If you’re looking to invest in cryptocurrency, you may not want to start with the big guns. Instead, focus on building your financial foundation and becoming a more savvy investor. In this ultimate beginner’s guide to investing in cryptocurrency, I’ll walk you through the steps of getting started from A-Z.
What Is Cryptocurrency?
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control and are not issued or backed by any physical assets. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services.
How To Get Started With Cryptocurrency
If you’re thinking about getting into cryptocurrencies, there are a few things you need to know. First and foremost, you need to have a secure wallet. This is where you store your cryptocurrencies so that you can use them. You also need to be aware of the risks associated with cryptocurrencies. Bitcoin, for example, is volatile and can experience significant swings in price. You should also be mindful of the taxes that may apply to cryptocurrency transactions. Finally, it’s important to remember that cryptocurrency is still in its early stages and involves many risks. Before investing significant money into cryptocurrencies, understand all the risks involved and consult with an experienced financial advisor.
Pros And Cons Of Investing in Cryptocurrency
Pros:
1. Currency independence: Unlike traditional currencies subject to political influences, cryptocurrencies are independent of any central authority. This makes them more reliable and immune to economic fluctuations.
2. Decentralized exchanges: Most cryptocurrencies are traded on decentralized exchanges, which allows for greater security and transparency than centralized exchanges. Additionally, decentralized exchanges do not require users to trust third-party administrators with their funds.
3. Limited supply: Unlike fiat currencies, which have an inexhaustible supply, there will only ever be 21 million bitcoins available in circulation (with a maximum number of 21 million BTC). This creates a scarcity of value that may drive up prices over time.
4. Privacy: Because governments or banks do not regulate cryptocurrencies, they offer more privacy protection than traditional currencies. For example, you cannot track your bitcoin transactions through a bank or credit card account like regular currency transactions.
5. Preexisting infrastructure: Many believe cryptocurrencies will eventually replace traditional currencies. As such, an extensive infrastructure is already in place to support the growth of cryptocurrencies.
Cons:
1. Volatility: Cryptocurrencies are very volatile and can be subject to sudden price changes. This makes them challenging to invest in and riskier than traditional investments.
2. Security: Cryptocurrencies are not immune to hacking attacks, which could steal your funds. In addition, some exchanges may not be safe for your personal information.
3. Illiquidity: Many cryptocurrencies are not easily tradeable on decentralized exchanges, which may make them difficult to sell at the desired price. This also makes them difficult to use as currency for everyday transactions.
5 Types of Cryptocurrencies
There are a few different types of cryptocurrencies, each with unique benefits and drawbacks. Here’s a rundown of the most popular ones:
1. Bitcoin is by far the most well-known cryptocurrency, and for a good reason. It was created in 2009 and is based on blockchain technology. This allows for secure transactions and a decentralized network. Bitcoin has been incredibly volatile over the years, but that seems to have only helped fuel its popularity.
2. Ethereum is another popular cryptocurrency based on the same blockchain technology as Bitcoin but with additional features. For example, Ethereum allows for more complex smart contracts and provides a platform for developing decentralized applications (DApps). While Ethereum has seen much less volatility than Bitcoin, it, too, has experienced periods of extreme price swings.
3. Litecoin is slightly different from other cryptocurrencies because it uses a different mining process than Bitcoin and Ethereum. This means it can be mined much more quickly than Bitcoin or Ethereum. Litecoin also has faster transaction times than other cryptocurrencies. However, like all cryptocurrencies, Litecoin is highly volatile and risky to invest in.
4. Bitcoin Cash is another spinoff of Bitcoin created in August 2017 to improve some of the shortcomings of bitcoin. For example, bitcoin cash allows for more incredible transaction speeds and lower fees than bitcoin. Like Litecoin, bitcoin cash is very volatile – meaning its value can change rapidly – but it also offers some unique benefits compared to other cryptocurrencies.
5. Ripple is a cryptocurrency designed to work with banks and other financial institutions. It’s often cited as potentially more stable than other cryptocurrencies due to its ties to traditional economic systems. However, Ripple has yet to prove itself as a successful cryptocurrency – it has seen significant price fluctuations over the years.
How to Trade Crypto Currency and Which Trading Platforms To Use
If you’re new to investing in cryptocurrencies, there are a few steps you need to take before trading. First, make sure you understand what cryptocurrency is. Cryptocurrency is a digital or virtual asset that uses cryptography to secure transactions and control the creation of new units. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
Now that you know cryptocurrency, it’s time to decide which trading platform to use. There are a few platforms available, but we recommend using Coinbase because it’s one of the most popular and well-known platforms. Once your trading account is set up at Coinbase, open an account with one of the other popular exchanges like Binance or Bitfinex.
Now that you’ve set up your trading accounts, it’s time to start trading! Begin by looking at the charts on each exchange and trying to find good entry points for the coins you want to buy. When you see a coin selling for below its actual value (called an oversold market), it’s likely a good time to buy into the coin. Conversely, if the market is going up too quickly for a particular currency, it may be an excellent time to sell off your holdings before they lose value.
Remember: patience is essential when investing in cryptocurrencies! It can often take some time for prices to settle after any significant changes happen on exchanges. Don’t worry; always check back on charts regularly to stay on top of your investments.
When to Trade, Where To Buy, How Much Payout Percentage
Cryptocurrencies are a new and exciting investment option that can offer high-potential payouts. However, knowing when to trade and where to buy is essential to maximize your gains. Here are three tips for investing in cryptocurrencies:
1. When to Trade: Cryptocurrencies are best traded during significant market trends and corrections. When prices are stable, it is best to hold onto your coins.
2. Where to Buy: As with any other financial investment, it is essential to research the best places to buy cryptocurrencies before investing. Some of the most reputable exchanges include Coinbase, Binance, and Kraken. Make sure you research before investing to avoid losing money due to a poor choice of trade or coin.
3. How Much Payout Percentage: The payout percentage on cryptocurrency investments will differ depending on the coin and the exchange used. Always research before investing to know what is expected from the coin/exchange you choose.
Read also: These Myths About Crypto Should Be Cleared!