How To Invest In Cryptocurrency
Investing in cryptocurrency is an excellent idea. It takes knowledge, research, and trial-and-error to understand the investment concepts behind it. This article will guide you on how to invest in cryptocurrency.
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The 5 Steps
#1 Understand Cryptocurrency
Cryptocurrencies are digital or virtual currencies that use cryptography for security. They are difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
Before you can invest in cryptocurrency, you need to understand the inner workings and how the market functions. If you are looking for an in-depth guide on cryptocurrencies, we recommend reading this introduction to cryptocurrency.
#2 Find The Right Coin For You
Now you know what cryptocurrency is, but before you invest in any of them, make sure the project makes sense. This means researching the market conditions and understanding the value proposition behind it, and looking at what others say about their experience with that coin. Do your research and make a judgment call. Check out the project’s website, read their whitepaper, and consult with other investors.
Remember that you need to do more than pick a coin from a long list of cryptocurrencies. You have to determine whether that particular cryptocurrency fits your portfolio by analyzing its market condition, consensus mechanism, and features.
#3 Get To Know The Market
If you want to invest in cryptocurrency, you have to pay attention to the macroeconomic factors that affect this market. In this case, we will be looking at the market trends and market sentiment for cryptocurrencies as a whole, which is best done through specialized websites such as Coinmarketcap.
For example, Bitcoin’s price increased from around $500 to $2000 in 2017. The market has since exploded. This is known as volatility, and it means that you have to pay attention to the market trends before investing in this cryptocurrency or any other for that matter.
#4 Get Your Wallet
Cryptocurrency wallets allow you to store your funds. It is a piece of software that gives you access to all the functions available in cryptocurrency trading platforms. However, if you are looking for an alternative to digital wallets that store cryptocurrency, there are hardware wallets with secure messaging and blockchain asset tracking features, as well as bookkeeping apps specifically designed for cryptocurrency investors.
Make sure to do your research on wallets to find the one that is best suited for you. Try different options and see which ones work best for storing your coins, especially if you are looking to use other platforms in addition to this one.
#5 Buy Your First Coin
Now it’s time to get your hands dirty. There are several types of purchases we can make. You can buy cryptocurrency from exchanges that sell them and allow you to buy and sell them as well as invest in them, like what Binance is doing. Some projects help new investors get their hands on coins by offering ICOs (initial coin offerings) or IEOs (initial exchange offerings), such as LAToken.
These services usually charge a fixed price for the token, and you may have to pay fees for exchanging your money from fiat to cryptocurrency and vice versa. Several broker websites allow you to purchase cryptocurrencies at a fixed rate based on the market value or take advantage of special offers and bundles. Of course, you can always choose to mine your coins instead.
Now that you know the basics of investing in cryptocurrency, check out our other articles on blockchain technology and look at what cryptocurrencies you should invest in this year.
Frequently Asked Questions
What is a wallet address?
This is a unique ID that allows users to access their cryptocurrency. If you want to transfer money between two people, the sender will need the recipient’s wallet address to send funds correctly. Wallets can be digital or physical devices.
What are hardware wallets used for?
These are physical devices that store your cryptocurrency keys offline. They are more secure than digital wallets but still not as safe as cold storage. The most popular hardware wallet is the Ledger Nano S, which costs about 100 Euros (~$112) and supports multiple currencies, including Bitcoin, Ethereum, Litecoin, Ripple, Dash, and many other cryptocurrencies.
What is cryptocurrency mining?
This is the process of verifying cryptocurrency transactions using computational power. Cryptocurrencies that use blockchain technology for these purposes are called proof-of-work cryptos, and this method typically helps secure blockchains against attacks. Mining can be profitable if you have enough hashing power, but before mining on your computer, you will need to research the subject to see if it’s worth your time and effort. You can also try cloud mining instead.
What is Ethereum?
Ethereum uses blockchain technology to verify transactions, and it operates outside central banks without needing to be controlled or backed by a single governing body. It also features its programming language for smart contracts (code that automatically executes when certain conditions are met).
What is Bitcoin?
Bitcoin is a type of cryptocurrency that uses blockchain technology to verify transactions. It also operates outside central banks without needing to be controlled or backed by a single governing body.
What are altcoins?
These are other cryptocurrencies that are not Bitcoin or Ethereum. The term “altcoin” was created because Bitcoin was the only significant cryptocurrency at first, and other coins were known as “alternative coins.”
What is IEO?
IEO stands for initial exchange offering. It works similarly to ICOs, but it allows third-party cryptocurrency exchanges instead of companies or projects to raise funds for themselves by issuing cryptocurrency tokens on the blockchain.
What is ICO?
This stands for initial coin offering. Essentially, companies or projects issue their token on the blockchain to raise funds for themselves. This service usually allows the investor to benefit from the increase in the value of their tokens.
Can I make money investing in cryptocurrency?
Yes, absolutely! It is possible to buy low and sell high at a higher price. There are more than 1,700 cryptocurrencies out on the market, and you can trade some like Bitcoin and Ethereum at a profit. However, you will need to conduct your research and look into the market before making any decisions.
Can I buy cryptocurrency with fiat?
Yes, you can! Cryptocurrency exchanges allow you to buy cryptocurrency using fiat, and there are services like Changelly and Shapeshift that will enable you to exchange one digital token for another.
How does cryptocurrency work?
The blockchain technology that cryptocurrencies such as Bitcoin and Ethereum are based on works by recording every transaction made using their token. The use of cryptography makes sure that each wallet has only one unique key to access the funds, while multiple users can have access to these keys.