After previously being considered a “niche” investment, cryptocurrency is now undoubtedly one of the most impressive financial disruptors across all sectors of society. In fact, as of February 2021, the number of active cryptocurrency traders was at 106 million globally. In the United States, 1 in 10 people invested in crypto in this year alone. Crypto even counts big names like Elon Musk, Kanye West, and Mark Cuban as just a few of its most famous and passionate investors. However, despite the impressive fan base and the recent growth, navigating crypto isn’t as easy as it may seem. To successfully and sustainably invest in crypto, there are a few important notes to remember.
Why Invest in Cryptocurrencies?
What sets cryptocurrency apart is its accessibility, decentralized nature, and blockchain technology. Traditional stocks or bonds have a lot of red tape and often require a sizable investment capital as well as a professional broker’s help. Cryptocurrency, meanwhile, can be accessed by practically anyone with an online account and some extra cash. That cash can even be as modest as a few dollars considering some cryptocurrencies like Dogecoin (DOGE)—despite being one of the top-performing coins—are priced under $0.50.
Moreover, because it’s decentralized, crypto is less likely to be manipulated or “taxed” by a monopoly, therefore making it more trustworthy. And since the code that makes up each coin is also backed and disseminated across hack-proof blockchain ledgers, it’s considered a safe and verifiable asset.
These attributes have helped propel cryptocurrency’s mainstream adoption, primarily by entities like Microsoft and even governments like that of El Salvador. All in all, this put crypto’s latest market cap at a whopping $2 trillion, which represents a 3x increase in value in 12-months.
How to Start Investing
Given the crypto market’s current trajectory, it would be wise to invest in them. However, the market’s methods aren’t the same as traditional investments. Here are the steps you need to take to start investing in cryptocurrencies.
1. Choose a Cryptocurrency
There are over 4,000 cryptocurrencies in existence, but not all of them share the same trading volume or popularity. Some of the top cryptocurrencies include Bitcoin (BTC), Ethereum (ETH), Tether (USDT), and XRP. These four represent some of the coins with the largest individual market cap. Bitcoin is the leader of the pack, with a single coin valued at $47,000. Because of its finite amount, it is also considered one of the most stable coins to invest in. ETH, USDT, and XRP follow closely behind with valuations of $3,000, $1, and $1.2, respectively.
This variation in price highlights another interesting characteristic of cryptocurrency, which is that price doesn’t necessarily dictate success. Rather, the price of crypto depends on its availability and trading movement. Other affordable cryptocurrencies include Cardano (ADA) at $2.50 and Polkadot (DOT) at $28.
2. Choose a Cryptocurrency Exchange
Traditional financial institutions don’t offer cryptocurrencies, so you’ll need to find a dedicated crypto exchange. To join these platforms, you can open an online brokerage account that allows you to buy, sell, and hold cryptocurrencies. Often, these transactions can be completed with only a small fee and don’t necessitate a third party. Additionally, there are many exchanges for beginner investors, including those with easily accessible app versions.
One such example is Robinhood, which is among the best trading apps available, because it also supports a more versatile investment portfolio. On this app, traders can buy stocks, ETFs, and cryptocurrencies sans commissions. Although, before committing to any exchange, try a demo account, which many of these platforms offer. This will let you familiarize yourself with the exchange without risking any money.
3. Choose a Cryptocurrency Wallet
Once you’ve bought your crypto, you’ll need to store its code in a wallet. There are several types of cryptocurrency wallets, but the two main types are hot and cold. Hot wallets are connected to the Internet 24/7, making it easy for traders to set up and access anytime. Cold wallets, meanwhile, aren’t connected to the Internet and therefore require extra work to access. Deciding which wallet you need depends on how you plan to use your cryptocurrency. If you’re a regular trader, then a hot wallet is recommended. If you’re a “hodler” then a cold wallet that is considered immune to hacking may be the best option.
Now, it’s important to keep in mind that while investing in cryptocurrency is straightforward, actually making money on it requires a little extra strategy and time. While this guide can help you with your initial foray into cryptocurrencies, you can further your investment journey with more updates and guides, here on our blog.