Cryptocurrencies are now part of mainstream investment assets. They can be traded, held, and sold like other stocks in different markets. Their difference is that crypto trading and investments have little to no regulation. If you want to start a invest in cryptocurrency or looking to add some to your portfolio, starting may be difficult. This brief post gives you the basics of crypto investing.
Before you begin trading cryptocurrencies, you need to first understand what they mean and why cryptocurrency is the future of finance? Cryptocurrency is a digital currency without physical units. It doesn’t have a central authority that verifies transactions but uses cryptography and blockchain to prevent counterfeiting. Being decentralize and using blockchain protects crypto from hacking and other criminal activities.
What is Cryptocurrency?
Electronic money is cryptocurrency. This currency uses blockchain technology, which is said to be secure. Since it can establish distributed consensus even among participants who are not reliable. Similar to traditional bookkeeper’s ledgers, blockchains for bitcoin allow anybody with access to the ledger to act as the bookkeeper.
Today, there are hundreds of different cryptocurrencies, and it could be challenging to categorize them all. A cryptocurrency is, in general, an encrypted, typically decentralized kind of digital money. Built on blockchain technology, a perpetual, decentralized ledger system, Bitcoin, the first and best-known cryptocurrency, is a decentralized digital cash system.
Investments in cryptocurrencies have come from all across the world. Despite the fact that Bitcoin is the most well-known kind of digital currency, many other cryptocurrencies are as usable. One of the most recent and intriguing asset classes to be made available to investors is cryptocurrency.
Overview of Cryptocurrency
Despite being the most well-known and valued cryptocurrency, Bitcoin has given rise to hundreds of alternatives, or altcoins. Alternative coins come in many different varieties. Some are forks of the original Bitcoin, such Bitcoin Cash and Bitcoin Diamond.
Others prioritise anonymity, such as Monero and ZCash. Some of them have names that are inspire by Greek deities (like Apollo Currency), reptiles (like Komodo), or even internet memes (Dogecoin). This world is strange and unique.
Most people only want to hold one of the two well-known currencies, Bitcoin or Ethereum. Despite this, some investors try to buy low and sell high on cryptocurrencies that are less well-known. It is believed that one may quickly become wealthy by making an early investment in the next Bitcoin.
Volatility is a constant regardless of the currency in which you invest. Any coin can only be consider valuable by other people. Even if this statement technically holds true for all currencies. It is especially relevant given that cryptocurrencies, unlike the majority of traditional currencies, are not back by a government or a precious metal (such as gold). This raises the risk of the investment, as many investors and speculators have learned the hard way.
Know the Types of Cryptocurrencies
Like fiat currencies, there are thousands of cryptocurrency types in existence. Technology and previous innovations make them easy to create and release to the market. Examples of popular cryptocurrencies are
- Bitcoins
- Ethereum
- Tether
- USD Coin
- Binance Coin
- XRP
If you’re considering investing in crypto, you need to know the difference between coins and tokens, two terms that you’ll commonly hear when investing in crypto:
- Coins: A coin (digital coin) is a string of blocks in a computer blockchain that function like fiat currency to store value (assets or projects) and act as a means of payment or exchange.
- Tokens: Digital tokens are programmable or digital assets that live within a given blockchain’s platform. Examples of tokes are digital art (such as NFTs) and other assets. They’re mainly offer through an initial coin offering (ICO), just like IPOs, and are valid with only one merchant.
A token’s difference from a coin is that it’s created within an existing coin’s blockchain, such as Bitcoin tokens or Ethereum tokens.
Select a Cryptocurrency to Invest In
Once you understand the types of cryptocurrencies and the difference between coins and tokens, it’s time to settle on one or a few coins for your cryptocurrency trading. Trading in a good cryptocurrency differs from picking a good stock.
A stock represents a company’s ownership in the form of an asset that creates profits/value for its shareholders. A cryptocurrency represents a zero-value digital asset. It increases only by supply and demand forces and nothing else.
When you’re evaluating a cryptocurrency to invest in, find out how its supply increases and what drives (or will drive) its demand for the coin to go higher. This means you must research, read crypto white papers, and look at the project’s roadmap.
You’ll also see the industry trend of the coin since its release and find out its market cap. Among the many types of cryptocurrencies, Bitcoin is currently the most expensive coin, but Etherium is the largest by holders.
Learn How to Invest
Once you settle on a cryptocurrency of your choice, it’s time to start investing or trading in crypto (buying and selling). You’ll need to first create your account with a trust-able online cryptocurrency exchange (see here) and an eWallet. Most stock exchanges or brokers don’t support cryptocurrency online trading, but with an online crypto exchange and wallet, you can start trading immediately. You’ll then fund your wallet with fiat currency, then order to buy your chosen cryptocurrency. The exchange will help you make the purchase.
Conclusion
You can also look at best cryptocurrency investment strategies for investors for your research purpose. Invest in cryptocurrency is easy, but as an investor, always be prepare for volatility. Because cryptocurrencies are more volatile than fiat currencies or traditional assets stocks. There are many price swings and market forces that can destabilize their prices.
