Investing in cryptocurrencies is becoming more and more common as the technology’s popularity grows and media networks promote those who have made it big by investing early. While access to cryptocurrency is still far from being ideal, options for investing in it are significantly greater than they were several years ago.
From the rise of exchanges to alternative ways of acquiring them, evaluating how to invest in virtual currency is worth your time and effort. But how does investing in cryptocurrencies work, and how can you even access these virtual coins and store them? This guide will provide you with everything you must know to get started investing in cryptocurrency.
A brief recent history of Crypto
While the first cryptocurrency, which is Bitcoin, was invented in 2009, no one really knew about it until 2013. Since then, however, the crypto market has witnessed exponential growth, leading to many people investing in virtual coins.
Today, there are over 1500 cryptocurrencies that have all been created in under 5 years, with 2017 being the year when crypto coins reached their all-time high. The market capitalization of these coins grew by 4000% at around $21 billion in March of the same year. Today, however, it has grown to over $454 billion, which is quite huge.
What is cryptocurrency? A cryptocurrency is a digital currency where a code based on cryptography controls the generation of units of currency and verification of transactions for the transfer of funds. This cryptographic protocol makes crypto transactions fast, secure, and affordable. The most important feature of cryptocurrencies is that they are not supported by governments or any country’s central bank.
How to get started investing in cryptocurrency
Buy cryptocurrencies To leverage the true benefits of cryptocurrencies; you need to own actual coins. Buying real crypto coins allows you to store value in the un-censurable and non-confiscatable form of money. You will also be able to experience the innovative power of sending or receiving money from anyone in the world without relying on an intermediary like a bank. Fortunately, if there is one thing that has gotten easier and better over the years with cryptocurrencies, buying these virtual coins is the user experience.
A few years back, this was such a complicated task that it led users to unscrupulous platforms. Today, however, buying crypto coins is simpler and intuitive. In fact, it can even be done through your smartphone. For beginners, we highly recommend buying cryptocurrencies on exchanges because not only is it simple, it is also very secure.
Find a reputable exchange platform The first step to investing in cryptocurrencies is signing up with an exchange that allows you to buy these coins with cash. An exchange is an online platform that allows anyone to buy or sell any cryptocurrency, be it Bitcoin or Ethereum or any other cryptocurrency listed on their site. Prior to signing up to an exchange platform, compare and scrutinize it in detail.
Most exchanges may require that you verify your account if you want to buy or withdraw large amounts of cryptocurrency. You will be asked to provide your name, address, phone number, and scanned ID or passport to verify your account and identity. Make sure to choose a reputable exchange platform that gives you access to high-value cryptocurrencies like Bitcoin, Ethereum, or Ripple. The site should also have fast verification and buy/withdraw limits that are generous.
What kind of cryptocurrency are you interested in? When looking to invest in crypto, it is important to understand the fundamentals of these digital assets, as this can play a huge role in the amount of risk involved. Fundamental analysis is the best indicator for long-term investors. Some factors to consider include;
Market Capitalization The capitalization of a cryptocurrency is based on the number of users it contains. Basically, your profit depends on your network and how active it is. As the user base grows, so do your investments. Fortunately, the consumption of cryptocurrencies seems to be growing at a rapid rate.
Find out if the digital asset you choose is widely acknowledged and trustworthy Just as in any other market, trust is crucial when investing in cryptocurrencies. Before investing in a cryptocurrency, you should do your own research to choose an asset that you are confident enough to put your money behind.
You will need to understand how the coin works, what it has to offer, and its history prior to choosing to add it to your portfolio. Similarly, the longer a virtual coin has been in circulation, the more trustable it is.
Don’t forget to check crypto market statistics. When investing in cryptocurrencies, it is crucial to gauge market behavior throughout different times. Although it might be baffling to follow market dynamics, this should not be overlooked, especially if plan to invest over a short period.
To make it simpler, consider streamlining your cryptocurrency of choice to those you prefer and look up their current charts. Try to spot its trends via market indicators. We highly recommend spreading your risk by combining multiple cryptocurrencies when trading.
How much can you invest in cryptocurrency
This is one of the main questions prospective crypto investors ask themselves. It is important to understand that the crypto world is disposed to market fluctuation partly due to its relative infancy in the market. Therefore, investors should always maintain a cautious attitude when looking to invest in these virtual coins.
With this information in mind, there are several factors you need to keep in mind when looking to invest in cryptocurrency. Just like any other investment, you should never put in more than you are comfortable losing. This is especially important in the world of crypto, seeing how quickly a position can depreciate. So take the time to consider your capacity and ability to take on such an investment. Find an amount that suits your needs and risk tolerance and stick to it.
After choosing the right exchange platform that meets your needs and buying your preferred cryptocurrency, you will need to transfer it to your personal wallet. If you don’t have a wallet, you will need to keep it in an exchange as you look for a wallet.
Choose a wallet
Never leave your coins on an exchange platform since you will not have full control of it.
Therefore, the next important step when investing in digital coins is to choose a wallet. A wallet is a software program that gives you access to all the cryptocurrencies you own and allows you to manage your stash, store, send and receive coins. It provides a secure storage solution for virtual currencies. However, if your wallet disappears, so do your cryptocurrencies. Therefore, it is crucial that you find a quality cryptocurrency wallet prior to investing. Some wallets are designed to hold a single type of coin, whereas others support multiple virtual coins, which is quite handy, especially if you don’t want to limit yourself to just one asset.
Other wallets come with additional features such as checking live exchange rates to your fiat currency of choice. Each wallet comes with a public address and a private key. The private address is for receiving funds, whereas the private key is for spending your virtual money. There are dozens of options to choose from, including online, apple, and android wallets.
Transfer funds to your wallet and invest. You can easily move your digital coins out of the exchange into your wallet by pasting your public key and clicking send. Although you can incur some transaction costs, they are quite minimal compared to banking fees. Once you have the coins in your wallet, you can hold on to them. Or invest in ICOs or blockchain.
Decide on the type of investment you are after. When looking to invest in cryptocurrencies, it is crucial that you create a plan. You need to decide whether your investment will be short-term, medium, or long-term undertakings. This is a vital consideration that impacts the amount of money you will place in your asset.
If you want to trade regularly, you will need to understand the cultures that control the markets, market trends, and the approach of investors. If you opt to hold on to the currency a little longer, you need to study market indicators, fundamentals, and technical analyses, general tech news, incoming market-moving events, developer announcements, among other things.
Finally, know the risks involved. We have all heard of the people who became millionaires after buying bitcoins for a few dollars a decade ago. Although cryptocurrencies can increase in value quickly, it is important to know that they can also decrease just as fast. It always pays to be reasonable with your financial decisions.
If you are intent on investing in crypto, the prudent approach would be to do extensive research to determine whether you can invest in this emerging market. Making small investments is highly recommended for beginners to start and learn about how to interact with virtual wallets without exposing themselves to this market volatility. This is all you need to get started investing in cryptocurrency. That said, it is important to take your time researching the different cryptocurrencies available using online forums.