Over the last few years, the idea of cryptocurrencies has exploded, and more people than ever have invested in currencies like Bitcoin. In fact, the latest data shows that 8% of Americans have invested in cryptocurrencies.
Most people these days have heard of cryptocurrencies. That doesn’t mean they know how to invest in them, though.
If you’re looking to get in on the cryptocurrency trend early, now’s the time to take action. Read on to learn everything you need to know about how to invest in cryptocurrency.
What are cryptocurrencies?
First things first, let’s make sure we’re all on the same page with regards to what cryptocurrencies are. Cryptocurrency is a unique, virtual medium for exchanging money. It uses special cryptographical functions and blockchain technology to conduct online transactions.
Cryptocurrencies are totally decentralized. They’re not controlled by any one entity, and—in theory—they’re immune to government control. (However, the government has recently started working to regulate them and interfere.)
Individuals can also exchange cryptocurrencies online with very few (if any) processing fees. This advantage makes them much more appealing than traditional currencies and financial institutions for exchanges.
Why invest in cryptocurrency?
There are lots of benefits that come with investing in cryptocurrencies. Here are some of the primary reasons why people are choosing to buy them.
Easy and secure transactions
With cryptocurrencies, it’s easier than ever for you to send money to someone else in a secure way.
Cryptocurrencies are exchanged with the help of both public and private keys. This approach keeps things secure and also helps to keep transfer fees low.
Cryptocurrencies rely on blockchain technology. Blockchain involves an online ledger that can be sent to all devices. This online ledger makes it easy to verify transactions and encourages all users to be honest.
Potential for high returns
At this point, it seems we all know someone (or know someone who knows someone) who has made it big investing in Bitcoin or another cryptocurrency. While you might not become a millionaire by buying Bitcoin, you can experience some pretty high returns.
Cryptocurrency is quite volatile, and the potential is there for you to earn large amounts of money from it. The key, though, is to make sure you’re buying the right coins.
How to get started
How do you know what kind of cryptocurrency to buy? Where do you even buy cryptocurrencies? You’re about to find answers to these and other questions about getting started with investing in cryptocurrency.
Choose an exchange
The first thing to do if you’re interested in buying cryptocurrencies is to choose an exchange. An exchange is where you can go to buy currencies.
There are tons of different exchanges out there. Some of the most popular ones include Bitfinex and Coinbase. When you use these exchanges, you can buy currencies with your debit card.
You can also buy fractions of coins when you’re buying popular currencies like Bitcoin. This can be a good option if you’re working with a limited budget.
Before you decide to buy through a particular exchange, do your research and make sure it’s a trustworthy exchange. There are a lot of questionable exchanges popping up these days, and you could end up getting scammed if you’re not careful.
Choose your currencies
Once you’ve found a place to buy your currencies, it’s time to start shopping. There are tons of different currencies for you to choose from, but the following are the most popular options:
- Bitcoin (BTC-USD)
- Ethereum (ETH-USD)
- Ripple (XRP-USD)
- Litecoin (LTC-USD)
Get a cryptocurrency wallet
After you’ve bought your currencies, you need somewhere to put them. This place is known as your wallet. There are two types of wallets you can use: a software wallet and a hardware wallet.
You’ll need a software wallet if you want to engage in any active trading. When you sign up for accounts with certain exchanges, you automatically have access to a software wallet.
Hardware wallets are similar to external hard drives. You can use them to store your currency in a secure way. They’re best for currencies that you don’t plan on needing to access anytime soon.
Diversify your crypto portfolio
In the same way that it’s best to diversify your stock portfolio, you also ought to think about diversifying the type of coins and currencies that you buy. This approach will help shield you from the volatile nature of the cryptocurrency world and protect you from significant losses.
Be wary of mobile wallets
You may have some people try to convince you to use a mobile wallet for your currencies. That’s not the best approach, though.
Mobile devices are easy to compromise, and your currencies will not be as secure as they would be in a software or hardware wallet.
Prepare for market ups and downs
Be sure to prepare yourself for the ups and downs of the cryptocurrency market, too.
Don’t invest more in cryptocurrencies than you’re willing to lose, and steel yourself for the possibility that the value of your coins could tank. If you prepare for this risk now, you’ll be less likely to act out of emotion or make rash decisions later.
Learn more about how to invest in cryptocurrency today
If you’ve been interested in investing in cryptocurrency but have held off out of fear or a lack of knowledge, now’s the time to turn things around and take action. With this information in mind, you’ll have an easier time knowing how to invest in cryptocurrency and the right way to invest so that your portfolio yields the highest returns.
Do you want to learn more about investing in cryptocurrency? Or do you want to get better educated on investing in general?
Either way, we’ve got tons of resources for you on Market Realist. Check out our latest investment articles to dive deeper. To stay up to date, you can also subscribe to Get Real, our daily newsletter with must-knows from the blockchain and across the markets.