Table of Contents
Introduction 1About This Book 2
Foolish Assumptions 2
Icons Used in This Book 3
Beyond the Book 3
Where to Go from Here 4
Part 1: Getting Started with Cryptocurrency Investing 5
Chapter 1: What Is a Cryptocurrency? 7
Beginning with the Basics of Cryptocurrencies 8
The definition of money 8
Some cryptocurrency history 9
Key crypto benefits 9
Common crypto and blockchain myths 11
Risks 12
Gearing Up to Make Transactions 12
Wallets 12
Exchanges 12
Communities 13
Making a Plan Before You Jump In 14
Select your cryptos 14
Analyze, invest, and profit 15
Chapter 2: Why Invest in Cryptocurrencies? 17
Diversifying from Traditional Investments 18
Stocks 18
Bonds 20
Forex 21
Precious metals 23
Gaining Capital Appreciation 25
Historical returns 25
Huge growth potential 27
Increasing Income Potential 28
A bit about traditional dividends 28
The basics on crypto dividends 28
Fueling Ideological Empowerment 29
The economy of the future 29
Freedom from government control of currency 30
Help for the unbanked and underbanked 31
Chapter 3: Recognizing the Risks of Cryptocurrencies 33
Reviewing Cryptocurrency Returns 34
Capital gains (or losses) 34
Income 34
Risk: Flipping the Other Side of the Coin 35
Glimpsing Cryptocurrencies’ Reward versus Risk 36
Digging into Different Kinds of Risk 37
Crypto hype risk 37
Security risk 38
Volatility risk 40
Liquidity risk 41
Vanishing risk 41
Regulation risk 42
Tax risk 43
Exploring Risk Management Methods 43
Build your emergency fund first 45
Be patient 45
Diversify outside and inside your cryptocurrency portfolio 47
Chapter 4: Looking Under the Hood: Blockchain Technology 49
Breaking Down Blockchain Technology Basics 50
What is a blockchain, and how does it work? 50
How does a blockchain secure itself? 52
Why is blockchain revolutionary? 53
Perusing Problems with Blockchain 55
Scalability problems 56
Environmental problems 57
Fraud problems 57
Political problems 58
What Can Blockchain Be Used for? 58
Payments 58
Voting 59
Supply chain monitoring 59
Identity verification 59
Legal ownership of stuff 60
Healthcare 60
Entertainment 60
Energy 61
Internet of Things (IoT) 61
Chapter 5: How Cryptocurrencies Work 63
Explaining Basic Terms in the Cryptocurrency Process 63
Cryptography 65
Nodes 66
Mining 66
Proof-of-work 67
Proof-of-stake 67
Proof-of-importance 68
Transactions: Putting it all together 68
Cruising through Other Important Crypto Concepts 69
Adaptive scaling 69
Decentralization 69
Harvesting 69
Open source 70
Public ledger 70
Smart contracts 70
Stick a Fork in It: Digging into Cryptocurrency Forks 71
What is a fork, and why do forks happen? 71
Hard forks and soft forks 72
Free money on forks 73
Part 2: The Fundamentals of Investing In Cryptos 75
Chapter 6: Cryptocurrency Exchanges and Brokers 77
Distinguishing Crypto Exchanges 78
Centralized exchanges 78
Decentralized exchanges 81
Hybrid exchanges 83
How to choose an exchange 84
Considering Brokers 87
How brokers work 88
The pros and cons of using a broker 88
How to choose a broker 90
Looking at Other Methods for Buying Cryptos 91
Funds 91
Credit card 91
PayPal 91
Cash 92
Cryptocurrency ATMs 93
Chapter 7: Using Cryptocurrency Wallets 95
Defining Cryptocurrency Wallets 95
A few important terms 96
How a wallet works 96
Looking at Different Types of Wallets 98
Online wallet 99
Mobile wallet 99
Desktop wallet 100
Hardware wallet 101
Paper wallet 101
Choosing a Crypto Wallet 102
Based on security 102
Based on your crypto ownership 103
Based on transaction fees 104
Based on anonymity 104
Keeping Your Wallet Secure 105
Back up your wallet 105
Have multiple wallets 105
Add more security levels 106
Update your software 106
Remember where you hide it! 107
Chapter 8: Different Types of Cryptocurrencies 109
Celebrating Celebrity Cryptocurrencies by Market Cap 109
Bitcoin 110
Ethereum 112
Ripple 113
Litecoin 116
Other top ten major cryptos 117
Top 100 major cryptos 118
Cryptocurrencies by Category 119
Payment cryptos 120
Privacy cryptos 121
Platform cryptos 121
Exchange-specific cryptos 122
Finance/fintech cryptos 123
Legal and property cryptos 123
Chapter 9: Identifying Top Performing Cryptocurrencies 125
Introducing the Invest Diva Diamond Analysis 126
Using Fundamental Analysis to Pick Cryptocurrencies 127
Go with what you know 127
Choose the right categories 128
Check out cryptos’ websites 129
Choosing Cryptos with Sentimental Analysis 131
Key sentimental elements 131
Stuff to check in the news 134
Trying Technical Analysis to Select Cryptos 136
Chapter 10: Diversification in Cryptocurrencies 137
Breaking Down Some Basics on Diversification 137
What is traditional diversification? 138
How does diversification reduce risk? 138
Using Cryptocurrencies in Long-Term Diversification 140
Diversifying with non-cryptocurrencies 141
Diversifying among cryptocurrencies 143
Tackling Diversification in Short-Term Trades 147
Part 3: Alternatives to Cryptos 149
Chapter 11: Getting Ahead of the Crowd: Investing in ICOs 151
Understanding the Basics of Initial Coin Offerings 151
How an ICO works and how to start one 152
ICOs versus IPOs 153
Investing in an ICO 155
Finding ICO listings 155
Analyzing an ICO listing 156
Outlining the ICO investment process 158
Holding your tokens after your purchase 159
So You Want to Start an ICO: Launching an ICO Yourself 159
Understanding the challenges 160
Taking a few steps before the launch 160
Chapter 12: Cryptocurrency Mining 163
Understanding How Mining Works in a Nutshell 163
Discovering What You Need to Mine 165
Before you begin: The mining profitability of different cryptos 166
Mining hardware 167
Mining software 167
Mining pools 168
A mining setup example 169
Diving in and making sure mining is worth your time 170
Chapter 13: Stocks and Exchange Traded Funds with Cryptocurrency Exposure 173
Looking for Stocks with Exposure to Cryptos 174
Fundamentals 174
Market sentiment factors 177
Other considerations 178
Considering Cryptocurrency and Blockchain ETFs 179
Getting an overview of blockchain ETFs 179
Keeping an eye on other indexes 181
Chapter 14: Cryptocurrency Futures and Options 183
Focusing on the Fundamentals of Futures 184
Futures’ features 184
Financial futures 185
Introducing the Basics of Options 186
Futures versus options 186
Puts and calls 187
Risks 187
Understanding Cryptocurrency Derivatives Trading 188
The advantages of crypto derivatives trading 188
The advantages of crypto derivatives for the industry 188
Trading resources 189
Chapter 15: Dealing with the Dollar and Other Fiat Currencies 191
Considering the World’s Reserve Currency: The U.S Dollar 192
Focusing on factors that affect the U.S dollar 193
Looking at Bitcoin versus the U.S dollar 194
Examining the Euro and Other Major Currencies 196
The euro and the British pound 196
Safe havens: The Swiss franc and the Japanese yen 198
The Aussie, Kiwi, and Canadian dollars 198
Comparing the Forex Market and the Crypto Market 199
The similarities 199
The differences 200
Resources for forex trading 200
Part 4: Essential Crypto Strategies and Tactics 203
Chapter 16: Using Technical Analysis 205
Beginning with the Basics of Technical Analysis 206
The chart art 206
The time factor 209
The psychology factor: Trends 210
Spotting the Key Levels 210
Support levels 210
Resistance levels 211
Trends and channels 212
When the trend is no longer your friend 213
Picking Out Patterns on a Chart 213
Bullish reversal patterns 214
Bearish reversal patterns 214
Smoothing Charts Out with Moving Averages 215
Basic moving averages 216
Sophisticated moving averages 216
Chapter 17: Short-Term Trading Strategies 217
Distinguishing Three Short-Term Time Frames 217
Profiting within hours 218
Profiting within days 221
Profiting within weeks 222
Trying Short-Term Analysis Methods 223
Deciphering chart patterns 223
Using indicators 227
Avoiding illegal pump-and-dump stuff 228
Managing Short-Term Trading Risk 228
Chapter 18: Long-Term Investing Strategies 231
Time Is on Your Side: Getting Started with Long-Term Investing 231
Your personal goals and current situation 232
Your portfolio’s objectives 233
Creating Long-Term Strategies 234
Observing psychological levels 234
Selling when you reach your goal 235
Keeping tax consequences in mind 236
Considering Limit and Stop-Loss Orders 236
Limit orders 236
Stop-loss orders 237
Chapter 19: Minimizing Losses and Maximizing Gains 239
Keeping the Losses Down 240
Measuring returns 240
Monitoring exchange fees 241
Understanding the art of getting out 242
Letting the Profits Rise 244
Buying at the bottom 244
Knowing that patience is a profitable virtue 245
Identifying the peaks 245
Finding peaks and bottoms with a few trading tools 247
Chapter 20: Using Ichimoku and Fibonacci Techniques 249
Getting a Handle on Ichimoku Kinko Hyo 249
The components of Ichimoku Kinko Hyo 250
Ichimoku interpretations 251
Introducing Fibonacci Retracement Levels 252
Some background on Fibonacci 253
How to insert Fibonacci retracement levels into your chart 253
Combining Ichimoku and Fibonacci Techniques 254
Chapter 21: Taxes and Cryptocurrencies 257
Distinguishing Three Types of Crypto Taxes 257
Income taxes 258
Long-term capital gain taxes 259
Short-term capital gain taxes 260
Minimizing Your Crypto Taxes 260
Lowering your mining income tax 260
Reducing your trading tax 261
Bringing down your capital gain taxes 261
Checking the rate of your state 262
Evaluating Taxable Income from Crypto Transactions 263
Tracking your crypto activity 263
Handling crypto forks 263
Reporting international crypto investments 264
Part 5: The Part of Tens 265
Chapter 22: Ten Considerations Before Getting Started with Cryptocurrencies 267
Don’t Get Too Excited 267
Measure Your Risk Tolerance 268
Protect Your Crypto Wallet 268
Find the Best Crypto Exchange/Broker for You 268
Determine Whether You Should Invest Short Term or Long Term 269
Start Small 269
Follow the Cause 270
Mull Over Mining 270
Look into Investing in Other Assets First 270
Get a Support Group 271
Chapter 23: Ten Possible Moves When Your Crypto Portfolio Is Down 273
Do Nothing 273
Reevaluate Your Risk Tolerance 274
Look at the Big Picture 274
Research the Fundamental Reasons the Crypto Is Down 275
Consider Hedging 275
Diversify within Crypto Assets 276
Diversify across Other Financial Assets 276
Exchange with a Better Crypto 276
Think about Adding to Your Current Position 277
Contemplate Cutting Losses 277
Chapter 24: Ten Challenges and Opportunities for Crypto Investors 279
New Cryptos on the Block 279
Finding Economic Data 280
Regulations 281
Hackers 281
Bubbles 281
A Down Market 282
New Currencies and Projects 282
Diversification 283
Falling in Love with a Crypto 283
Using Invest Diva Diamond Analysis 284
Part 6: Appendixes 285
Appendix A: Resources for Cryptocurrency Investors 287
Appendix B: Resources for Personal Portfolio Management 303
Index 309
