Today, digital assets are an important part of the portfolios of investors of all sizes. People are willing to invest not only in gold, stocks and fiat but also in cryptocurrency. Yet not every potential investor has the level of knowledge to “enter the crypto”. If a person is at least familiar with the stock market, it will be much easier for him to master the basics of investing in a new asset class. There are peculiarities to it.
What do you need to do to become an investor or trader? Where can one learn the basics of this activity? What qualities and skills do you need to increase your funds in the crypto market and not lose everything in rash actions? To sort it out, we ask experts.
New crypto literacy
Today, the crypto industry seriously faces the problem of the low level of literacy of people in digital assets and blockchain. People do not seek to study this on their own, and those who do cannot find reliable sources or trusted mentors.
When a person does not have enough knowledge and experience but wants to make a profit, he is looking for the simplest and fastest ways. Learning the intricacies of the crypto market is long and difficult, and therefore many decide to entrust their funds to management rather than learn. This turns into a serious problem. Investors often lose money because, due to the lack of experience or reason, they choose unreliable performers.
Igor Zakharov, Manager of DBX Digital Ecosystem, says,
“We witness a low level of financial literacy even in common instruments such as stocks, futures, and currencies. Cryptocurrencies have some characteristics of their own, and we consider their huge volatility a fundamental problem for all investors. Changes in the cryptocurrency prices can occur so quickly that investors simply cannot make an adequate decision. There is simply no time to think about your moves.
“This problem is now more successfully solved by trading algorithms than people. Algorithms are devoid of emotions and react faster to the situation. They operate around the clock, which gives more control. We suggest our clients should use algorithmic cryptocurrency algorithmic trading. Besides, in the IT, clients do not need to transfer investment capital. Everything happens distantly, and accounts are always under the investors’ control. This simplifies the cooperation.”
Analyst Aziz Kenzhaev believes that the low level of literacy is observed in all Russia’s finance, not only in the crypto industry. Improving financial literacy is necessary not only for the population but also for the whole national economy. There are already some programs aimed at increasing the financial literacy, and they are actively working. However, it would be great if there were more of them and they covered the cryptocurrency sector.
Dmitry Kudinov, Operations Manager of EMCD, the largest mining pool in Eastern Europe, a specialist in the mining of digital assets, also believes that the problem of financial literacy is very acute not only in the cryptocurrency sector. This is a common problem for both digital assets and traditional finance. Futures, forwards, options and other derivative financial instruments have been traded for hundreds of years. But a few know how to use these tools. This is a problem for the industry, but a good opportunity for skilled traders and investors.
Dmitry Noskov, StormGain crypto exchange expert, agrees, saying,
“There is an acute problem of literacy not only in cryptocurrencies, but also in the overall financial literacy. Many people do not understand not only complex financial instruments, but also the simplest aspects of the financial markets. Out of ignorance, many of them get involved in fraudulent schemes, believe in the possibility of unrealistic earnings and lose their money.
“Ways to solve the problem are financial education and self-education (studying sources on the Internet, reading books and taking up various training courses (from professionals).”
Danatar Atajanov, Brand-manager OXLY.IO, believes that Russia is not so far behind the rest of the world in the adoption of cryptocurrencies, and there is no need to talk about a critically low level of literacy. Investing in cryptocurrencies is a rather specific area of activity, requiring competences and tools. Just as it is not recommended to self-medicate, one should not start investing in crypto without experience and knowledge. Yet there are enough opportunities for independent study. Many respected crypto resources form libraries of knowledge that can be studied by unprepared users. There are many video courses and tips from recognized traders on the Internet that one can study. Novice investors, nevertheless, are not recommended to engage in trading for significant amounts on their own.
Marat Mynbaev, investor, fundamental and technical analysis expert, Founder of Amir Wallet, explains,
“We have an overall problem of low financial literacy. This is not taught in school or college. There are courses, schools and academies for improving financial literacy. For example, at Amir Academy we pack knowledge in such a way that even a child will understand how the crypto market works. You should improve your financial literacy step by step. Read books and attend seminars and courses. All this will help you with your financial self-education.”
Vladimir Gorgadze, head of the Blockchain Master's program at MIPT, head of tokenization projects at MMC Norilsk Nickel, head of Newity, a blockchain solutions developer, thinks that an experienced investor does not have to be an expert in the field. One needs to understand the market, people, and business. The expert reminds that Steve Jobs was not a professional in technology, but, thanks to his vision, Apple became one of the world's leading corporations. A successful investor must be a good entrepreneur. Conversely, deep knowledge of cryptocurrencies does not guarantee any success in investing.
Gleb Jount, the official representative of the Bitget exchange in the CIS, notes that capitalization and attention around the cryptocurrency market have increased significantly over the past two years, saying,
“For example, Bitcoin was declared an official currency in El Salvador. The conference focused on Bitcoin was attended by over 45,000 people. There is fear of missing out around NFTs. Crypto is used to circumvent sanctions. The cryptocurrency market has become larger. Thus the demand for solutions such as asset management has also grown.
“Achieving self-made success in cryptocurrencies through investing, trading and experimenting requires a significant investment of time and a good understanding of the logic of crypto. Participation in the market via someone and the practice of trust management allow you to get rid of almost all the nuances.”
The expert adds that literacy is important, since the cryptocurrency economy is a real alternative to the classic world of finance, payments and online value. To solve this problem, there is a lot of high-quality educational information in the public domain on the basics of cryptocurrencies and blockchain technologies, the nuances of trading and investing, etc. There are also courses. Speaking even more deeply, it is possible to increase the emphasis on ordinary financial and crypto literacy, just from school desks.
Skills and knowledge required for an investor
In order not to have to rely on third parties and trust them to manage your funds, it is better to study the basics of trading and investing on your own. This path will be long and thorny, but whatever way to make money is associated with learning and gaining experience. Only a detailed study of the topic will minimize the risks and give good results. But what exactly do you need to do to enter the market and start earning?
We ask experts what basic knowledge and skills a person should have in order to manage their investment portfolio independently and increase it, and whether anyone can learn this or only professionals who have devoted a lot of time to studying trading and the intricacies of investing can do it.
According to Igor Zakharov, endurance and emotional stability are necessary. You need to be able to count and have a diversified approach to the analysis of information. You also need to be prepared to endure failure for a long time. But the most important thing is to quickly adapt to the new market behavior, which is very volatile.
The expert notes that professionals are not born, they are formed in exhausting training and practice. He adds,
“Probably, each person could master everything necessary to become a successful investor. Unfortunately, in practice, we see such training as very expensive and psychologically difficult. For various reasons, most novice investors cannot bear a long journey of learning because they need to earn here and now. But the market does not always provide an opportunity to earn money, and a person always has some need. This conflict forces beginners to increase risk and break the rules.”
Aaron Chomsky, head of investment at ICB Fund, notes that investing in cryptocurrencies is not “rocket science”. He says,
“One should focus on the most reliable projects that will not disappear in the foreseeable future—where large players have poured a lot of money, which have the opportunity to both promote the project and accelerate the rise of token price. One should buy assets during a correction, and not at price peaks. More risky actions involve participation in ICO / IEO and other initial placements, since hype projects do not appear so often for their search to take a lot of time. The supreme rule of investing in the cryptocurrency market is very simple. In the early seed rounds, the project should attract the attention of prominent funds, while a long analysis of technology and tokenomics can be neglected.”
Dmitry Kudinov singled out the following basic skills for asset management: fact-checking and analytical thinking. First of all, you should not listen and read “analysts” on Telegram, Twitter, Instagram or other platforms. If you rely on the reasoning of strangers, then the responsibility for making investment decisions should also be assigned to them. What does it mean? When you lose money and realize that you did it because of the words of a completely unfamiliar person, it will be too late.
The expert notes that almost anyone can learn not to lose money. But this is not a matter of several months, but rather several years (and this is with in-depth study and practice for 6–8 hours daily). Traders and asset managers learn every day as the market often has unique situations that cannot be prepared for. The primary task of the trader and investor in this case is to predict all developments and create a strategy in which they will not lose money, anyway. It's difficult, but possible.
Dmitry Noskov believes that the compilation and management of an investment portfolio is best, of course, entrusted to professionals, but you yourself should have at least minimal knowledge of the financial market. It is enough to know at least the very basics in order to at least understand what the specialists say and what they are going to do with your money.
Aziz Kenzhaev says,
“Professionals were once beginners. It can be learned by anyone who really wants to learn it and can take the time to do it all. Basic knowledge includes: money, its turnover, financial markets, how they work, decentralized finance, and for tech analysis you need Dow Theory, Elliott Wave Theory, and risk management.”
Vladislav Akeliev, Development Director of the ECOS cryptocurrency investment platform, agrees that learning to trade and invest is available to everyone. The expert adds,
“The thing is that learning about investments takes time, and so does managing your portfolio. This is especially true in the dynamic cryptocurrency market, with its volatility and changes within one day. Anyone can learn how to repair shoes, but it is often more convenient to entrust it to professionals. Finance is no exception.”
Vladimir Gorgadze emphasizes the necessity to remember that investments and trading in the market are always a risk and a lottery. Having even advanced knowledge of the financial market does not guarantee success in investing.
Of course, you still need to get some knowledge about the terminology and lingo of the market, various financial instruments (options, derivatives, etc.), types of orders (market, limit, leverage, etc.), technical analysis; play in exchange sandboxes; if possible, communicate with experienced players; constantly read chats and forums, not forgetting to treat this source of information critically—thus you can get a lot of useful information, for example, where players obtain information, how quickly they react to it, which sources are not be trusted, etc. This will not guarantee an increase in investments, but it will definitely help you become oriented in this area.
It is important to remember that there are a lot of professional players in the market. The crypto market is still small and immature compared to the traditional financial market, therefore it is manipulated both by exchanges and by market makers, large players and unscrupulous participants. Many traditional trading strategies do not work due to voluntary or involuntary market manipulation. The influence of regulators is also very strong (both for the better and for the worse). Work on investments, if they are not long-term, takes time. If an investor is not ready to monitor constantly all market events, they should be very careful.
Victoria Ustimenko, CEO of PRETOBUSINESS PR agency, says,
“Traders in most cases earn on arbitrage, the difference in cryptocurrency rates on different exchanges. Introducing artificial intelligence into stock exchange trading would make it easier to enter this market. Yet everyone can already try to trade. There is the concept of social trading, in which you pay royalties to an already established successful trader and simply copy his strategies for a percentage of the profits. The factor worth considering is that speculation is not prohibited in the cryptocurrency market, and there is a possibility that you are simply participating in speculation, not buying or selling some token profitably.”
Egor Abramov, Principal of the Fort Ross Ventures venture fund, notes that crypto assets trading is very similar to stock exchange and FOREX trading. He says,
“If a person wants to play in a casino, of course, no one can interfere. The thing to remember is that you should risk only the amount that you do not mind losing. If the task is to make a profit, this is the prerogative of professional investors only. It is reasonable to invest significant amounts only with them.”
Gleb Jount believes that in many respects everything depends on the person and their goal. There are market participants who prefer to buy an asset and hold it for a long term. Here you can limit yourself to the basic skills of using a broker, replenishing an account on a crypto exchange with a card, buying, for example, Bitcoin, and withdrawing funds to a personal wallet. Next is the habit of long-term waiting.
Active and successful investment requires a deep fundamental understanding of the cryptocurrency market, including the technical component. When it comes to trading, the secret mixture consists of knowing technical analysis, risk management, market psychology, strategy and, of course, experience. Learning this requires a lot of time and the ability to assimilate, at times, subtle financial and technical material. Apart from rare cases, a small share of market participants can independently manage their portfolio actively in the long-term. The beauty is that almost anyone can achieve success with the right discipline, because all the necessary information and tools for mastering are in the public domain.
Independent financial expert Alexander Ryabinin believes that the question posed is twofold. He says,
“On the one hand, talent matters. On the other hand, zeal. In the first case, your development will be easier and many times faster. You must be ready for the second in trading or investing, where it will take over one year to achieve stable and positive results.
“So, in order to make money in this market, you will need knowledge in the theoretical part (at least, technical and fundamental analysis), your own trading system and experience (which is difficult in terms of timing, that being an individual factor). But from experience, I’d say that it would be necessary to go through the stages of a trader or investor for stable results, and this is not one year.”
To study the basics of trading or to entrust your funds to management is the choice of every crypto enthusiast. Anyway, you need to act based on your goals and the availability of free time and finance.