Crypto

How To Invest In Crypto

Cryptocurrency is continuing to rise in use and popularity more and more as the years go by.As it becomes more mainstream and popular, more people are choosing to invest in it and they are actually seeing results from their investments. 

But to someone just starting out in the cryptocurrency world, the concept of actually investing and understanding everything you need to know can seem quite intimidating. You can be a bit overwhelmed in knowing where to start or what exactly it is you need to look out for. 

Well don't worry, we’ve got you covered! In this article, we’ll be telling you about everything you need to know about investing in cryptocurrency, what it is, and how you would go about investing for yourself. 

So let’s dive straight in and by the time you reach the end of this article, you’ll be a pro! 

What is Cryptocurrency? 

Before we get into how you pick the right cryptocurrency to invest in and then how you invest in it, it’s important for you to have a basic understanding of what cryptocurrency actually is. 

A cryptocurrency is a form of digital currency that works usually through blockchain. It is all completely digital and there is no physical form of cryptocurrency. It doesn’t have to rely on any central authority that will verify any transactions made, nor does it rely on creating new units. To stop any counterfeit currency from being made, it relies on cryptography instead. 

Cryptocurrency is usually supported by blockchain technology. A blockchain is a concept that consists of literal digital individual blocks of data. These blocks of data then contain information, and this information can be about anything, including cryptocurrency transactions. Every block of data will make reference to the previous block, which in turn creates a whole chain of blocks, and this is why it’s called a blockchain. The reason each block contains references is that it allows the chain to be protected from hackers. The references cannot be changed, so the hackers can manipulate the blockchains. 

There are literally thousands of thousands of cryptocurrencies that are out there and available to be able to use. The reason there are so many is that it is relatively easy to make these cryptocurrencies.When new coins are made, they can jump onto an existing blockchain and this is another reason it’s so easy to make a new cryptocurrency. 

Picking The Right Cryptocurrency To Invest In

So now we have a better understanding of what cryptocurrency is, let’s take a look at how you work out which cryptocurrency is the right one for you to invest in. 

It’s always important for you to do your own research when you’re looking to invest in cryptocurrency. Don’t just rely on word of mouth or someone’s opinion of which cryptocurrency is the best one to invest in, because if you don’t know about it yourself, this could be very bad information for you to work with. 

The thing that makes a cryptocurrency worth more or less is a lot to do with its supply and overall demand of it. If a certain cryptocurrency is suddenly popular and more people want it but there is a limited supply of it, then the price of that cryptocurrency will increase. When you’re looking into which cryptocurrency to invest in yourself, you will want to take this into consideration. You also need to take into consideration how the supply of that cryptocurrency will increase and what will make that cryptocurrency become more of a demand. 

A good way to do this is to look at the cryptocurrency team’s digital media which is referred to as “the white paper”. This will tell you whatever you need to know about the cryptocurrency and it will show you a roadmap for the entire project. You need to look out for anything within that roadmap that you think will spark a demand for the cryptocurrency. You will also want to research the actual cryptocurrency team. Get to know them and what they are doing, and work out if they have the skills and ability to actually execute their idea. If the team behind the cryptocurrency looks legit and comes across as professional, dedicated, and focused, then you’ll have a better idea of how well their cryptocurrency may do.

You should also look into how well financially the cryptocurrency of choice is already doing in terms of price and demand. If the cap on the cryptocurrency is already quite high, then this usually means that their growth is close to stagnating. You want to look for a cryptocurrency that is on the rise, but not quite at its projected goal, so you can make some capital off of it without worrying about it stagnating. 

You want to make sure that whatever cryptocurrency you’re investing in has room to grow. You want to be able to invest in a cryptocurrency that is going to be worth something in the longterm. So bare this in mind when you are looking for the right cryptocurrency to invest in. 

It will take a great deal of good judgment and prediction on your part to invest in the right cryptocurrency, but with the right research and attention to detail, you’re sure to be successful in your investment. 

How To Invest in Cryptocurrency

Once you have selected your chosen cryptocurrency to invest in, you will have to go about actually investing in it. We’ll go over everything you need to know about how to invest in cryptocurrency right here. 

The first thing you will need to do before you can actually invest is to create and open an account with an existing cryptocurrency exchange. There are lots of different cryptocurrency exchanges you can choose from, so you will want to look into some of them before you decide which one you’d like to open an account with. 

One of the most popular cryptocurrency exchanges is called Coinbase. Along with being one of the most popular, it is also extremely beginner friendly, so you will be able to navigate your way around Coinbase without any difficult issues. Coinbase operates in the United States and does its exchanges out of the US. There are lots of other exchanges you can look into, some of which include Gemini, SoFi, and Robinhood. When you look into a cryptocurrency exchange, just make sure that it supports the specific cryptocurrency that you want to invest in and buy. 

As soon as you’ve chosen your cryptocurrency exchange, you will need to put fiat currency into your account, and then you will be able to create an order to buy your desired cryptocurrency. The way the orders work is quite similar to the stock exchange in the sense the cryptocurrency exchange will take your buy order and match it with someone who has made a sell order that is the same price. Once this is done, the trade will be made. 

Once you have purchased your cryptocurrency, you will then have to prepare yourself for the volatile nature of the cryptocurrency exchange. Crypto is generally considered to be one of the most volatile exchange rates, even more so than the stock market. Prices and value can rise and drop extremely quickly and at quite a noticeable rate and amount too. You also need to allocate your personal portfolio to the specific cryptocurrencies and you want to make sure these allocations are in wide and balanced bands. If for whatever reason you fall out of these bands, you will need to make sure that you are rebalancing when it is appropriate. 

Pros of Investing In Cryptocurrency

As with anything else, there are both pros and cons of investing in cryptocurrency, so we’ll tell you about both. Let’s start with the pros. 

One of the biggest pros of investing in cryptocurrency is that lots of cryptocurrencies can be used for additional utility. One example of a cryptocurrency that allows additional utility is Bitcoin. Bitcoin and some other cryptocurrencies let you trade for services and goods. Some also offer discounts on services and access to other projects. This isn’t the rule for all cryptocurrencies though, so you should look into whatever cryptocurrency you are investing in to find out. 

Another great thing about cryptocurrency is that it is incredibly diversified. It has no correlation to existing stocks or bonds, or any other forms of asset classes. This has a lot to do with cryptocurrency still being a relatively new concept and the data that exists with it is still relatively new and limited. Because cryptocurrency is very much its own contained thing, it makes a lot of sense that it isn’t tied to the other asset classes, and this diversification is definitely a pro. 

Cryptocurrency is also great for its return potential. It is widely believed and regarded that cryptocurrencies actually have a better financial return rate than the stock market does, and this return rate will only get better as time goes on. 

There are lots of pros to cryptocurrency, these are just some of the most important we think it’s important that you know about. 

Cons of Investing In Cryptocurrency

Though there are lots of pros to cryptocurrency and investing in them, you do have to look at the cons too. You have to be mindful of them even if your investments are going well. So let’s have a look at some of the cons now. 

Probably the biggest con of investing in cryptocurrency and just cryptocurrency as a concept is that the regulation in cryptocurrency is extremely limited. When you get involved with cryptocurrency, you have to be prepared and accepting of the fact that you won't have as much security or protection with it. Though it is similar, you have to remember that it is not the stock market. 

One of the biggest examples of this is hacking. If you get hacked and all of your investments get stolen, if the coins and the cryptocurrencies are a scam, there isn’t really anything you can do about it. But this is part and parcel of why cryptocurrencies are in such high demand. People overall like the fact that cryptocurrencies aren’t highly regulated. If the regulations become more strict, could see the cryptocurrency lose its demand completely. 

The other big con of cryptocurrencies is their high volatility. We have spoken about this already, but this point definitely needs to be further understood. The prices and values of individual cryptocurrencies can swing between high and low loads of times in one day, let alone a week, or a few months. You could start the day ready to invest in a cryptocurrency that is worth a lot, but in a matter of hours, the value could be extremely low. This is a risk you take when you invest in cryptocurrency. 

The Best Cryptocurrencies To Invest In When You’re Just Starting Out

If you are ready to start investing in cryptocurrency and you accept both its pros and cons of it, then let's have a brief look at some of the best cryptocurrencies you can invest in to start off with. 

Bitcoin is probably the best and most well-known cryptocurrency available right now. All cryptocurrency exchanges support Bitcoin, so you won't have to worry about finding an exchange that does if you choose this one. 

Two other good options include Ether and Cardano. Ether uses the Ethereum blockchain and the demand for Ether is slowly on the rise. Cardano is sort of an alternative to Ethereum and it also has the potential to rise higher in value on the exchange in the future. 

Conclusion

If you are serious about investing in cryptocurrency, then you will have to make sure that you use the tips and information we’ve provided for you here when it comes to investing. 

It may seem a bit complicated at first, but once you get into the swing of things with cryptocurrency and you have been investing for a little while, it will all start to make a bit of sense.

Start off small with your investments, so if you make mistakes, it won’t hurt you financially too much.