Since Bitcoin came into the picture as the first cryptocurrency in 2009, a lot has changed about investing. The thing that was simply seen as an interesting phenomenon is among the top investment options for many. Most people did not see its investment potential as there were only little-known facts about cryptocurrency, particularly Bitcoin. But with time, hundreds of cryptocurrencies have been developed. However, Bitcoin has managed to stay at the top in value, trade volumes, popularity, and the standard reference of cryptocurrency.
The crypto has consistently drawn quite a gathering of speculators betting on crypto trading as their way to make their fortune. The cryptocurrency market is enormous, and the number of coins being developed is increasing by the day. This can become a challenge to anyone who wants to join the crypto investment bandwagon in 2021. This information is to help you get started on your crypto investing journey.
How to Invest in Cryptocurrency
Unfortunately, you can’t walk into your local banks and brokerage firms to get cryptocurrency as you do with fiat currency. Cryptocurrency only exists in digital form, and you can only hold its proof and not its physical form. Traditional financial institutions avoid dealing with it since its unregulated. Its works in a decentralised network that has no central authority.
While trading is the most common way of investing, you may also find interest in how to build a cryptocurrency exchange. You can opt to develop and run an exchange platform rather than just trading.
Only Allocate a Small Percentage of your Portfolio to Crypto Investing
A combination of fear and greed is usually a key leader when making most investments. Looking at the progress and fluctuations in cryptocurrencies, especially Bitcoin, it can be difficult to control these emotions. You can’t trust the price of cryptocurrencies for use as the basis of the amount you need to allocate cryptocurrency investment. To make a rational investment decision, you need
- To only allow cryptocurrency to occupy only a small portion of your portfolio. You can decide the exact percentage, but between 5-10% should be sufficient.
- To understand that cryptocurrency is a different type of investment that doesn’t pay any dividends or interest, unlike stocks. That means it will only be a good investment if prices increase beyond your purchase price.
Choose Your Cryptocurrency
When it comes to cryptocurrencies, there are in their hundreds, complicating the selection process. Even though many of them have come and gone, some have stood the test of time, and it would be good to start with more stable cryptos instead of the newer ones. Bitcoin is the most dominant, followed by Ethereum. Others are Ripple, Dash, Tether, Zcash, and Litecoin.
Choose a Buying Platform
One of the biggest challenges in investing in cryptocurrency is that you can’t get them from regular financial institutions. The only places dedicated to buying, selling, trading, and holding cryptocurrency are crypto exchanges. In simple terms, these platforms are like brokerage firms but specific to cryptocurrencies. They offer trading services, and some have inbuilt blockchain wallets to hold cryptocurrencies. They charge fees for buying and selling cryptos.
Storing your Cryptocurrency
To store your cryptocurrency, you need a wallet, and it’s either hot or cold. Unlike regular wallets that you can see and hold, cryptocurrency wallets are software programs that store private and public keys that proof of your cryptocurrency. They don’t store cryptocurrency in the real sense, only crypto addresses and the keys to initiate and enable transactions.
Cryptocurrency wallets are in different forms; desktop, online, mobile, paper, and hardware wallets. Research on the best Ethereum hardware wallet and other wallets to know which suits your needs.
Keep Your Cryptocurrency Secure
You need to keep your cryptocurrency and transactions secure. Security experts recommend that first, you keep your wallet keys secure. That means avoiding sharing devices or leaving your accounts logged in. Also, use VPN when transacting online to ensure that your transactions are encrypted. This makes it harder for cybercriminals to hack your accounts.
Cryptocurrency investing needs a lot of patience in learning the best places to buy, trade, or store your coins. Besides, you need to understand the market basics and that it’s quite volatile and prices change dramatically from time to time. Note that predicting the price trends for cryptocurrencies is more difficult than in traditional investments.