Decided you’re getting into crypto and don’t know where to start?
Building a crypto portfolio from scratch is challenging. There’s a lot to learn, new terminology to get familiarised with, accounts to get verified, and then of course, you need to research the actual coins themselves!
I’m here to help you get started.
First we’ll talk about how to get your investing infrastructures set up, such as brokerage, exchanges, making your funds available and so on. Then we’ll briefly discuss risk profiles and if you should even be investing in the first place.
Finally, I’ll give you some coins I would consider good initial additions to a new portfolio.
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How to buy cryptocurrency in New Zealand
One of the most challenging parts of building a crypto portfolio is actually moving your money from the legacy fiat systems, like bank accounts, into the digital currency system and onto the blockchain.
Banks are generally unsupportive of this, so there are several hoops to jump through before you can make you first crypto investment.
The first thing you need is a fiat onramp.
A fiat onramp is a platform that allows you to change fiat currency (such as New Zealand dollars) into cryptocurrency (such as Bitcoin).
The fiat onramp I recommend to anyone wanting to invest in cryptocurrency in New Zealand is Independent Reserve. They are an Australian brokerage/exchange and easily the best available to Kiwis today. They allow deposits and trading in NZD for all major cryptocurrencies.
An alternative is Easy Crypto. Easy Crypto isn’t an exchange, it’s a full service brokerage. Therefore rates are slightly higher than Independent Reserve, but it does make it very easy for Kiwis to move NZD into Bitcoin or other cryptocurrencies. If you’re a novice investor and want the simplest and fastest method to move your NZD into crypto, I’d pay the extra 1-2% and go with Easy Crypto.
There are other exchanges internationally that you will want to utilise eventually, but to get started a fiat on ramp like Easy Crypto or Independent Reserve is all you will need.
Get those accounts set up, and you can move on with the next step.
Choosing your investment amount
The general advice within crypto circles is only invest what you can afford to lose.
It’s good advice.
Further advice from me would be: Don’t invest anything until you’ve educated yourself.
How many books on cryptocurrency have you read? Have you read the Bitcoin whitepaper? Have you read any other whitepapers? How many Bitcoin podcasts have you listened to? Do you know what a blockchain is? Have you learned basic charting? Do you know the tax laws? Do you know what a hash rate is? Do you know how mining works?
If not, head to the library, read a few books, read the guides here on my blog, and study the market as a spectator for a few months. Understand what you’re getting into. This is real, hard-earned money you’re going to be investing, and you can lose it very quickly. Don’t learn the hard way.
How much to invest?
When you finally believe you’re ready to invest, you need to decide what your initial investment amount will be.
A good yardstick would be, don’t invest more than 5% of your net worth.
For example, if you have $10,000 in the bank, $10,000 in shares, $100,000 of net equity in a house, your net worth is $120,000.
5% of your net worth would be $6,000. Don’t invest any more than that.
If you lose everything, your net worth will have decreased from $120,000 to $114,000. That’s money you can afford to lose.
As your knowledge and confidence grows, you can increase your allocation from 5% to something more. But if you’re reading this blog post, you’re likely not ready for that.
Also understand, you do not need to invest that full 5% immediately. That’s only an allocation. Example: You could start by investing 1% in Bitcoin, and leaving the remaining 4% for future decisions down the line. It’s important to understand that not investing or waiting can also be a very good investment decision.
What should you invest in?
There are literally thousands of cryptocurrencies to choose from. How do you know which ones are “good”?
Take a look at coinmarketcap.com. This lists cryptocurrencies in order from largest to smallest market cap. Generally speaking, the larger the market cap, the more the cryptocurrency is worth. The more the cryptocurrency is worth, the more value investors see in it. Generally speaking.
I’m not going to tell you what to invest in, but I am going to give you a list of cryptocurrencies to research for yourself. All of these listed below are coins I believe are compelling and have the potential to offer real value. It will be up to you to do your homework and decide what amount of value you see in them.
Also remember, this is just a starting point. There are many interesting and promising coins I haven’t mentioned here, but this should give you something to get started on.
10 Cryptocurrencies for Beginners to look at:
Bitcoin is the original cryptocurrency and almost every portfolio will need to enter the digital currency space via Bitcoin. Bitcoin’s sole purpose is as a currency/exchange of value. One reason Bitcoin is deemed such high value is its longevity and stability. Blockchains come and go in every market cycle, but Bitcoin has remained king throughout. Bitcoin will usually be standard in any crypto portfolio. I’ve written more about Bitcoin here.
Litecoin is a “lite” version of Bitcoin, created in 2011. It is very similar to Bitcoin, but generally has less transaction volume, which also translates to faster transactions and lower fees, which makes it appealing to many investors. I’ve written more about Litecoin here.
Ethereum came on the scene as a second generation blockchain: a ledger that could be used for more than just currency. You might consider it like a blockchain Windows or Android – something applications can be developed on top of. Ethereum birthed the ICO craze and the concept of dApps (decentralised apps). It has an impressive list of partners and collaborators within the Ethereum Enterprise Alliance – including Microsoft, Scotiabank, T-Mobile, Price Waterhouse Coopers, and many more. I’ve written more about Ethereum here.
XRP is a coin developed by the payments company Ripple, for use with their cross-border payments platform xRapid. The coin is designed to faciliate international payments faster than the current legacy banking systems. I’ve written more about XRP here.
Binance Coin is the native coin of the Binance cryptocurrency exchange. Binance Coin provides value to holders by offering lower trading fees and access to IEO launches on the Binance platform. You could think of Binance as the NYSE or NASDAQ of cryptocurrencies, and the coin is what allows you to access the features of it. I’ve written more about Binance here.
EOS is a platform that allows development of dApps, similar to Ethereum. EOS raised more than a billion dollars during their ICO, which many think will allow them to develop much faster than competing platforms. I’ve written more about EOS here.
NEO is another platform similar to Ethereum based out of China. NEO was one of the first platforms to utilise a dual-coin system, which many platforms have now imitated. Those who see value in NEO generally like the platforms partnerships within China and see it as a front-runner to capture the China market. I’ve written more about NEO here.
Stellar was founded by one of the co-founders of Ripple and is essentially a Ripple competitor. Like Ripple, the aim of the platform is to facilitate cross border payments faster and cheaper than the current banking infrastructure. The difference is Stellar is run by a non-profit foundation, while Ripple is a private company. I’ve written more about Stellar here.
Remember, investing in crypto is a long game. Do your own research, invest wisely, never invest more than you can afford to lose. Good luck!