Cryptocurrencies have rapidly gained popularity in recent years, and many people are curious about what they are and how to invest in them.
A cryptocurrency is a digital or virtual currency that uses encryption techniques to secure and verify transactions and to control the creation of new units.
Bitcoin, the first and most well-known cryptocurrency, was created in 2009, and since then, thousands of other cryptocurrencies have been developed.
Investing in cryptocurrencies can be an exciting but risky endeavour. On the one hand, it offers the potential for significant returns, but on the other hand, it can be extremely volatile, and the market is largely unregulated.
Therefore, it is essential to understand the basics of cryptocurrency investing before jumping in. This beginner’s guide will provide a comprehensive introduction to cryptocurrencies and their underlying technology, blockchain.
It will also cover the different types of cryptocurrencies, how to buy and store them, and the risks and benefits of investing in cryptocurrencies.
Whether you’re a novice or an experienced investor, this guide will help you navigate the world of cryptocurrencies and make informed decisions about investing in them.
Please note that any financial advice provided by me is for informational purposes only and should not be construed as professional financial advice.
Investing involves risk and you should always do your research and consult with a licensed financial advisor before making any investment decisions.
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What is Cryptocurrency?
Cryptocurrency is a digital or virtual currency that uses cryptography, which is the practice of converting legible information into an almost uncrackable code, to secure and verify transactions and to control the creation of new units.
Unlike traditional currencies, which are centralized and controlled by governments or financial institutions, cryptocurrencies are decentralized and operate on a peer-to-peer network.
The first and most well-known cryptocurrency is Bitcoin, which was created in 2009 by an unknown person or group using the pseudonym Satoshi Nakamoto.
Since then, thousands of other cryptocurrencies have been developed, each with its unique features, uses, and benefits.
Cryptocurrencies are typically stored in digital wallets and can be bought and sold on cryptocurrency exchanges or used to purchase goods and services from merchants who accept them as payment.
Transactions are recorded on a public ledger called a blockchain, which is a decentralized and transparent system that allows users to verify transactions without the need for a third party, such as a bank or government.
Overall, cryptocurrency represents a new and innovative way of conducting transactions and storing value, and it has the potential to disrupt traditional financial systems and revolutionize the way we interact with money.
Why Should I Invest In Cryptocurrency?
Cryptocurrencies have been making headlines in recent years, and many people are wondering whether they should invest in them.
While there are certainly risks involved, there are also several compelling reasons to consider investing in cryptocurrencies.
1. Potential for High Returns.
One of the main reasons people invest in cryptocurrencies is the potential for high returns. Cryptocurrencies can be extremely volatile, with prices fluctuating wildly in short periods.
While this volatility can be unsettling, it can also provide opportunities for savvy investors to make significant profits.
For example, those who bought Bitcoin in 2010, when it was worth just a few cents, saw their investment increase in value by more than 20,000% by the end of 2017.
Another reason to invest in cryptocurrencies is diversification. Cryptocurrencies operate independently of traditional financial markets, which means they can provide a hedge against market downturns.
By investing in cryptocurrencies, you can diversify your portfolio and reduce your overall risk.
Cryptocurrencies are decentralized, which means they operate independently of governments, financial institutions, and other centralized authorities.
This decentralization makes them more resistant to censorship, manipulation, and corruption.
It also gives users greater control over their money and provides more privacy and security than traditional financial systems.
Cryptocurrencies represent a new and innovative way of conducting transactions and storing value.
They use cutting-edge technology, such as blockchain, to provide secure and transparent transactions without the need for intermediaries.
By investing in cryptocurrencies, you are supporting the development of this new technology and contributing to the growth of a new and exciting industry.
5. Increasing Adoption.
Finally, cryptocurrencies are becoming increasingly accepted as a legitimate form of payment. Major companies such as Tesla, Microsoft, and PayPal have started accepting cryptocurrencies as payment, and more businesses are likely to follow suit.
As adoption increases, demand for cryptocurrencies will also increase, which could drive up their value.
Why Should I Not Invest In Cryptocurrency?
While there are certainly reasons to consider investing in cryptocurrency, it is also important to understand the risks and potential downsides before making any investment decisions.
Here are some reasons why you might want to think twice before investing in cryptocurrency:
1. Volatility and Risk.
Cryptocurrencies are notoriously volatile, with prices fluctuating rapidly in short periods. This volatility can lead to significant losses if you invest at the wrong time or fail to manage your investments properly.
Additionally, cryptocurrencies are not backed by any government or institution, which means there is no safety net if things go wrong.
2. Lack of Regulation.
Cryptocurrencies are largely unregulated, which means there is little oversight or protection for investors.
There have been numerous instances of fraud, theft, and hacking in the cryptocurrency world, and there is little recourse for victims of such crimes.
3. Limited Use Cases.
While cryptocurrencies have been touted as the future of money, the reality is that they have limited use cases at this point.
While some businesses are starting to accept cryptocurrencies as payment, they are still not widely accepted, and many people still view them as speculative investments rather than a legitimate form of currency.
4. Environmental Concerns.
The process of mining cryptocurrency requires vast amounts of energy and has been criticized for its environmental impact.
The high energy consumption required to mine cryptocurrencies contributes to climate change and other environmental problems.
5. Lack of Understanding.
Many people are drawn to cryptocurrency because it is a new and exciting technology, but few people truly understand how it works.
Investing in something you don’t fully understand is a recipe for disaster, and it’s important to do your research and seek advice from trusted sources before making any investment decisions.
How Does a Cryptocurrency Appreciate In Value?
Cryptocurrencies are digital assets and have no central control, like traditional currencies regulated by banks and the government of a particular country.
For example, the value of the US dollar is determined solely by the government and the federal reserve of the United States of America, putting the decision of how the currency should run under the control of some individual somewhere in the government.
This individual control the value and circulation of the money-making it is easy to be manipulated. Potential investors worldwide continue to doubt the legitimacy of cryptocurrency just because it has no physical appearance and thereby cannot be controlled by any third party, including the government.
When I heard about cryptocurrency for the first time, I was lost, and I always wondered how such technology could be converted into money. One of the questions that kept popping up was how such an unseen asset could appreciate.
There has been a lot of talk about how to price Bitcoin and other cryptocurrencies. We set out here to explore what the cryptocurrency’s price might look like if it achieves further widespread adoption.
In this section, I will explain further how the prices of cryptocurrencies are determined.
1. Node Count.
Node count is an immeasurable indicator of the value of a cryptocurrency. Node count is a measurement of how many active wallets on the network exist, which can be searched on the internet or the homepage of a currency.
To analyse whether or not a currency has a fair price, one can search for the node count and the entire market capitalisation of the cryptocurrency and then connect those two indicators with other cryptocurrencies. Naturally, the higher the node count, the more valuable it becomes.
2. Rising Demand.
Supply and demand are significant factors determining the value of anything that can be purchased, including all digital currencies in the market.
For example, if more people try to buy bitcoins while others are willing to trade them, the price will go up and vice versa.
And since the supply of several cryptocurrencies is short, the increased popularity has been driving up prices.
Thanks to this rise in popularity and adoption of Cryptocurrencies by many companies and individuals, more and more governments and countries are trying to find out how they can implement them.
These reasons have been critical drivers for the price hike in cryptocurrencies worldwide.
3. Mass Adoption.
If a currency gains mass adoption, its value can explode. This is because the total number of most cryptocurrencies is short, and an increase in demand leads to an immediate rise in price.
4. Inflation of fiat currencies.
If the price of a fiat currency decreases, then the price of Bitcoin would go up concerning that currency.
This is because you will be able to get more of that currency with your Bitcoins. It remains paramount to buy cryptocurrencies because your fiat money is meant to depreciate every time it stays in the bank.
How do I Invest In Cryptocurrencies as a Beginner?
Cryptocurrencies have emerged as a popular investment option in recent years, with Bitcoin leading the way in terms of market capitalization and adoption.
As a beginner, investing in cryptocurrencies can be a daunting task, but with the right guidance and approach, it can be a profitable venture.
In this article, we’ll discuss how to invest in cryptocurrencies as a beginner.
1. Understand Cryptocurrencies.
Before investing in cryptocurrencies, it’s important to have a basic understanding of what they are and how they work.
Cryptocurrencies are digital or virtual currencies that use cryptography for security and operate independently of central banks.
They use a decentralized system called blockchain, which records all transactions and makes them immutable.
2. Choose a Crypto Exchange.
A cryptocurrency exchange is an online platform where you can buy and sell cryptocurrencies. There are many crypto exchanges available, and it’s important to choose a reputable one that offers high security and good customer support. Some popular exchanges include Binance, Coinbase, and Kraken.
The crypto exchange is a platform where people signup up to buy and sell any cryptocurrency of their choice to each other.
The cryptocurrency exchange may collect a commission on every transaction or may even charge a monthly subscription fee to use their platform.
Here are a few crypto exchange platforms to get started with.
Binance is a Hong Kong-based cryptocurrency exchange launched by developer Changpeng Zhao (aka CZ) in July 2017.
Binance is a crypto trading platform that offers one of the most competitive rates. So whether you’re a beginner or a seasoned trader looking to trade crypto, this is probably the easiest and cheapest way.
The platform accepts users worldwide and has received favourable reviews from the crypto community.
Zhao’s company Beijie Technology created the exchange after a successful ICO raised $15 million. Binance has continued to maintain its place as a significant player in cryptocurrency circulation globally.
Binance comes with dozens of features that make it stand out amongst all other major crypto exchanges grouped into two, such as the Binance Trading and Binance exchanger services. Putting this all together, Binance has brought many different benefits to its platform, such as.
1. Peer-To-Peer Trading.
2. Credit/Debit card.
3. SEPA/Wire transfers
4. Spot Trading.
5. Margin Trading.
8. Crypto loans and many others.
The company is registered in Malta, the heaven of crypts, and offers a fast blazing exchange. It has grown tremendously since its ICO and is now positioned in the world’s top 10 cryptocurrency exchanges. It now has over 190 altcoins listed on it.
TRY IT NOW- BINANCE.COM
Coinbase is a U.S. crypto-based exchange that serves the global public. They are suitable for beginners and offer tremendous speed and reliability.
You can buy cryptocurrencies quickly and trade at the same time using CoinBase. They have an app for both iOS and Android which gives you the comfort of cryptocurrencies being traded from anywhere.
The security standard of CoinBase is high, and they have been around for many years.
TRY IT NOW- COINBASE.COM
3. Change Now.
ChangeNow has an established track record of bringing consistently successful products out in the crypto space.
It currently supports over 200 cryptocurrencies and fiat pairs like USD / EUR. Crypto exchanges are one of the best and easiest to use out there.
When you use ChangeNow to swap cryptocurrency, the matching engine connects to some of the biggest and busiest cryptocurrency exchanges in real-time to get you the highest price.
TRY IT NOW- CHANGENOW.IO
Kraken is a crypto exchange that is meant for severe individuals and businesses. Apart from an Individual account, it also offers an institutional arrangement idle for crypto businesses.
Kraken supports multiple digital assets, and numerous traditional currencies allow you to fund your account. Kraken also provides a high-volume crypto exchange Bitcoin OTC desk.
I have used Kraken, and one feedback that I got about this platform is that it is not well-diversified enough.
TRY IT NOW – KRAKEN.COM
BuyCoins is a service provided by Bitkoin Africa which allows users to trade cryptocurrency instantly with no wait time.
Users can buy/sell cryptocurrency directly from the BuyCoins app without searching for traders to buy or sell to.
BuyCoins is headquartered in Lagos, Nigeria. If you are seeking to start your crypto business without the hassle of submitting documents, you can get started with Buy coins. Africa.
TRY IT NOW – BUY COINS.AFRICA
Luno is a bitcoin exchange and payment service running in 40 countries worldwide. With a devoted mission to teach the world about cryptocurrencies and how to trade them.
If all you seek is an exchange to purchase cryptocurrency pairs across dozens of cryptos, Luno is not the best option.
Luno is only limited to exchange offers to trade in bitcoin, ethereum, bitcoin cash and Litecoin, the four most significant coins by market capitalisation, across fiat currencies worldwide.
The Luno wallet and payment app make it easier to send, receive and spend your crypto and fiat.
Education is granted through the Luno Learning Portal and blog for beginners who do not know about cryptocurrencies.
Luno makes using crypto in the real world easy. You can change your crypto into your local currency at any time and spend it.
TRY IT NOW – LUNO.COM
3. Set Up a Wallet.
A cryptocurrency wallet is a digital wallet that stores your cryptocurrencies. There are two types of wallets: hot wallets and cold wallets. Hot wallets are connected to the internet, while cold wallets are not.
Cold wallets are considered more secure because they are not vulnerable to hacking or other online threats. Some popular wallets include Ledger, Trezor, and Exodus.
4. Determine Your Investment Strategy.
Before investing in cryptocurrencies, you should determine your investment strategy. This will depend on your risk tolerance and investment goals. You can invest in cryptocurrencies for the long term, or you can trade them for short-term gains.
If you’re a beginner, it’s recommended to start with a small amount and gradually increase your investment as you gain more experience.
5. Conduct Research.
It’s important to conduct thorough research before investing in any cryptocurrency. This includes researching the technology behind the cryptocurrency, the team behind the project, and the market trends.
You should also be aware of the risks involved, such as market volatility, regulatory changes, and security risks.
6. Diversify Your Portfolio.
Diversification is an important aspect of investing in cryptocurrencies. It’s recommended to invest in multiple cryptocurrencies to spread your risk. This will help you avoid the risk of losing your entire investment in one cryptocurrency.
7. Day Trade Cryptocurrencies.
Another way to get started as a crypto trader is to predict its value to go up or down. This works more like Forex Trading; the only difference lies in the fact that you are trading and predicting digital assets.
This is the quickest way of making money as a crypto trader; though it is risky and comes with consequences, arming yourself with the correct information will help you get started.
Bringing it all to a wrap, when it comes to trading cryptocurrencies via a CFD, you risk the market price rather than taking ownership of the cryptocurrency.
I wrote a comprehensive guide on how you can get started with day-trading cryptocurrencies; follow the link to the article below.
8. Invest In Emerging Cryptocurrencies.
This involves buying any cryptocurrency of your choice to make a profit in the nearest future. For example, those that bought Bitcoin 10 years ago at $1,000 experienced massive gains as the price of Bitcoin skyrocketed ten years later.
There are over 1,000 cryptocurrencies in existence, and more are being created. These cryptocurrencies are called Altcoin (alternate coins).
Bitcoin happened to be the first cryptocurrency, and its existence gave rise to other cryptocurrencies such as Litecoin, Ethereum, Bitcash and many more. Bitcoin is so high in value because it has a large community than the other cryptocurrencies.
However, to be honest with you, when deciding to invest in cryptocurrencies, you should seek out emerging coins to invest in.
9. Mine Cryptocurrencies.
Cryptocurrency Mining is a validation of transactions; miners are rewarded with cryptocurrencies after these transactions.
Cryptocurrencies are mined but digitally. To mine any kind of cryptocurrency, specific tools are needed to perform the talk.
Cryptocurrency mining can be very hectic and require serious cash and equipment; If you have the financial capacity to invest in bitcoin mining tools, you could start a bitcoin mine and grow from zero to hero.
The Bitcoin reward that miners receive is an inspiration that urges people to assist in the primary purpose of mining, to legitimise and monitor Bitcoin transactions, ensuring their validity.
Miners are getting paid for their work as auditors. They are doing the work of verifying the legitimacy of Bitcoin transactions.
This convention is meant to keep Bitcoin users reliable and was conceived by bitcoin’s founder, Satoshi Nakamoto. By validating transactions, miners are helping to stop the double-spending problem.
10. Create Your Cryptocurrency.
Are you a Cryptocurrency lover and want to create your custom currency? Do you have a problem that you intend to solve?
Then this is the way to go around it. The First thing to understand before pressing forward to create your cryptocurrency is the difference between coins and tokens.
Both are cryptocurrencies, just that a coin is designed to operate its blockchain, see blockchain like a server, while a token life is designed to work on an existing blockchain platform like Ethereum and Neo.
A blockchain is simply a record of transactions made on and secured by a network, just in case you are curious about it.
So while coins have their independent transaction ledgers, tokens rely on already-designed technology to verify and secure transactions and ownership.
11. Accept It As A Payment Option On Your platform.
I have seen so many online platforms use this, and I must say that it is one legit way to make money with cryptocurrencies. All you need to do is to integrate it alongside your website.
12. Join Cryptocurrency Affiliate Programs.
This is another way to make money with cryptocurrencies, all you need do is refer a friend, and when they subscribe, you stand a chance of making money. Here is an article I recommend you read to help you get started with affiliate marketing.
13. Gambling With Cryptocurrencies.
This is not an advisable way to make money with cryptocurrencies, especially if you don’t understand basic gambling concepts. But, like any form of gambling, you can make money and lose money.
14. Write About Cryptocurrencies.
Cryptocurrencies, in general, are a new niche with a scarcity of writers who understand their concepts.
Most times, all you generally see is spam content that tries to amuse you into investing in cryptocurrencies without the appropriate knowledge.
If you are interested in this topic, you can start a blog dedicated to this cause or even guest posts for other writers that will pay you for writing.
Here is an article to help you get started with your blog.
15. Keep Your Investment Safe.
Cryptocurrencies are vulnerable to hacking and other online threats, so it’s important to keep your investment safe. This includes using strong passwords, enabling two-factor authentication, and keeping your private keys safe.
While there are certainly risks involved in investing in cryptocurrencies, there are also several compelling reasons to consider them.
With their potential for high returns, diversification benefits, decentralization, innovation, and increasing adoption, cryptocurrencies offer a unique and exciting opportunity for investors looking to explore new horizons in the world of finance.
Finally, investing in cryptocurrencies can be a profitable venture if done correctly. As a beginner, it’s important to understand the technology behind cryptocurrencies, choose a reputable exchange and wallet, determine your investment strategy, conduct research, diversify your portfolio, and keep your investment safe. With these tips in mind, you can start your journey into the world of cryptocurrencies.