Cryptocurrency is a puzzling concept. Many people do not understand the technology and concept behind cryptocurrency, let alone the method for investing in it. It has been celebrated as the currency for the future and deprecated as a very risky asset. Its unique position as a complicated unregulated digital currency and yet a very accessible and tempting investment option make cryptocurrencies a very intriguing investment.
Over the past decade, the cryptocurrency that used to be worth pennies has gained value beyond investors’ expectations. The crypto-trading space has transcended the market value of $1 trillion.
Fortunately, it’s pretty simple to learn the ropes and buy cryptocurrency once you have understood the basic principles.
What is Cryptocurrency?
Cryptocurrency is any virtual form of currency that exists on the internet. It uses cryptography to secure transactions and is decentralized, which means it does not require third parties like banks to facilitate transactions.
Cryptocurrency is an intangible asset, and any transactions made in it are done digitally. Any cryptocurrency you receive or transfer is stored in digital wallets and recorded in public ledgers. This distributed ledger technology is known as a blockchain.
There are two types of cryptocurrencies; coins and tokens. Some popular cryptocurrencies include Bitcoin, Ether, Binance coin, Tether, Solana, XRP, Cardano, USD coin, Terra, and Avalanche.
Top 4 Steps to Start Investing in Cryptocurrency
Step # 1: Decide on a broker or crypto exchange service
You must first choose a broker or crypto exchange service to buy cryptocurrency. Before investing through a brokerage or exchange service, you must check the cryptocurrency’s exchange rate against your own. For example, if you are from India, you’ll probably want to check the bitcoin rate in the Indian rupee. You can choose the amount you want to invest after getting the BTC in INR figure.
A crypto exchange service is where crypto traders meet to buy and sell the currency. One major advantage of exchanges is that their fee is comparatively lower. However, they have complex interfaces and advanced performance charts that intimidate new crypto traders. A few popular exchange services include Gemini, Coinbase, and Binance US. Despite their apparently confusing representation of data for beginners, they offer user-friendly purchase options to make the process easier.
On the other hand, brokerage services charge relatively high fees, but they are much less complex than exchange services. Brokerage services offer user-friendly exchange options for beginners with their interface. Some brokers claim to charge no fee because they generate their income by giving updates on buying and selling trends to large brokerages.
Brokerage services are highly convenient, but you must be careful. They may have restrictions in place and may not allow you to move your currency from the platform. It is better to hold your cryptocurrency in secure hardware crypto wallets that are not linked to the internet. Robinhood and SoFi are two of the most popular cryptocurrency brokers.
Step # 2: Create an account and pick your payment option
After deciding whether you want to invest using a brokerage or exchange services, you must sign up on your chosen platform. You will have to verify your identity according to the guidelines on your chosen forum and the amount you want to trade. You will be required to upload personal documents and information such as your social security number, identity card, driver’s license, employer information, and even source of funds. After the platform has verified your identity, you will have to select a payment method.
Although you can choose a credit card as your payment method, you should avoid it because the cryptocurrency price volatility could inflate, and the cost of purchasing a coin could increase. So, it is better not to link your credit card to the cryptocurrency account.
Step # 3: Make a deposit and buy crypto
After you have chosen your payment option, you need to transfer funds to your crypto account to finalize your purchase of the cryptocurrency. You will need a few days for the money transfer to process before you can use the deposit to buy cryptocurrency by the brokerage or exchange service you are using.
There are hundreds of different cryptocurrencies, from the popular bitcoin to obscure ones like Theta Huel and Holo. You can choose to invest in well-known cryptos like Bitcoins and Ethereum, as they are the largest cryptocurrencies by market capitalization. Alternatively, the relatively unknown cryptos are cheaper to invest in, but there is the possibility of greater volatility than even the more established currencies.
Many bundle offers and cryptocurrency orders are available at different crypto trading platforms. Almost all cryptocurrency exchange platforms provide market and limit orders, and some even include stop-loss orders. Most exchanges and brokers can buy fractional shares of cryptocurrency, allowing them a chance to invest in expensive cryptos like Bitcoin and Ethereum.
Step 4: Pick a secure storage method
Cryptocurrency wallets are a safe place to store your digital currency. Having your purchased cryptocurrency in your accounts reassures you that you have full control over your assets and can safely access them anytime you want. These wallets help you avoid the risk of your exchange getting hacked, resulting in the loss of your funds. You can pick two types of wallets to store your cryptocurrency and funds; hot wallets and cold wallets.
• Hot Wallets
Online wallets are also known as hot wallets. Investors can access these wallets through computers, tablets, and phones using the internet. These hot wallets are very user-friendly, convenient, and easy to use. Still, they are very susceptible to hacking as your private key is generated and stored on the internet-connected device. In worst-case scenarios, traders who haven’t set up high enough security might lose their accumulated funds. You can create strong passwords and two-factor authentication procedures to make your wallet secure.
• Cold Wallets
Cold wallets are offline wallets which makes them safer to use than hot wallets. These wallets store users’ private keys offline and come with software that works in parallel, allowing users to view their profiles without risking their private keys. Cold wallets offline hardware devices include USB flash drives and hard drives. However, you must be careful not to forget the keycode of your cold wallet and not allow your device to break. Otherwise, you might never be able to access your funds and currency again.
Cryptocurrencies are certainly the most interesting investment option. These are digitally traded currencies that work through virtually distributed ledgers called blockchains. The coins are mined and traded online. When you have a stockpile of coins, it is called staking. You can store your cryptocurrency assets in software hot wallets or relatively more secure hardware cold wallets.
You can explore the methods to buy cryptocurrency using exchanges or by investing in companies connected to cryptocurrency. When you start investing in a cryptocurrency, it is best to do your research before making up your mind about a specific currency. However, cryptocurrencies offer a great investment opportunity to earn passive income, so explore all your options.