More and more people are buying into cryptocurrencies, and getting involved has never been easier. To buy cryptocurrency for the first time, all you have to do is sign up for one of the several online exchanges. You should know a little more than that, though, before putting your money into these digital currencies with complete assurance. This essay covers everything you need to know to invest in cryptocurrency, from the basics to future portfolio management. Am I prepared?
A primer on cryptocurrency investing
To begin, there are a few fundamentals that you must grasp before you start making financial investments. You should know how to handle a greater degree of uncertainty while making these investments; this is maybe the most important.
Because of its widespread use and notoriety, Bitcoin serves as a model for the normal ups and downs that crypto coins experience. Bitcoin’s value fluctuates by 10% or more every day, making it a dangerous investment. So, start with a tiny amount of your portfolio and don’t get too carried away. That way, you can practice riding out the inevitable ups and downs in your cryptocurrency’s value.
Unlike most institutions, Bitcoin is not FDIC-insured. Your assets are gone forever in the event of an exchange’s bankruptcy, wallet compromise, or shutdown due to cryptocurrency’s anonymity.
Cryptocurrency sales are taxed. Crypto investors and traders pay taxes on their earnings.
Choosing the Correct Cryptocurrency for Your Investing Goals
You want to invest despite knowing the market’s history and risks. Centralized exchanges are the safest marketplace for cryptocurrency. Multiple companies offer online cryptocurrency-buying platforms. Good cryptocurrency exchanges include Coinbase, Crypto.com, and Gemini. These exchanges’ costs may reduce your profits, so be aware.
Cryptocurrency exchanges accept wire transfers, bank transfers, debit cards, and credit cards. You can buy and store crypto with your wallet. Some wallets communicate with decentralized exchanges, which may offer coins not listed on conventional exchanges. You may be investing in a scam.
Your ideal coin depends on your investment goals and the market. Look for a cryptocurrency that matches your principles and interests before investing. The most popular cryptocurrencies include Bitcoin, Ethereum, Dogecoin, and Binance Coin, but there are hundreds more with benefits and cons.
There is no need to spend more than you have
It is not a wise idea to invest in cryptocurrency if you were going to use the funds for a down payment on a home or college for your children because of the high level of risk involved. Contrary to popular belief, high-risk investments are not a means to an end (rapid wealth) but rather a means to a more diversified portfolio. It is wise to only invest funds with which you are able to sustain a loss in the cryptocurrency market.
As an example, a sensible amount to invest for diversity is 5–10% of your total portfolio. As a result, your overall portfolio value won’t fluctuate wildly every day due to the cryptocurrency market. You should know that going all-in on the crypto market or a specific crypto currency is akin to gambling, so although it’s okay to believe in it, you should also be prepared to lose money. Listening to cryptocurrency podcasts allows you to learn a lot about the different coins and strategies that can potentially help you maximize your gains.
Making a crypto purchase
Choosing a cryptocurrency exchange to purchase your assets from is an important first step, as previously stated. This will determine both your coin options and the method of purchasing them. To reiterate, centralized platforms provide a more secure environment in which to purchase cryptocurrency, but first-time investors will have to pay a premium for this convenience. After that, follow the exchange’s account creation and verification steps. Verifying your identification is a necessary step in meeting federal regulatory standards, which means you will likely be unable to purchase or trade cryptocurrency until then.
After that, you must fund your exchange account in order to buy cryptocurrency. Payment options vary depending on the platform you use, from bank transfers and debit/credit cards to wire transfers and other online payment systems. The money has to clear before you can begin purchasing, which could take a few days. In many cases, banks will treat cryptocurrency purchases as cash advances and impose additional costs if you make a purchase using a credit card.
To make your first cryptocurrency purchase, you must first fund your account. After this is completed, the next step is to decide how you will keep your updated digital money safe. Here, you have two choices: the easiest is to keep it in the exchange account, but you can also move it to a cold or hot wallet.
Cloud storage services store hot wallets, while devices like USB drives store cold wallets offline. Both choices have their advantages; ultimately, you should choose the one that best suits your needs.
Sustaining Your Cryptocurrency Holdings
Always monitor the performance of your cryptocurrency assets. Not everyone will be able to appreciate it. One simple approach would be to add all of your cryptocurrency holdings to a central investing dashboard, such as Personal Capital. If you want to know what’s happening in the cryptocurrency market, you should read the news and keep tabs on your coins.
You can’t just put your money into cryptocurrencies and forget about them; anything can happen at any moment, causing their value to skyrocket or crash. Because of this, it’s a beneficial idea to keep checking your portfolio and learning more about cryptocurrency.
