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With a whopping 10,748 types of cryptocurrencies that have a total market cap of $1.44 trillion, cryptocurrency has become a main asset class today.
But what the heck is cryptocurrency?
Is it a trend or is it here to stay?
Is it safe?
And how do you get started investing in it?
If you’re a beginner to cryptocurrency, let’s be honest: there’s a learning curve. But on the other side of that learning curve lies financial potential with tremendous upsides.
In this article, we’ll break down everything you need to know about cryptocurrency for beginners so that you can decide if it’s an investment vehicle right for you.
What Is Cryptocurrency?
Before we get into how to invest in cryptocurrency, let’s talk a bit about this asset class.
What the heck is cryptocurrency to begin with?
Crypto is a digital currency that’s traded like stocks to earn profits.
It can also be used as a virtual currency, which can be a source of purchasing power like cash.
Similar to stocks, cryptos can be traded in a crypto exchange or a trading platform.
They can also be bought with fiat currency like USD and stored in a digital wallet for future use or trading.
The twist?
No physical products or ownership here – everything is virtual!
History of Crypto
Let’s backtrack for a minute to break down the history of cryptocurrency.
The crypto saga began in 2008 with Satoshi Nakamoto, the mysterious founder who first published a paper about Bitcoin, the first cryptocurrency created.
Initially, Bitcoin traded at $1 per coin, and this increased to $9 after a Forbes post in 2011.
As technology for digital wallets matured with better security, more people started creating cryptos.
Soon, Ethereum emerged as the second largest crypto after Bitcoin.
The emergence of decentralized exchanges (DEXs) in 2017-2018 further boosted the crypto market. Since then, the prices have skyrocketed and then dropped and are now on the path to recovery.
Cryptocurrencies have become a household name — and more people than ever are learning how to use it as an investment opportunity.
Advantages of Investing in Cryptocurrency
Spending time and effort in learning how to invest in cryptocurrency has many benefits. The advantages of investing in cryptocurrency include:
- Transfer money within minutes
- Highly cost-effective
- Decentralized (which means that all authoritative power is distributed among all the peers on a network. For example, in order for someone to “hack” Bitcoin, they would need to hack into at least 51% of the large network of computers responsible for running Bitcoin. This is essentially an impossible task.)
- Many types of cryptocurrencies to choose from
- Highly accessible
- Secure
Disadvantages of Investing in Cryptocurrency
At the same time, it’s important to know the pitfalls before you know how to invest in cryptocurrency. It’s disadvantages include:
- Wild price swings
- Possibility for regulations
- Crypto mining can require powerful computers
- No refund or cancellation policy.
Now that we know what cryptocurrency is, as well as its history and advantages and disadvantages, let’s break down how to start investing in cryptocurrency today.
How to Start Investing in Cryptocurrency
Step 1: Select the Type of Cryptocurrency
From Bitcoin to Litecoin, Ethereum and others, evaluate which type of cryptocurrency is right for you.
Look into the trends of cryptocurrencies over the past year as well as future predictions as the stepping stone of how to invest in cryptocurrency.
Step 2: Choose the Exchange
The second step of how to invest in a cryptocurrency guide is to decide on the crypto exchange. Consider aspects like:
- security
- transaction fees
- investment requirements
- and even if the exchange supports the crypto you want to invest in
Step 3: Create the Digital Wallet
Your digital wallet will store your cryptocurrencies. The next step is to find a reliable and secure wallet — whether hot or cold— to keep your cryptos safe.
Step 4: Decide on How Much to Invest
How much are you willing to invest in cryptocurrency? The choice depends on your:
- investment strategy
- return expectations
- risk you’re willing to take
Once you are comfortable with the amount, make your selection on the cryptocurrency exchange.
Step 5: Stay on Top of the Values
Like any other form of investing, monitor its value and follow your crypto investment strategy.
Now that you know how to invest in cryptocurrency from start to finish, let’s break down a few tips to ensure that you are investing the right way.
Tips for Investing in Cryptocurrency
Tip 1: Diversify
Like any other investment opportunity — stocks, real estate and others — diversify your crypto portfolio by including two or more types of cryptocurrency in your investment basket.
Tip 2: Consider Long-term
Although cryptocurrencies are often seen as short-term investments, they’re highly beneficial in the long run as the volatility will even out to give you good returns. Because of this, consider investing in cryptocurrency with a long term mindset instead of thinking short term.
Tip 3: Automate Purchases
Many trading platforms today allow you to automate buying and selling, which can help turn cryptocurrency investing from active to passive. Set the threshold values and let the platform buy or sell for you when the value goes below or above the preordained thresholds.
Tip 4: Start Small
Again, if you’re like most beginner crypto investors just learning how to invest in cryptocurrency, start with a small capital and only increase your investments as you get a better understanding of this market.
The Bottom Line: Investing in Cryptocurrency
Cryptocurrency has several investing advantages, but it can be a steep learning curve.
Use the directives in this guide to not only invest in crypto, but to do so safely.
Above all, commit to growing your cryptocurrency knowledge so that you can minimize your risk and maximize your profit!
