The world of cryptocurrency investment can be overwhelming for a beginner crypto enthusiast, but it’s also an exciting space full of potential. It’s no wonder that people have increasingly been curious about crypto investment with the rise of massive profits, revolutionary technology and decentralized finance in the web3 world. If you are just starting out in your cryptocurrency journey, it’s essential to understand what cryptocurrencies are, how they work, and how you can approach investing wisely.
What is Cryptocurrency?
Cryptocurrency is a virtual or digital currency that uses cryptography for security. It’s not similar to traditional currencies like dollars or euros. It’s rather decentralized and typically operates on blockchain technology, a distributed ledger that records all transactions across a network of computers.
Key Characteristics of Cryptocurrencies
Decentralization: The key feature of cryptocurrency is decentralization. They are operated by decentralized networks, which means they are not controlled by any central authority like a government or financial institution.
Security: Cryptocurrencies use cryptographic techniques to ensure secure transactions.
Transparency: Blockchain technology allows all transactions to be publicly recorded and verified, which increases transparency.
Global: Cryptocurrencies can be sent across borders quickly and with low fees which makes them appealing for easy national transactions.
Types of Cryptocurrencies
It’s very essential for a beginner cryptocurrency investor to know the different cryptocurrencies available on the market, before diving into crypto investment.
Bitcoin (BTC)
Bitcoin is the first and number one cryptocurrency among thousands of cryptocurrencies . It is often considered as “digital gold “because of its deflationary nature (there will only ever be 21 million bitcoins) and its store of value.
Altcoins
Altcoins are other types of cryptocurrencies other than Bitcoin. Some of the most popular altcoins are Ethereum (ETH), Ripple (XRP), Litecoin(LTC), Cardano (ADA)
Stablecoins
Stablecoins are cryptocurrencies designed to maintain a stable value like the US dollar. Tether (USDT), and USD Coin (USDC) are examples of stablecoins.
Meme Coins
Meme coins referred to such kinds of coins which were started just as jokes but gained popularity for social media trends. These coins are highly risky though some investors have made huge profits.
How to Get Started with Crypto Investment
If you are ready to dive into your crypto investment journey, there are some essential steps to follow:
Research and Education
Having complete knowledge over blockchain, different cryptocurrencies, and the market trends is the key to of success in crypto industry. There are a lot resources on the internet like CoinMarketCap, CoinGecko and crypto news wallet to educate yourself in the crypto industry.
Choose a Cryptocurrency Exchange
A cryptocurrency exchange is a platform where you can easily buy and sell and trade cryptocurrencies. But choosing the exchange is the most toughest task for the beginner crypto investor. Because there are a lot of fake exchanges on the market. If you’re planning to invest, you must choose a few first class crypto exchange platforms like Binance, Coinbase, Bybit, OKX, Upbit, Kraken and Gate.io etc.
If you invest all of your money in a single exchange, you can lose all of your investment if that exchange becomes bankrupt. Exchanges like Voyager and Celsius were bankrupted as a result it takes a lot of time for the investors to get their money back. Some of the most popular exchanges include :
Binance: It is the number one crypto exchanges platform. It’s popular for low transaction fees, strong security and availability in most of the countries compared to other cryptocurrency exchanges.
Coinbase Exchange: Coinbase holds second position among crypto exchanges. Though the trading volume of Coinbase is 7x lower than Binance, it’s one of the safest crypto exchanges for its low transaction fees, high security and user friendliness.
Bybit: Bybit is also popular crypto exchanges and holds third position among other crypto exchanges for its user-friendliness, low transaction fees and strong security.
Set Up a Wallet
A cryptocurrency wallet is the kind of platform where you store your digital assets like cryptocurrencies or NFTs etc. There are two types of wallets :
Hot Wallets: These wallets are online based connected to the internet. Though they are convenient to use but vulnerable to hacking
Cold Wallets: These are offline wallets, such as hardware wallets, that provide a higher level of security but are less convenient for trading.
Start Small
It’s not wise to start your crypto investment journey with a big investment. If you want to be a pro crypto trader, you have to practice by investing a small amount. I, myself, started my crypto journey with a big investment that caused a huge loss for me.
Crypto Investment Strategies
There are many ways to approach your cryptocurrency investments depending on your risk tolerance and investment goals:
HODLing
“HODL” stands for “Hold on for Dear Life.” This strategy refers to buy cryptocurrencies and holding them for long term. This technique is popular among Bitcoin investors who believe in the long-term potential of the asset.
Day Trading
This strategy involves buying and selling cryptocurrencies within short time frames to profit from price fluctuations. Though it is a profitable technique, it is also risky as it requires a deep understanding of the market and is not generally recommended for beginners.
Staking
Staking is one of the most profitable crypto investments. It allows investors to earn passive income by locking up their cryptocurrencies in a proof of stake (PoS) blockchain network. When they stake any specific coin, they get rewards by adding additional coins with their staking coin. Thus, it provides passive income opportunities.
How Do You Invest in Cryptocurrency
If you are thinking of investing in cryptocurrency, there are thousands of cryptocurrencies to be considered. There are many ways to invest in cryptocurrency like buying crypto currency by direct investment in crypto funds and companies. To invest directly in crypto coins, you can buy cryptocurrency using crypto exchanges or app or decentralized applications like Metamask, Trust Wallet, Token Pocket etc.
Different Types of Cryptocurrency to Invest
When you are about to invest in cryptocurrency, it’s common to think of buying and holding one or more crypto coins. There are a lot of options to invest in cryptocurrency like:
Buy cryptocurrency directly: You can directly purchase and hold one or more cryptocurrencies. You must prioritize the most established crypto coins like Bitcoin, Ethereum and Salona to virtually unknown coins which are recently released in the exchanges. Though the recent listed coins give more profits in a short time, there is also risk investing in new listed cryptocurrencies. .
Invest in cryptocurrency companies :You can also invest in cryptocurrency companies like Robinhood Markets Inc, (HOOD ), and PayPal Holdings Inc. (PYPL), and MicroStrategy Inc. (MSTR), that holds large amounts of cryptocurrency on its balance sheets
Invest in cryptocurrency-focused funds: If you don`t want to invest in individual crypto companies, then you can choose a cryptocurrency-focused fund instead. You can choose exchange-traded funds (ETFs), such as index funds and futures funds. In January 2024, the Securities and Exchange Commission approved the first Bitcoin Spot ETFs. These funds hold bitcoin and offer shares to investors based on bitcoin spot prices.
Invest in a cryptocurrency Roth IRA : If you want to invest in cryptocurrency as well as want to enjoy the tax advantages provided by an individual retirement account (IRA), then you can consider investing in a cryptocurrency Roth IRA. You will be facilitated more secure storage for your cryptocurrency holdings by using the services of a crypto IRA.
Become a crypto miner or validator : One of the easiest ways to invest in cryptocurrency is to mine or act as a validator in crypto networks. Cryptocurrency miners and validators get rewards in crypto , which the can hold or exchange into another currency.,
Risks of Investing in Cryptocurrencies
Though there are high potentials of rewards in crypto investment, they have some sort of risks as well like:
Volatility
Price volatility is common in cryptocurrencies. For example, Bitcoin`s price can fluctuate thousands of dollars in a single day. Though volatility can create opportunities for profit, it also may cause some sort of risk of substantial losses.
Lack of Regulation
As the cryptocurrency market is still relatively new, and regulatory frameworks are still being developed, investors may be at greater risk of this lack of regulation including issues related to security, fraud and market manipulation.
Security Risks
Blockchain technology is secure but individual cryptocurrency wallets can be vulnerable to hacking. Many Investors have lost their money due to hacked exchanges and web3 wallets.
