Everything you need to know
When it comes to actually invest in cryptocurrencies, on paper, this may sound a bit difficult, especially if you have never entered the world of cryptocurrencies before. From having to analyze and pick from the thousands of altcoins out there, to picking an exchange, the perfect wallet, and managing your funds, there are countless ways through which you can actually get up and start investing. With all of that being said, however, where do you start, and how?
This difficulty is one of the main reasons a lot of people are discouraged from actually investing in cryptocurrencies, and yet those few that do end up choosing to do so quickly adapt to it.
In fact, according to Dune Analytics, within the decentralized finance space alone, as of April the Fourth, 2021, there are more than 1.781.194 users, which is astonishing.
In fact, Binance, one of the world’s largest cryptocurrency exchanges out there, according to CoinMarketCap, has a 24-hour trading volume of $32.641.264.631, with 1167 markets and 348 coins as of April the Fourth, 2021.
But if you’re seeing this and have no idea what any of this means, that this information is pointless and worthless to you, and as such, we’ve created a guide to investing in cryptocurrencies that will get you up to speed on everything that’s currently happening within this space, so the next time you decide to invest, you’ll know what to look for.
Getting started with crypto investing
Now, before you even get started, if you are a company, the chances are high that you will need an accounting company and need to know how cryptocurrencies are taxed within your specific country or region. Furthermore, even if you are just an individual that wants to get into cryptocurrency investing, there are a few things that you need to know. These include a cryptocurrency exchange account, personal identification documents if you end up using KYC (Know Your Customer) platforms, and a secure internet connection alongside a method of payment.
We would strongly recommend that you get your own cryptocurrency wallet outside of the exchange account.
There are multiple valid methods through which you can pay, and these include debit cards, credit cards, and bank accounts.
Here’s a quick crash-course on crypto-wallet. You have two types of wallets, hot wallets, and cold wallets. Hot wallets are crypto wallets that are connected to the internet in some way, think of these as web-based wallets, where the currency stays on the exchange you use for example. This is excellent for quickly buying and selling cryptocurrencies, but if you are investing for the long term, it can be risky as they have the potential of being compromised.
On the flip side, you have cold wallets, which are these crypto wallets that have no connection to the internet and can be in the form of hardware wallets, or paper wallets.
These have no way to be compromised, and even if you end up losing them, as long as you have your private key or seed, your funds can be recovered.
This is due to the fact that the funds themselves never leave the blockchain, and you are not storing them in your wallet, you are just storing the private keys through which you can access that specific address in the blockchain.
Carrying on, privacy, and security are also important issues of many cryptocurrency investors, as anyone who gets a hold of a private key can authorize the transactions. Another aspect you should be aware of is that, on the biggest cryptocurrencies out there such as Bitcoin, anyone can view the history of transactions made on its blockchain. Keep in mind that only the transactions are publicly recorded, not the identifying user information.
You should also know that the cryptocurrency market, no matter how popular it may be at the time of writing, is quite volatile, so when you decide to invest, keep in mind that this is done through your own risk. There are no guarantees in this world, and this is the case as well for crypto-investments.
Choosing an exchange
If you want to buy, sell, trade, or hold cryptocurrencies, the first step you need to take is to actually sign up for a cryptocurrency exchange. Make sure to pick an exchange that allows you to withdraw your crypto to your own personal wallet for the highest level of security. Now, keep in mind that there are plenty of cryptocurrency exchanges out there, and many of them do require KYC.
The top 10 cryptocurrency exchanges at the time of writing include:
- Coinbase Pro
- Huobi Global
So, all you have to do is make an account, choose the payment option you’d like, connect a wallet and place an order.
Choosing a payment option
But wait, how exactly do you choose a payment option? Well, this is highly dependent on the exchange. Some will require you to include pictures of your driver’s license, social security number, or other various information, all of which might be dependent on the region you are in.
Generally speaking, you can use most credit or debit cards to pay and buy cryptocurrencies, or in other words, exchange FIAT for Cryptocurrencies.
Placing the order
Once you pick the right exchange and have connected a payment method, you can start investing.
There are many investment methods out there, but here are the main things you need to keep in mind. Allocate a small percentage of your portfolio to cryptocurrencies, and be wary if you end up investing more than 10%. Cryptocurrencies are mediums of exchange first and foremost, and as such, their value is determined by the market. Choose the cryptocurrency you want to invest in after doing a lot of research. Bitcoin is currently number one, with Ethereum, Zcash, Dash, and Ripple being other notable mentions. Avoid investing based on trends, and do actual market research, and always understand your risk strength and invest in what you are willing to potentially lose if things go wrong.
As previously discussed, you can store your cryptocurrency on desktop wallets, online wallets, mobile wallets, hardware wallets, and paper wallets.
Some of the best cryptocurrency wallets out there include:
● Ledger Nano X
With that out of the way, hopefully, now you know everything that you need to in order to get started with crypto-investing. Always base your decisions based on research and analytics, in order to make an educated risk, and remember to never invest more than you are willing to lose.