Many people believe that cryptocurrency is the future, and it’s hard to disagree. Crypto has officially made its way to the mainstream, with public figures such as athletes announcing investments in crypto, and with the widespread use of cryptocurrency across various industries, from retail to gambling.
But what’s the hype really all about? While it is indeed one of the hottest investment options right now, it’s important to have a basic understanding of what cryptocurrency is and how to safely invest in crypto.
What is Cryptocurrency?
The simplest way to explain crypto is to describe it as a digital currency. It is a currency that solely exists in the digital sphere and may be used for a host of purposes, such as trading for profit, making private money transfers, purchasing goods online, and even using crypto as online casino credits.
Unlike regular fiat currencies, crypto is unregulated. However, crypto maintains security through the use of cryptography, which prevents counterfeiting and double-spending. Most cryptocurrencies likewise utilize blockchain technology, which is basically a digital ledger stored across several computers. The use of blockchain ensures that transactions are duly recorded and prevents fraudulent transactions since the records are present across all computers in the blockchain.
Why Invest in Cryptocurrency?
Crypto is now a legitimate payment option in numerous fields. Furthermore, the decentralized and deregulated nature of cryptocurrencies poses an advantage for those who would want to remain anonymity and to keep their transactions private.
Despite crypto’s spread to mainstream consciousness in recent years, though, many still believe that crypto has a lot of untapped potential. This makes now perhaps the best time to invest in crypto while it’s still relatively early in its existence. For instance, those who invested in Bitcoin early around the early 2010’s were able to reap a fortune when Bitcoin rose in value in the latter part of the decade. While this is no guarantee that the same will happen with other cryptocurrencies, this shows the potential of crypto to build fortunes for those who are bold and shrewd enough to make the right investments.
One of the things that makes crypto either appealing or unappealing, depending on the type of investor you are, is its volatility. The value of cryptocurrencies can swing dramatically within short periods of time. Although this is sure to scare people away, it’s something that can also be taken advantage of to make quick profits if you know what you’re doing.
Tips for Investing in Crypto
Here are some tips for beginners who are looking to make the most out of crypto:
1. Start Small and Build Gradually
The volatility of cryptocurrencies is no joke. It’s not impossible for you to lose everything you put in within a short period of time, and investing and trading cryptocurrencies is definitely not for the faint of heart.
To see if investing in crypto is right for you, make small investments first to get a feel of how dramatic the swings can be. Once you’ve become comfortable, slowly put in more money. Of course, it should go without saying that you should only be putting in money that you can afford to lose.
2. Choose a Reliable Wallet
A crypto wallet is where you store the cryptocurrency that you have. Crypto wallets may either be online wallets which are often apps or websites, or offline wallets, where your crypto is stored in hardware such as a hard drive.
Whichever wallet you choose is up to you and your preferences. Take into consideration factors such as the fees, the cryptocurrencies supported, and reviews of other people who have used the same crypto wallet.
3. Pick the Right Exchange
Crypto exchanges are where you can profit from crypto by trading. While you can also make money from crypto through other means such as mining, trading cryptocurrencies in a crypto exchange, which is a virtual marketplace, is arguably the quickest way to profit from crypto.
It is therefore crucial to trade crypto in a platform that caters to your needs. There is a variety of crypto exchanges to be found online, and not all of them are the same. Compare and contrast factors such as fees, the number of cryptocurrencies available to be traded, and user experience before you decide on an exchange to stick with.
4. Get Educated
Profiting from crypto isn’t just about purchasing a cryptocurrency and waiting for it to yield. A crucial part of investing in crypto is knowing when to sell. Naturally, you would want to sell right before the value of your investment declines, but how do you know when that will happen?
There are numerous tools to analyze trends in crypto which can come in handy for any investor in any level. Learning a few of these tools can go a long way in helping you profit as much as you can.
5. Stay Up to Date
Apart from knowing how to analyze trends in value, it’s also important to be on the lookout for events that can affect the value of cryptocurrencies. For instance, when a public figure endorses a coin, it might be an indication that the value of that coin could go up.
Also be on the lookout for new currencies that could get introduced to the market, and familiarize yourself with the people behind them to see if their coin is worth purchasing.