How to Start Investing In Cryptocurrency

Over the past two years, the hike in search results for "cryptocurrency" and terms alike is evident in its popularity. Especially the COVID-19 pandemic has compelled people to look for passive ways to fulfill their means - investing is one of those. 

 Blockchain technology is a lucrative career for many; others are dying to learn how to hop on this bandwagon. 

 While learning something new is a good idea, you must be careful with what sources to trust. 

 This article will guide you through the basics of cryptocurrency and how you can invest in it. 

Choosing how to invest

As with any investment, you need a broker or use a crypto exchange platform. 

Though they both have the same job - helping you invest in Crypto, they are slightly different. 

What is a cryptocurrency exchange?

A cryptocurrency exchange is a platform designed for buying and selling cryptocurrencies. Most cryptocurrency platforms have lower fees than brokers, thus attractive for newbies. However, complex graphs and not-so-easy-to-use interfaces can be challenging to understand cryptocurrency platforms. Luckily, some platforms have free resources like the Binance Academy. In addition, Coinbase has many blog posts on crypto basics and investing. 

Nonetheless, you probably read this blog post because you looked up "how can I buy cryptocurrency" and need money on the side. Using a cryptocurrency platform would be much better than hiring a broker if that's the case. There are plenty of platforms like Currency.com, Binance, or Coinbase. Since Binance and Coinbase have a bit of a learning curve, Currency.com is perfect for beginners.

Despite strong encryption on most crypto sites, there is still a threat to your data being vulnerable to cybercriminals. 

What is a crypto broker?

A broker is an expert who will help you purchase cryptocurrency. A broker will do that for you instead of making the difficult buying and selling decisions yourself. But, of course, brokers have a fee, and sometimes hiring a broker can be more expensive than using a crypto platform. 

Numerous reports of crypto brokers illegally selling your information to brokerages or crypto funds have been reported. Others have been accused of dishonesty regarding market prices. If you want to go on this route, Robinhood, Kraken, and SoFi are some well-known brokers. Be cautious, though, because many of these brokers have restrictions and rules of their own. Therefore, it is always better to do your research and decide what suits you best.

Creating a cryptocurrency wallet

Though hiring a broker or using a centralized exchange platform are the two most popular investing methods, a slight vulnerability is involved. Alternatively, advanced crypto investors prefer creating cryptocurrency wallets. These wallets help you store funds to buy a cryptocurrency and can be integrated with decentralized exchange platforms like Uniswap or Curve. 

Key Takeaway

Getting started on a centralized exchange platform is the easy way to begin investing in cryptocurrency. It's easier to add funds and trade crypto coins, and your data is safe. On a side note, make sure you can transfer and purchase cryptocurrency through fiat currency (USD, or whatever your local currency is). 

Create an Account 

Once you've decided to invest in Crypto using an exchange platform, it's time to create an account. Most platforms have different identity verification procedures, so follow that. Unfortunately, it isn't easy to begin trading on most legit platforms unless you verify your identity. 

Deposit Cash/Add funds

To begin the actual trading, you have to add some funds to your account. The common and easy way is to link your bank account with the exchange platform. Other methods include wiring money into your account or paying with a credit or debit card on the forum.

 Although most platforms allow using your credit card, it is advised you do not use one. This is because using a credit card on an exchange platform is risky. In addition, credit card companies charge additional fees on crypto purchases because, technically, it's money "bought in advance." So unless you have loads of cash waiting to be spent on credit card fees, don't go down that route. 

Buying cryptocurrency

Understand what you want to buy

To buy cryptocurrency, first, you'd have to spend some time looking around. This is because there are many mainstream cryptocurrencies to trade, like Bitcoin, Dogecoin, and Ethereum, to the unknown ones like Holo and DASH.

 Investing in cryptocurrency is different than investing in stocks. Crypto, unlike stocks, doesn't have financial backing of any sort. So you're bidding to pay more than someone else has already paid. 

 With stocks, you expect the company you invested in to grow eventually and the stocks to increase in value, earning you gains. On the other hand, Crypto isn't backed by any assets that would ultimately grow and increase in value. So, while Ethereum and Dogecoin seem attractive, you need to understand the pros and cons of investing in them. 

Calculated Risks

Building on the previous point, don't try to repeat other investors' mistakes. Trying to make guesses based on past trends and charts is a risky attempt at investing in Crypto. While a lot of resources would suggest looking at the past trends like the growth of bitcoin and other currencies, it is not always feasible. Of course, Bitcoin was worth pennies in the past, but its worth has increased drastically. So, before investing in Bitcoin or Polkadot, try to assess the future of its growth. Is it expected to grow at the same rate or higher in the future? 

Volatility

Cryptocurrencies are perhaps the most volatile assets. Their prices change more frequently than anything. One day you think of investing in Crypto, and the next day you wake up to a drastic price hike just because of a random tweet. 

 Some investors benefit from these price hikes, like those with a firmer grip on the market trends. But beginners like you might have to spend some time understanding this.  

Risk Management

As a trader, your ability to assess risk is the single-most-important trait. More volatile assets are riskier, and knowing when to buy or sell these is what separates an advanced investor from a beginner. But, depending on your investment goal, there are also different ways of measuring risk. 

 It is advised to set aside some money for trading and use it bit by bit, as a beginner at least. This way, even if you lose, you still have funds to trade more. 

Investing more than you lose 

Lastly, don't mistake putting down more money in Crypto than you can afford to let go. Speculative assets like Crypto have highly volatile prices due to their highly volatile markets. You don't want to invest the entirety of your savings in something that leaves you with nothing if it results in a loss. 

 

Storage Method 

Despite the safety methods used on exchange platforms, the crypto exchanges are not entirely safe. They are at an increased risk of hacking and fraud. In addition, if you work with a broker, you might not have a say in storing your assets. But with an exchange platform, you have options like attaching a crypto wallet, hot wallet, or leaving it on the forum. 

 

Other ways of buying cryptocurrency 

Though cryptocurrency is trending, it is a risky investment. There are alternative routes to putting your money into cryptocurrency:

  • Investing in companies connected to blockchain and cryptocurrency like Nvidia and Square
  • Investing in exchange-traded funds (EFTs)
  • Investing in crypto funds like the Grayscale Bitcoin Trust 

Conclusion 

Cryptocurrency is a volatile and risky market. If you're planning on investing in Crypto, start by educating yourself on trading, investment, and blockchain. Incidentally, as a beginner, start with smaller investments.