Crypto Investing 101

Crypto Investing 101: The Complete Guide for Beginners

In 2009, Bitcoin was a cryptocurrency with no real market value. It was owned primarily by developers and those in the tech community. Today, more than ten years later, Bitcoin is worth over $48,000.

And that’s just for one token. If you invested $100 in Bitcoin in 2009, you’d be worth $48 million today.

That’s no joke.

Crypto investing is now on every investor’s radar. There are hundreds of cryptos besides Bitcoin, and they only appreciate in value every day. The decentralized platforms, blockchain technologies, and high-security servers make this an attractive investment for every investor.

However, crypto investing does come with its risks. The volatile and unpredictable nature of cryptocurrencies means you could suffer massive losses. If you’re a beginner in this world, you might be worried about how to invest in cryptocurrency safely.

This article has you covered. We will be exploring the basics of cryptocurrency, how to buy tokens, and some investing strategies. Are you ready to begin your exciting journey into crypto investing?

What Are Cryptocurrencies?

A cryptocurrency (often referred to as ‘crypto’) is a kind of digital currency. It can be used in exchange for various goods and services. Unlike traditional money, or ‘fiat,’ crypto exists digitally in a form known as tokens. It has no physical form.

Cryptocurrencies utilize advanced technology networks called a blockchain.

Blockchain is unique in that it is decentralized in how it gathers and stores information. The registration and flow of records are not managed by any one institution, such as a bank.

This eliminates the need for middlemen like lenders and other financial institutions. Buyers and sellers can do business directly with each other, which also lowers transaction fees.

Another appealing element of blockchain technology is that it utilizes advanced security systems, leading to better data protection and privacy.

How Do Cryptocurrencies Work?

Blockchain technology is the foundation of how crypto works and operates. Every time a transaction or order goes through, it gets added to a digital ledger – this is the blockchain. Blockchains exist all over the world and operate through computers or ‘nodes.’

These nodes will check the existing and new data to verify the transaction. Because the system is so decentralized, it makes it impossible to trace or hack.

Getting into the secure blockchain system would entail hacking over half the nodes in the network. Not only is that highly time-consuming, but it is also an expensive endeavor.

What Are the Benefits of Crypto Investing?

The growth of cryptocurrency has skyrocketed over the world. You may have heard of people who became millionaires just by holding Bitcoin or about how Ethereum is “going to the moon.”

There is no doubting the appeal of cryptocurrency. However, it is a risky venture to invest in. Have you wondered why so many people are giving in to investing in crypto? Following are the main attractions of this currency.

Security

Blockchains and mining are relatively new technologies but highly advanced. Blockchains are visible to all users but unable to be hacked by most developers. The transparent yet complete private platform is appealing to those who value high-security systems.

Liquidity

There are numerous trading platforms, companies, and brokerages – all dealing in crypto! Trading your tokens for cash or even gold is very simple, instantaneous, and with minimal fees.

Digital currencies are hence popular with short-term investors for their high liquidity rate. Long-term investors can also benefit from the fluctuating prices and high demand.

Minimal Inflation

Fiat is governed by governments and large-scale financial institutions like banks. Thus money is affected by intense regulation and legal frameworks. Cryptocurrencies, on the other hand, are immune to inflation.

They are also free from markups and surge pricing. The blockchain system is built such that buyers need not be concerned about losing money in transaction fees, markups, and more.

Decentralization

Crypto operates on peer-to-peer networks with an emphasis on democratic usage. There are no third parties or middlemen involved. This makes the buying process smooth, efficient, trustworthy, and cheaper.

Currency of the Future

As blockchain technology grows, financial gurus and experts are hedging their bets on crypto as the currency of the future. Increasing establishments are accepting it as currency, in addition to cash and credit.

Many companies are also coming out with their digital tokens. These can be used for intra-company use and cashed out for physical items.

Cryptocurrencies also operate across international borders. The broad markets and potential for growth have rendered it a strong player in the investment sector.

How Can I Buy Cryptocurrency?

Cryptocurrencies don’t work quite like fiat. You cannot walk into a bank and place an order for your favorite crypto. Buying crypto can take some work and research.

Following is a step-by-step guide on how you can buy crypto today.

Step One: Choose Your Cryptocurrency

There are over hundreds of cryptocurrencies out there. Picking the right one for your investing needs can be tricky, as cryptos come and go very quickly.

Do some research on which crypto would work best for you. The most popular cryptocurrencies right now are Bitcoin, Ethereum, and Ripple. Zcash, Dash, and Binance Coin are also some smaller cryptocurrencies.

The currency you choose will depend entirely upon how much risk you wish to take, how much you have to invest, and how long you’re willing to hold for.

We cannot stress how important it is to make a prudent buying decision. Most cryptocurrencies disappear in a few years or flatline. This means that you could lose significant money with very little notice.

Step Two: Choose a Trading Platform

You will need to find a trading platform to buy cryptocurrencies. There are numerous cryptocurrency exchanges where you will be able to buy, hold and sell your tokens.

Consider factors such as transaction fees, pros, cons, security, and more. This will help you decide which platform to go with.

Some popular online brokerages include Binance, Coinbase, eToro, Gemini, and Robinhood. Remember, not all coins will be available on all platforms. Therefore, if you’re looking to buy a particular currency, you will need to find a broker that trades in it.

Step Three: Store Your Coins

After doing so much research and spending your hard-earned money, you will need to ensure you store your crypto. Cryptocurrency is usually stored in a wallet, which is a software program that holds the keys that connect you to the blockchain where your purchase lives.

Wallets don’t store your coins per see, but rather grant you access to them with your public and private keys. Without your key, you will be unable to complete your intended crypto transaction. Digital wallets will provide you with information such as your current balance and a detailed record of transactions.

There are many kinds of wallets you can opt for, such as:

Hardware wallets: These are the most secure because your key won’t be stored digitally but on a USB or physical device. You will also be able to access your cryptocurrency from different devices. Look out for hardware wallets such as the Ledger Nano in stock, as they will be the most secure option for your coins.

Online wallets: These are the most convenient but not necessarily the most secure. Online wallets live on the cloud and can be accessed from any computer. But your private key is stored online, thus reducing privacy.

Desktop wallets: Infomation is safer on desktop wallets than online wallets because they live on your computer.

Most people select a wallet based on the ideal combination of security and convenience. Another distinction to make is between hot wallets and cold wallets.

A cold storage wallet is like a savings account. It is ideal for those who wish to store their money for a long time.

Hot storage wallets are utilized by those who wish to use their currency frequently. This utilizes a device that is connected to the internet.

All the wallet types mentioned above (hardware, online, and desktop) are hot wallets. They allow for easy access to funds.

Step Four: Secure Your Currency

Every time you make a transaction or use your crypto, you need to double-check that your investment is secure. Keeping your coins safe after purchase is essential to protect them from hacking.

Many people use VPNs, or virtual private networks, for an additional layer of security. VPNs ensure that your data is fully encrypted and that no one can see your online transactions.

What Are Some Important Crypto Investing Strategies?

Cryptocurrency investing is highly profitable with significant returns and sound philosophy. At the same time, it is essential to note that investing in crypto is also high risk and speculative.

For example, while blockchain technology is, for the most part, secure, there have been instances of exchanges getting hacked. The lack of regulation also leads to fraudulent practices or inadequate security.

The extreme price fluctuations render cryptocurrencies very volatile. You gain thousands of dollars overnight, but the flip side is that you can also lose thousands of dollars overnight. Investing without being entirely comfortable or knowledgeable can lead to significant financial difficulties.

We advise exercising caution when investing in crypto. Here are a few key strategies we suggest every beginner implement.

Do Your Due Diligence

Research is critical when it comes to crypto. You will want to educate yourself on blockchain technology, servers, and other information.

Arm yourself with information so that you’re prepared for the future. Considering that you could lose your entire investment overnight, doing basic research is an investment essential.

Invest What You’re Comfortable Losing

Many people get attracted to the ROI that crypto offers. And while the gains are considerable, do not make the mistake of investing too much, too fast.

Financial gurus swear by investing only what you’re okay with losing. This way, you don’t lose your entire life savings or retirement fund just on crypto!

Don’t Put All Your Eggs in One Basket

Diversification is a hot topic in investment. An important step you can take to protect yourself is to allocate your funds appropriately. Decide upfront how much of your portfolio crypto can take up.

By spreading your investments out, you reduce your exposure to risk if some of your assets lose value.

Start Small

Another essential tip for beginners is to stick to small amounts. Many cryptos can be expensive, with one token going for hundreds of dollars! Allocate a small payment to your portfolio.

You can even buy a portion of crypto to reduce your risk and play it extra safe. Be wary of investing more than 10-15% in crypto.

Keep Track

It would be best if you were on top of your currency and calculating all your profits and losses. This will allow you to diversify if need be or change your allocations. You will also be able to track patterns and adjust your strategy if required.

Get Ready for a Wild Ride

The nature of cryptocurrency is that it is volatile and unpredictable. Be prepared for this instability, and take it in your stride. Doing detailed research can go a long way in preparing you for your new investment!

Our most significant piece of advice? What goes up can come down, and vice versa. Enjoy the fluctuations of the market, and hold tight to your investment.

If you’ve undertaken crypto investing prudently, your assets will be safe in the long run.

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