a 2.5% chance of picking the right one, with the losers severely lowering your returns.

In fact, statistically, the ones that drop tend to fall by a lot, and in these cases, you could expect to see a decline of at least 90% to 100% of your entire investment. By chasing the one that does well, it's really important to mention this because for every story you hear about someone making millions of dollars, there are likely hundreds of other people who have lost, sold too soon or too late, or don't see anywhere near the types of returns like this.

So if you're chasing the biggest returns possible, I'm not going to discourage you from trying to make money, but just understand that the odds are against you. Most likely, you're not going to be the next half pizza millionaire. However, the good news is that there are other strategies out there that have a very good chance at making good money, and even though it might not be 10,000%, it could still add up to a lot.

That brings us to number two. Generally, the most stable and predictable returns have come predominantly from Bitcoin and Ethereum. I'm sure most of us have seen articles that sensationalize how much you would have today if you invested $100 in Bitcoin in 2009, which if you're curious is $48 million, or how Ethereum is up 35,000% since its inception.

Even though there's a lot of optimism around the future of the top two, it's also very easy to think they've already gone up so much already, I would make more money investing in something smaller. But you know what? You might be wrong. A blog called Market Sentiment extracted the daily trading data across 317 different exchanges in almost 2,000 different coins to find the commonalities of the best returning cryptocurrencies based on historic price, market capital, and trading volume dating all the way back to December of 2013.

What he found was really surprising. On the surface, it was found that when you compared the first listing price of an exchange with the latest trading price available, only 40% of them gained value. That was it. So right off the bat, if you blindly buy into everything that comes up, expect 60% of them to be losers or break even at the very best.

However, even though 40% of cryptocurrencies actually gain any value, as I'm sure you're aware, the ones that do well do really, really well, and the average gain across those winners is a staggering 3,048%. Now, even though that sounds like a ton—and it is—what's even more interesting is how much of that is driven by a few of the outliers who skyrocket past the moon and go to Mars.

Because if you remove the top 1% of the cryptocurrencies from that gain, your return drops all the way down to 641%, and if you remove the top 5%, your return drops down to what you would have made investing in the S&P 500. This means of the 40% that actually gain any value, only 2% of that actually pushes your return up higher than that of the stock market long term.

Then the other 98% of the time, you would have been better off just being a boring buy-and-hold S&P 500 stock market investor instead. Although what begins to put this into perspective is that throughout the overall cryptocurrency market and testing different strategies to maximize returns for almost the last decade, the vast majority of profits year over year are mainly led by Bitcoin and Ethereum.

The website costavg.com shows us that just a $50 a week investment in Bitcoin would have yielded a total of $2,180 since 2016, and Ethereum would have brought you $6,683. But that's not to say that those types of returns will continue indefinitely. However, so far year over year, they tend to be the safest and highest risk-adjusted returns in cryptocurrency, so it's probably best just to stick with that.

The third study after study shows the importance of diamond hands, and no, I'm not talking about my coffee flavor now for sale at bankrollcoffee.com, but instead the practice of buy and hold. Now unfortunately, this should not be used as an excuse to hold on to a losing cryptocurrency longer than you should, with the expectation that if you just hold on long enough, it'll have to recover because it might not. I'm looking at you, Nano.

But long-term, a buy and hold approach of the top cryptocurrencies has done well. Even though in the short term you could lose a significant amount of money, as an example, this reminds me of the Reddit user Joe4M, who put this exact strategy to the test and documents it on his website top10cryptoindexfun.com. Legend has it he's still documenting his portfolio to this day.

Alright, no, he does post a monthly update on there, but if you follow along, it's actually really interesting. Four years ago, he started by investing $100 each into the top 10 cryptocurrencies on January 1st every year, and by the end of the first year with this experiment, his portfolio lost 85% of its value. Back then, even the almighty Bitcoin fell 70%, and four of the top 10 cryptocurrencies were no longer in the top 10 list by the end of the year.

But you know what they say? When cryptocurrency goes down, blame it on Congress and then buy more. So he kept his original investment and repeated the process again by buying $100 each into the top 10 coins. Well, 12 months later, during a time where the S&P 500 went up 29%, his cryptocurrency portfolio increased a whopping 1.74%, leading him to underperform a savings account.

Although he kept repeating that process year over year, and now that patience has finally paid off. If we now combine all four years together, holding everything equally the entire time, we could see that all of them are now up a significant amount. Even the previous 2018 portfolio went from an 85% loss to a 72% gain. He even mentions this, having averaged a 514% return compared to the S&P 500's return of 56% during that same time frame.

All of that is to say that despite the consistent volatility and severe crashes along the way, historically, both Bitcoin and Ethereum have always recovered, and the market moves forward. If you believe in a project and you have the means to stay patient, generally a buy and hold approach is going to be the most profitable, even though in the short term you might lose.

Fourth, speaking of that, with cryptocurrency, only invest what you're willing to lose. I know this is the most cliché investing advice ever, but it's true. Given the uncertainty, volatility, regulation, and manipulation of a large portion of the market, you should not be investing an amount where if you lost it all, you would be ruined.

The truth is to think logically and make rational, level-headed decisions. You could not let your emotions get the best of you or trade as though you're trying to cure the national debt. The only way to remain completely neutral is to limit your investment to the point where if it drops, it would suck, but you would be perfectly fine, and you wouldn't have heart palpitations.

From my experience, after speaking with hundreds of people, if you're ever at a point where you're losing sleep, unable to concentrate, or panic at the sight of a 10% drop, that probably means you've invested too much, and it's a good idea to lower your investment to the point where you could think objectively. Honestly, that amount is going to be different for everybody.

Hey, you know what? If you're comfortable going 100% all in, 3x leverage on Shiba Inu, more power to you. But for the vast majority of people, it's probably a better idea to start out your investments small and grow it over time than invest more than what you're comfortable with and lose your mind if anything happens.

Now, on the plus side to all of this, studies actually show that if you want to diversify your portfolio, it doesn't take much to boost your returns. For instance, Fidelity recently considered Bitcoin to be an uncorrelated asset, meaning its price and performance are not directly tied to how well other investments do, like stocks and real estate.

For that reason, it was found that just a 5% allocation to Bitcoin would have boosted the cumulative return of a traditional portfolio by 65% since 2014, even despite the sell-offs along the way. So don't think that you have to invest everything into cryptocurrency to get the benefit; just invest enough where if it goes to zero, you'll still be okay, but still enough where if it goes up, you'll be able to make some profit.

Fifth, don't blindly invest because everyone believes it'll eventually hit a dollar. That's just a recipe for disaster. The reality is, when you're reading or watching advice online, you have no idea if or how that person is compensated or if they have a bias that might affect their advice.

For example, I'll be completely honest that 5% to 6% of my entire portfolio is invested in Bitcoin and Ethereum. That's something that took me years of research to feel comfortable with, and it's up to you to decide if I could speak about that investment objectively or if I'm only talking about it because I want my investments to go up.

Now, obviously, I think it's pretty evident that nothing I say or do will impact the price of Bitcoin and Ethereum, which is where I'm investing my money. But that's not the case for smaller market cap coins, which could easily be influenced up or down depending on what somebody says.

It becomes so easy to fall into an echo chamber of investments where you watch one person saying that rocket emoji coin is going to the moon, and then you get recommended another creator who says that rocket emoji coin is going to the moon. All of a sudden, that becomes all you get recommended, and it becomes very difficult to hear opposing viewpoints or anything else that might give you a more well-rounded opinion.

So in this case, don't just listen to one person or one source. Do your own research by hearing both the good, the bad, and everything in between. Places like YouTube, Twitter, and Reddit are fantastic resources, but just be aware that every coin is going to have its own community where they believe it's the best thing ever since sliced bread.

Do your best to see past that. Decide if this is something you want to buy in, and then be prepared to lose all of it. And six, you got to take cybersecurity extremely seriously. I'm not going to go into all the ways that someone can take control of your account and transfer your cryptocurrency from one wallet to another with very little recourse, but I will say this: stronger password protection and two-factor authorization is a must-have, regardless of where you keep your coins.

For the ultimate protection, here's what I'd recommend. One, the least secure is keeping your coins on a brokerage or an exchange. Not to mention, you never know if a brokerage might go under, get shut down, or flat out deny access to your account. So for that reason, if you have a significant amount of money, it's probably a good idea to move it to a private wallet that only you have access to just in case.

Two, a step up from that would be what's called a hot wallet. This refers to a digital wallet that connects to the internet, so that way, it's a lot easier to buy and trade. Just kind of think of this like your own secured bank account, except with cryptocurrency. By having it connected to the internet, it's always there in the event you need access to it. However, the downside here is that they could certainly be more prone to an attack; however, they're certainly a lot more convenient to use.

Third, if you want the most security, you could look into what's called a cold wallet. This is a way that you can store your cryptocurrency offline, so unless someone has access to your physical hardware wallet and they know your secret passphrase, they can't get access to it. Generally, people tend to use either the Ledger or Trezor, and if you have a lot of money and you want to store it safely, this is probably the best way to do it.

Now, sure, the inconvenience is that if you ever want to move it, you have to connect to the internet and then move it to a hot wallet, but for security, nothing else beats this. The fourth: you should never click links in emails or texts. Don't give anyone access to your wallets and never reuse the same passwords.

I know this all sounds like common sense, but you know the saying, "an ounce of prevention is worth a pound of cure," which means it's a lot easier to prevent something from happening than fix it once it does. Just be cautious, write down your recovery phrase, and store it somewhere safe, and enable two-factor authorization for an extra layer of security.

The fifth, as far as what I do, I use a combination of everything, and I spread my money throughout as many different places as possible. I also throw some of it on blockfi.com, because at least they're paying me interest, whereas otherwise it would be earning nothing for me. It just helps to compartmentalize different holdings into different places so I don't make any impulsive decisions.

If you want up to $250 of free Bitcoin for signing up with BlockFi, feel free to use my link down below in the description. But otherwise, using a combination of everything is probably best so that that way, you always have something to fall back on.

So those are my favorite strategies when it comes to cryptocurrencies that historically have been both safe, stable, and secure. Just remember, it's always possible that something like this works until it doesn't, or a bear market lasts longer than expected. So when so many new people are entering the space, just play it safe, be careful, don't invest more than what you're willing to lose, understand the risks involved with yoloing into the next poop coin, and always, no matter what, subscribe or hit the like button.

So with that said, you guys, thank you so much for watching. Also, feel free to hit the notification bell or add me on Instagram, and on my second channel, The Graham Stephan Show. I post there every single day I'm not posting here. So if you want to see a brand new video from me every single day, make sure to add yourself to that. Thank you so much for watching, and until next time!