Cryptocurrency has been one of the trending topics for many years now and a lot of people are seeing it as the next big investment to jump on. However, before you invest in cryptocurrency, there are some important things you need to know especially as a beginner.
Get a pen and jotter to write down some things because after reading this blog post, you will have everything you need to know to before investing in cryptocurrency.
What Is Cryptocurrency?
Cryptocurrency is basically a digital asset or virtual money that has no ties to traditional financial institutions. This means that crypto transactions can be made between individuals without the need for any intermediaries or financial middlemen.
Nowadays, cryptocurrencies are now used as forms of payment that can be used to purchase goods and services and so it’s becoming increasingly more popular. A cryptocurrency is also a form of investment and today, a lot of people now have crypto in their investment portfolios.
How To Invest In Cryptocurrency?
Below are the steps to invest in cryptocurrencies:
- Choose a crypto exchange app: there are several cryptocurrency exchanges where you can easily invest in crypto. Some of them are Binance, Kucoin, Coinbase, Crypto(dot)com, BlockFi, Celcius, and so on. These crypto exchanges sell crypto at market rates and make their money through trade fees. You can check our top crypto exchanges that will be suitable for you.
- Deposit money on the app: There are so many crypto exchanges that support fiat currencies. You can deposit your fiat currency on these exchanges through your debit or credit card, or through peer-to-peer trading. Check out our tutorials on how to deposit fiat on Binance and Kucoin.
- Pick the cryptocurrencies to invest in: There are various cryptocurrencies out there and it is quite confusing for beginners to choose the one to buy. And that is why at Personal Finance Circle we recommend that you start with the top cryptocurrencies like Bitcoin, Ethereum, Cardano, Litecoin, Solana, and so on.
Advantages & Disadvantages Of Investing In Cryptocurrency
Investing in cryptocurrency has its good and bad sides. Below are the advantages and disadvantages of investing in cryptocurrencies
- It protects your money against inflation.
- There’s no limit to the profits you can make.
- You can make passive income through crypto.
- It serves as an investment opportunity.
- A large percentage of the world population sees crypto as the money of the future.
- Some new cryptocurrencies are built just to scam people.
- You can lose a percentage of your money if you sell during a bear trend.
- Cryptocurrencies are very volatile.
- You can’t revert a crypto transaction.
- Cryptocurrencies are prone to hacking.
- Some governments are against crypto and may bring about regulations that won’t favor investors.
What Is The Best Strategy To Invest In Cryptocurrency?
The best strategy to invest in cryptocurrency is to use the Dollar Cost Average strategy. As a beginner, this will help you to stop asking questions like “which coin should I buy now?”or “When is the best time to buy a coin?”.
As a beginner, you shouldn’t rush yourself with these things, because you might not gain anything by asking people the best time to buy a coin. That is why the dollar cost average strategy is recommended. You need to first pick the cryptocurrencies you want to buy and then use the dollar cost average strategy to invest in them.
For example, you can say you will be investing in Bitcoin and Ethereum every week or every month with a specific amount of money. Over time, this will help you even buy more cryptocurrencies and make more returns by just investing.
>> READ THIS: 5 Best Ways To Make Money With Crypto
How To Store Your Cryptocurrency
Once you start investing in cryptocurrency, you need to know how you want to store your crypto assets. This is very important.
There are different ways to store your cryptocurrency:
- Crypto Exchanges: You may decide to keep your cryptocurrency on a crypto exchange app where you bought it. This has some advantages attached to it. You don’t need to worry yourself about private keys, and there are no complexity to it. It is easy to use most of the crypto exchanges our there. The disadvantage is that if there is a security breach on the platform, your cryptocurrency could be at risk.
- Hardware Wallet: Due to the fear of hacking, you can store your crypto on a hardware wallet. This is really not compulsory but it is advisable for people who have a very high amount of cryptocurrency. It is the safest way to keep your cryptocurrency. It is offline and you can’t get hacked. I will personally recommend you buy a Ledger Nano X wallet. Tap here to buy one for yourself.
Should You Invest In Cryptocurrency?
This is a personal choice. It is something you have to decide for yourself. Cryptocurrency is here to stay it’s not going anywhere and over the past few years, it has been one of the best investments in history of mankind.
However, our advise to you is that you shouldn’t put a very high amount of money in crypto and even when you invest in crypto, ensure you diversify your portfolio.
Another thing is you should understand your risk tolerance. If you can’t tolerate high risk investments or if you are not comfortable with seeing your crypto portfolio go down, then you shouldn’t invest in cryptocurrency.
Before you invest in cryptocurrency, ensure you spend a decent amount of time looking deeper into projects to determine if it has long-term sustainability. Never invest in a cryptocurrency just because your friends are investing in it.
Also ensure you avoid cryptocurrency projects that are promising guaranteed returns, high gains or a risk-free experience. If you hear those things, avoid them.
Crypto can be risky but it is definitely one of the best investments you should have in your portfolio. And that is why we recommend that you check out our 9 crypto investing tips for beginners.