Cryptocurrencies are seen as the currency of the future, forever changing the way people exchange and transact. Owing to the popularity and novelty of cryptocurrencies, their value as assets are increasing at spectacular rates. Thus, seasoned and speculative investors are on the prowl for the best cryptocurrencies to invest in and profit from. While it takes a lot of work and research to the stomach and rides the wave of investing in cryptocurrency, beginning investors are most welcome to try. Here’s how to invest in cryptocurrency for beginners and how to get protected, too.
A cryptocurrency, as the currency of the future, is a new form of paying for goods and services which uses online platforms. A good way of understanding the essence of cryptocurrency and crypto coins is to liken them to the chips you use at the Casino or the tokens you use when playing at an amusement center. For a sum of money, you get an equivalent number of tokens. Online, companies have their own crypto tokens too for use in purchasing their products.
The novelty in cryptocurrency lies in its decentralized technology, versus banks or central bank’s unified, centralized system, called a Blockchain. A blockchain is a network of computers that keeps a record of all cryptocurrency transactions.
So far, the top ten cryptocurrencies by market capitalization are Bitcoin, Ethereum, XRP, Tether, Litecoin, Bitcoin Cash, Chainlink, Cardano, Polkadot, and Binance coin. These ten emerge from some 6,700 cryptocurrencies that are publicly traded. Late this year, the market research website CoinMarketCap.com reported that the total value of all cryptocurrencies had reached over $645.7 Billion as of December 18, 2020. Out of this total value, $421.7 approximately comprise the total value of all Bitcoins.
Points To Consider When Investing
So how to invest in cryptocurrency for beginners? is it a good decision to invest in cryptocurrencies even if these assets are very volatile, with their value drastically falling and rising in a heartbeat? Investing in cryptocurrency is for those who have a high tolerance for risk. Consider the following:
- Just use what you can afford to lose. Unlike businesses that rely on cash flow for stability, cryptocurrencies do not have real investments pegged into their value. The rise and fall of their value are based on speculation, so it’s quite difficult to predict, calculate, or manipulate. So if you decide to invest in cryptocurrencies, be ready to lose. That means do not use your entire life savings for investing in the rough and tumble of the crypto market. But prepare yourself for the opposite disposition in our next consideration:
- Take calculated risks and be fine with it. As you dive into the waters of cryptocurrency, be open to the possibility of not ever getting your money back. But go ahead and take calculated risks by exploring investments in the top ten performing cryptocurrencies, which are also guaranteed to be safer.
- Explore coins other than the popular ones. Aside from Bitcoin and Ethereum, there are other coins that are also promising. Check coins that are cheaper in value but more or less feasible in terms of their purpose and business model, which eventually could possibly make them succeed.
- Do some reading on the cryptocurrencies’ whitepapers. A whitepaper is a document which details a certain crypto coin’s nature, business model, purpose, and what benefit or utility it offers. A whitepaper also reveals what the company releases this certain crypto coin. By going through the whitepapers, you can more or less gauge the credibility and potential of a crypto coin. A simple barometer of whether a coin is reputable or not is how its whitepaper is written and presented. Check the conventions on whitepapers in terms of style and format; if the coin you are eyeing has a whitepaper that benchmarks with the authority of the more popular and reputable coins, then it may be a good sign.
- Decide whether you want to simply buy cryptocurrency or tokens, or you want to own a stake in the company issuing the crypto tokens. If you wish to just buy tokens, then you are entitled to use these. However, if you wish to own a part of the company, then you are entitled to company earnings. Obviously, the latter requires you to invest bigger because of the inherent aspect of ownership.
Crypto Coin’s Whitepaper Reading Tips
Here are a few tips when reading a crypto coin’s whitepaper. This way, you get protected:
- Check who owns the company. It’s best if the owner or company is familiar to you because of the track record, so you know that the coin is up to standard, ethical, and aligned with your philosophy.
- Identify the other major investors in this coin. Just like the company owner, if you see the major investors be reliable in their financial judgment because, for example, they also run credible and successful businesses, then this is worth noting. Check the news for popular entrepreneurs who are buying a slice of a certain crypto coin and then follow suit.
- Determine if the cryptocurrency you are considering is already developed and established. There are also some companies who announce crypto investment opportunities with them but have yet to develop the coin and thus are raising funds for it. To be safer, you could always go for those with established crypto coins and are no longer in the early stages of developing their cryptocurrency.
Types Of Exchanges
Having considered the points mentioned above, you may be ready to start buying cryptocurrencies. How do you start buying or exchanging? Firstly, there are two types of exchanges: Fiat to Crypto and Crypto to Crypto.
- Fiat to Crypto. This type involves exchanging Fiat money for cryptocurrency. This can be done in Coinbase, a channel that allows you to buy Bitcoins and other crypto tokens using Fiat money.
- Crypto to Crypto. As it suggests, with this exchange, you use your crypto coins for obtaining another crypto coin. This is what you can do when you already have available crypto tokens stored.
No matter what type of exchange, look for exchange services that are reputable. If one is not available in your country, you may look for those that are in developed countries with stable economies. Once you have chosen the exchange service, you can start opening an account, funding it with the required amount of money, and observing whether it is a good time to buy. Learning how to invest in cryptocurrency, especially for beginners, also needs a keen eye and great timing. As a neophyte, the best time to buy is when the prices are observed to be stable and low, and never when the crypto bubble is crashing or at its peak. Avoid turbulence, but seek the calm, slow, and steady season to start buying. Learn more on how to invest in cryptocurrency for beginners here!