Cryptocurrencies have gained popularity due to their explosive prices caused by continuously growing demand each day. When the idea of Bitcoin was first launched, there weren’t many people who believed it’d grow to be a widely used form of currency, from trading at less than a dollar during its inception to over $50,000 in today’s market.
This rapid growth has inspired the developments of other cryptocurrencies. This has further attracted the attention of both investors and speculators. In comparison, cryptocurrencies can’t be considered a traditional investment such as stocks and real estate that depend on interest rates. However, the price surge could generate profits for holders. A trend that’s caused more people to hold part of their portfolios in crypto.
Before investing in crypto, you need to understand what they are. Cryptocurrencies are a form of digital money or virtual currency which uses a unique technology called a blockchain. The currency is secured so it can’t be used more than once or a counterfeit produced.
Cryptocurrencies aren’t regulated by central banks or one institute. It’s more of a peer-to-peer method of transactions through secure wallets. The term crypto refers to the complex cryptography used to secure these transactions. One can always learn more about cryptocurrencies by searching the web for more information.
Investing in Cryptocurrencies
After understanding what cryptocurrencies are and how blockchain technology works, you may start gauging your investment. Here are some of the things you need to know when starting your investment:
- Choose where to buy
The first step of investing in cryptocurrency is choosing the right platform to buy. The platforms have different suitability depending on your region and the amount you need to invest. These platforms are usually online exchanges because traditional financial institutions don’t offer these services.
These online exchanges also offer wallets in which you can hold your coins. However, you may need a hard wallet that’s more secure than online wallets. This is primarily important for holders who want to keep their investment for a longer period of time.
- Choose the right cryptocurrency
This is one of the most challenging choices a beginner can make. Some will only want to hold crypto, while others will always speculate on the price. There are over 5,000 cryptocurrencies on the market. As a beginner, you should consider buying reputable coins like Bitcoin (BTC) and Ethereum (ETH) and as you advance, you can start buying altcoins that promise a higher percentage increase in price, depending on your reason for investing.
Once you explore the market well, you may venture into other coins too. Alternatively, you can opt to divide your investment between coins to make the most out of both stability and price rise.
- Don’t go all in
One problem faced by many starters is the get-rich scheme that people think exists in crypto. Even when the coin you’re holding seems to be on a bull run, never allocate all of your investment in cryptocurrencies.
Self-control is vital because there’s a history of some coins being used for pump-and-dump. By investing part of your portfolio in crypto, you’ll be protected from market crashes and potential loss of your investment.
You might as well earn interest on your crypto by exploring popular lenders and borrowers like BlockFi and Nexo.
- Avoid hype investments
Investments based on hype could be a quick way to lose all of your money. In this age of social media, there’ll be many people claiming a certain coin will have a pump in price and convince you to invest in them. This could be suicidal because all those are speculations—as no one can fully predict how a crypto market will turn out.
Panic buying and selling could make you lose money. The trend has been prices dropping and going up again after some time. Making rash decisions due to these abrupt market changes could make you lose on future bull runs. Hold your coins as long as you can and only sell when necessary.
- Secure your cryptocurrencies
Cryptocurrencies are designed to work with the Internet, and this means they’re vulnerable to hackers. Once your wallet is accessible to someone else, you can quickly lose your investment. You can secure your wallet through two-factor authentication. However, this might still be vulnerable to hackers.
The best way to secure your coins, especially for long-term holding, is to use hardware wallets such as Ledger and Trezor. Hard wallets are offline accounts that can only be used when connected to a computer. Once you unplug the device, such as a USB, your wallet goes offline again and is immune to hackers.
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Cryptocurrency could be the future of currencies and payments. Since it’s not controlled by central banks, the power to trade and transact is transferred to individuals, and with fewer regulations. However, in as much as it’s promising, it could turn out to be like any other investment and suffer a significant downside. You should then invest wisely and according to your capabilities. Examine the pros and cons of cryptocurrency to make an intelligent investment.
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