Since cryptocurrency started gaining popularity, more investors have become interested in joining the hype. If you’re a crypto newbie and want to learn more about this lucrative asset, you’re in the right place. In this detailed guide, we take you through all you need to know about cryptocurrency, from the different types of coins to what you should keep in mind when investing. Let’s dive into it!
What is cryptocurrency?
Cryptocurrency is a digital currency. In other words, it’s cash that you can only use online. As the name indicates, cryptocurrency relies on encryption, a technology that encodes information about the use of the currency in transactions in order to secure it. Digital currencies work like cash, meaning you can use them as an investment or for payment. What makes crypto different from other types of money is that they are decentralized, meaning that no central authority regulates it.
What are the different types of cryptocurrencies?
The word cryptocurrency is used to define virtual currencies in a broader sense. However, there are currently around 20,000 of them. Bitcoin is the first cryptocurrency developed and one of the most popular ones. But there are also alternatives to Bitcoin, commonly known as altcoins. Here are the cryptocurrencies that have gained the most popularity among investors:
- Binance Coin;
It’s not possible to tell for sure which of these coins will be the most lucrative ones, considering that the crypto ecosystem is still new and no one can make accurate predictions about their future. Even if these coins have gained massive popularity, they involve some risks, and it’s essential to be aware of them before investing. Getting informed about crypto is the first step in determining whether this investment is suitable for you.
Some aspects to consider before investing in crypto
Cryptocurrencies are volatile in nature, and their value can go through large swings in a short time. Hence, it’s essential to consider how you feel about this aspect. Assessing your risk tolerance is crucial before investing in crypto, as there’s no certainty that you’ll win. In fact, there will undoubtedly be some losses, too, so you should consider whether you’re willing to take this risk or not. Moreover, you should also get clear about your reason for investing in crypto. Are you only doing it because it is a trend or because you have another goal in mind?
Cryptocurrency is a powerful opportunity if you’re in it for the long term. But before you dive in, it’s paramount to use caution and consider your expectations and intentions. A long-term perspective is crucial when investing in assets like crypto, which can quickly go up and down. You want to avoid making emotionally driven decisions or buying when prices go up only because of FOMO. These aren’t good investing strategies and often lead to disappointment and losses.
Steps to take when getting started with crypto investing
Crypto investing has become more accessible to anyone interested in it. Different exchanges are available, and it takes only a few minutes to set up an account and begin your crypto journey.
However, just like with any other asset, it’s wise to do your research on crypto before investing in it. If you want to start crypto investing, consider the following steps.
Choose a cryptocurrency
Before purchasing a company’s stock, you’d typically evaluate the risks involved. Things are no different for crypto, so before investing in a digital currency, make sure to evaluate its characteristics.
Suppose you choose one of the top cryptos like Ethereum. Before investing in it, you need to understand how it works, its pros and cons, and also check the Ethereum price.
It’s best to avoid newer cryptos massively promoted on social media so that you won’t fall victim to a scam. To minimize fraud risks, you can make your investments on a reputable platform.
Pick a crypto exchange
You’ll have to buy crypto through an exchange, and choosing a reputable one is paramount. This platform will be your dashboard where you’ll trade, buy, sell and manage your investments.
There are different options out there, but when selecting, consider factors like security, the volume of trading, fees, and the cryptos you can purchase on a specific exchange.
Consider how you’ll store your assets
Crypto is digital, meaning that you must store your coins in a digital place. Many crypto newbies choose their investment platform as a storage option.
Make sure to evaluate your options and decide what works best for you. Your platform should be regulated, carry financial insurance, and ensure safety against cyber threats and hackers.
Decide how much you want to put into crypto
The amount you invest in crypto depends on different factors like risk tolerance, investing strategy, and your budget. Another thing to consider is the transaction costs and minimum investment requirements, which are different for every exchange.
Generally, exchanges enable you to pay in dollars, meaning you won’t have to buy a whole coin. As a result, you don’t need to put thousands of dollars into your investments. Also, keep in mind to only invest as much as you can afford to lose!
Manage your crypto holdings
Cryptocurrency is an exceptional investment because you can use it to purchase things but also hold it as a long-term investment – what you do with it it’s up to you only and is linked to your goals and investing strategy.
You can achieve financial health if you learn how to plan effectively. One key rule is to invest regularly and diversify your portfolio. Also, it’s essential to save for unexpected situations and spend less than you earn.
Investing in crypto can seem pretty overwhelming when you’re new to it. However, if you take the time to learn how it works, you’ll be able to navigate the market successfully. It’s paramount to understand the concepts related to crypto before making any investment, as you don’t want to jump into something you know nothing about. Start gradually when investing, and remember to make only informed decisions that align with your goals.