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- Insights
- Cryptocurrencies
- Stocks
- White Papers
- Industry
- Geography
Interest in cryptocurrencies has exploded over the past few years. Bitcoin, once a term circulated only amongst the technically advanced, has now entered the mainstream vernacular. As its popularity has soared, more and more people are thinking about investing in Bitcoin and other cryptocurrencies. Over 11,000 other cryptocurrency options exist today, including Ethereum, Tether, Chainlink, Binance coin, etc.
With so many different options, new investors may feel overwhelmed with where to start. Presently, the global crypto market tops $2.7 trillion, so educating yourself and jumping in is the best way to get started. This article will help new crypto investors choose cryptocurrencies that are right for them and discuss what they need to think about when investing for the first time.
One struggle with cryptocurrencies is that the arena is full of misinformation and potential scams. It's important to educate yourself but also to understand how to educate yourself about cryptocurrencies. For example, many websites will purport to give you valuable information, but really they exist only as a front to lure you into buying a cryptocurrency that they are developing.
One way to avoid this problem is by gathering information only from trusted sources. Below, we've compiled a list of some websites that we think provide the best information when it comes to cryptocurrencies:
Today, some major investment groups are beginning to offer cryptocurrencies as a potential investment opportunity. However, these advisors are unnecessary because you can buy crypto yourself from a trusted exchange. The most popular exchange in the United States is Coinbase, but other alternatives like Gemini also exist. If you already have a financial advisor, check with them to see if they offer cryptocurrencies.
It's important to spend the time to educate yourself before buying cryptocurrencies. Many cryptos function similarly to traditional investments and financial instruments like stocks, bonds, and even futures. Your average investor would most likely not purchase them without a significant amount of research first. The same logic applies to cryptocurrencies.
Although cryptocurrencies are not as complicated as these other investments, the point is that educating yourself can help avoid making a poor investment.
Bitcoin and other cryptos can be confusing at first. One thing to keep in mind is that cryptocurrencies do not function as a normal bank account. They use cryptography to secure themselves, and they are stored in what is called a wallet.
Wallets can come in any number of forms. There are paper wallets, software wallets, and hardware wallets. A wallet stores your cryptocurrency holdings using cryptographically generated strings of data called keys. One of these keys, the public key, is used to send money to another wallet. The private key is used to access your wallet and funds. By design, cryptocurrencies are very secure and use a lot of energy to verify transactions.
However, the security aspect can also be confusing, which is why many cryptocurrency exchanges allow you to store your holdings in a digital wallet on their platform. They also let you connect your checking account to make deposits, purchases, and withdrawals easier. Keeping your holdings on a crypto exchange is less secure than a hardware wallet, but it simplifies buying and selling.
Some of the key principles of finance are understanding risk management, rate of return, and portfolio management. These principles can also be applied to cryptocurrencies. Investments are typically rated based on their risk level and the amount of return they are expected to generate. Usually, more risky investments have a greater return. Cryptocurrencies are some of the riskiest investments, as evidenced by their wide price swings but also huge growth.
Of course, all cryptocurrencies are not equally as risky. Newer cryptos are riskier than tried and true investments like Bitcoin and Ethereum. When deciding what to buy, it's important to keep these ideas in mind.
Think about your risk level as an investor – can you afford to lose the money you're using to make this purchase? What level of return do you want for your investment? The most stable investments are found in the top 100 cryptocurrencies on Coinmarketcap. These cryptocurrencies typically have the highest volume of trading and market cap. This is no guarantee of success, but usually, higher trading volumes indicate a more trustworthy investment.
Finally, remember to diversify and do not rely on a single cryptocurrency as your vehicle for financial success.
Once you've purchased crypto, you can either wait for it to increase in value or use it to make purchases. In most cases, people typically hold onto it for its investment value.
Although some people are still skeptical about whether or not we should fully embrace crypto as a currency, more and more places accept it as payment for goods and services.
If you decide to make purchases with crypto, you'll need to find a business that accepts crypto as a payment method (usually, it's Bitcoin). To complete a transaction using Bitcoin, you'll need to send the requested amount to their wallet from yours.
Depending on the website or vendor, they will either have the process automated and streamlined or have to verify the transaction manually.
Once you've sent the payment and confirmed the transaction, your purchase is complete. The plus side to cryptocurrencies, over other digital payment methods, is that transactions are near-instantaneous.
Like other kinds of investments, there's no one-size-fits-all approach to cryptocurrencies. Despite wild swings, both downward and upward, cryptocurrencies have displayed remarkable resilience. Many of them have only continued to trend upwards in value. One camp of investors believes that "holding" (that is, holding onto their investments) is the best option. However, if you only hold onto your crypto, you'll never realize the gains.
Finding the right time to sell can be tricky, so it's best to establish a target for yourself. If you reach that target, you can reevaluate whether it is time to sell or hold onto your investment. The cost of living has risen dramatically due to inflation and supply chain issues created by covid, so it may be tempting to cash out sooner to help cover your living expenses.
Then again, you may have a fear of missing out in the future. Set a target, and then evaluate whether you need to sell to stay afloat or if you can afford to hold your investments for longer. No matter which one you choose, establishing clear goals for yourself about how much of a return you want can help you make a better, more informed decision.
Regardless of whether you choose to invest or not, learning more about cryptocurrencies is essential to remain competitive in today's economic landscape. Cryptocurrencies are a great opportunity for younger investors with greater economic freedom to invest.
The most important thing to consider when investing is making sure that you're educated about the risks that crypto-investing carries. Learn about the technology and the available crypto options, then select the best investments for you. If you do this, you'll surely be a crypto-expert in no time.
