The Different Forms Of Cryptocurrencies
When most people think of a cryptocurrency, chances are that theyâre thinking of Bitcoin . Bitcoin is considered the cryptocurrency flagship â the coin that launched thousands of coins.
According to Statista, as of February of 2022 there are more than 10,000 cryptocurrencies, a 3.7 X increase from the cryptocurrencies that existed as of year-end 2019.
But donât worry â this article is focused on cryptocurrency for beginners, and as a beginner, you donât need to learn every single cryptocurrency.
Instead, letâs go over just a few of the most popular types to give you an idea.
How Do I Buy And Invest In Cryptocurrencies
There are a number of ways you can buy and invest in cryptocurrencies.
The most common way is to open an account with an online cryptocurrency trading platform, where you can deposit fiat currencies to buy cryptocurrencies. These platforms allow you to trade between different cryptocurrencies.
To buy cryptocurrencies directly with fiat money or another cryptocurrency, you need an exchange or broker. You also have the option of mining cryptocurrency yourself. Mining is the process of solving complex mathematical problems to confirm transactions in the blockchain.
Earn Crypto For Free Through Learning And Mining
As mentioned, you can actually earn a free trickle of crypto just by learning about crypto on sites like Coinbase with its Earn program. For example, you can earn $2 in Stellar just by watching a two minute video:
If you have a powerful computer with a gaming-capable graphics card, you can also mine crypto for free. Mining is the act of leasing your computers processing power to the blockchain and receiving a trickle of crypto in return. I wrote a guide on how how to start mining Bitcoin in 60 seconds.
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How Does A Blockchain Work
Cryptocurrency is based on blockchain technology. Blockchain is a kind of database that records and timestamps every entry into it. The best way to think of a blockchain is like a running receipt of transactions. When a blockchain database powers cryptocurrency, it records and verifies transactions in the currency, verifying the currencys movements and who owns it.
Many crypto blockchain databases are run with decentralized computer networks. That is, many redundant computers operate the database, checking and rechecking the transactions to ensure that theyre accurate. If theres a discrepancy, the networked computers have to resolve it.
How To Choose A Cryptocurrency Exchange
There are many exchange options out there, so it can quickly become overwhelming on which to choose. The major ones are fairly similar, and they are all competing for your money. Typically, most people choose one exchange and stick with it, and this is great news for you. Because of the high competition, exchanges are offering incentives and sign-up bonuses that will give you free cryptocurrency. Weve written a complete comparison of some of the major exchanges, including the current offers for you. For beginners, I highly recommend Coinbase and you can get $10 for free when signing up if you use the link below. If you sign up and dont use our incentive link, thats fine, but you wont get the $10 for free.
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Is It Safe To Invest In Cryptocurrency
In a nutshell – it is very safe to invest in cryptocurrency in the US. However, as we covered earlier, there are still several risks that you need to take into account to ensure that your investments remain safe and secure at all times.
At the forefront of this is ensuring that you only invest in cryptocurrency with an online broker that is regulated to offer US clients digital asset services.
For example, when you use eToro, you can be sure that your capital and digital tokens are in safe hands – as this brokerage firm is regulated by multiple tier-one bodies. Webull, Coinbase, and Gemini also have a strong regulatory standing in the US.
Moreover, when it comes to wallet security, this is another area where eToro excels.
This is because when you invest in cryptocurrency through this broker, your digital tokens are kept safe by the platform’s in-house wallet – which is bound by institutional-grade security controls.
And if you’re a beginner, keeping your cryptocurrency investments in your eToro web wallet will most definitely appeal, as you don’t need to have any knowledge of private keys or remote hacking defenses.
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How To Cash Out Crypto On Coinbase
Many people buy cryptocurrency with the intention to sell it. Selling your cryptocurrency is fairly easy but lets go through how to do it. In this example, we will use Bitcoin. All you will need to do is click on the cryptocurrency youd like to sell, then hit Trade and Sell BTC. After you sell the amount youd like, you will now have USD in your Coinbase account. To transfer this to your bank, click on USD, and then Cash Out. Your USD will now be transferred to your bank account.
How To Buy Cryptocurrencies
If you decide that you want to take part in the financial revolution that is about to unfold and would like to buy some CryptoCurrency, you have different possibilities at your disposal. There are faster, but more expensive means and more tedious, but cheaper solutions. Additional factors impacting your decision might include security and transparency as well.
Buying and selling
The oldest and most common means is that you buy from a person who deals with CryptoCurrencies. The most common currencies can be found easily, and usually you can manage a good deal on the exchange ratio. However, if you want to get a hold of a larger amount, it could take multiple meetings and more time, not to mention that the rare CryptoCurrencies are harder to come buy.
If you buy CryptoCurrency for cash and store it in an anonymous wallet instead of an exchange site, you can be sure that your investment is safe from all prying eyes.
An expensive, but fast way of buying Bitcoins. There aren’t that many ATMs that are equipped with CryptoCurrencies. All you need to do is scan the QR code of your wallet, insert the banknotes and within 10-20 minutes, the amount you deposited will be balanced on your account. However, the exchange ratio is usually not the best, and there is an additional 5% of costs as well, but you don’t need to have a bank account or any other personal data for the transaction.
Debit / credit card
If you don’t want Bitcoin
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Major Companies Are Engaging With Cryptocurrency
Some of the biggest and most dominant companies globally are now engaging with cryptocurrency – which once again, proves beyond doubt that this industry is here to stay in the long run.
For example, Tesla – which is one of the largest companies globally with a market capitalization of over$1 trillion, invested $1.5 billion from its balance sheet in late 2020 into Bitcoin.
Then you have companies like Overstock, Paypal, Microsoft, and Starbucks – all of which allow you to spend Bitcoin on their respective products and services.
How To Set Up Your Portfolio
The first and most popular CryptoCurrency is Bitcoin, so it is not surprising that novice users will turn to this at first. The following steps are, however, not that straightforward, since it heavily depends on personal preferences and the inclination for taking risks.
According to our experience so far, the market undergoes a cyclical period of consolidation, horizontal positioning and then an explosion of exchange ratios, then a collapse. That is what has been happening since 2011, the first rising period, and we have no reason to presume that this will be anything different in the future. Therefore, the 70% drop at the beginning of 2018 is, however big it might seem, normal. Bitcoin hasn’t, since its 2009 launch, had any hacks or shutdowns, so it is evident, that it’s the most secure and least risky CryptoCurrency on the market.
In the long run, however, it seems that Bitcoin and Ethereum are the “secure” investments from 2018 and onward as well. Additionally, multinational companies may even start issuing them. Generally, it is safe to say, that the “smaller” a given CryptoCurrency is, the most risky should it be considered.
For beginners, the portfolio should consist of 45% BTC , and the rest should be divided among the 20 CryptoCurrencies with the largest capitalization. Here’s an example:
- 5% for “betting games”
Only the altcoins that conform to the above criteria will be able to survive the following years and bring profit.
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Choosing Where To Store Your Cryptocurrency
With cryptocurrency just obtaining it isnt enough, you also need a place to store it.
Coinbase/Coinbase Pro, Bittrex, Kraken, Binance, etc all offer online wallets. You can technically store your cryptocurrency on them for as long as they continue to operate.
However, exchanges arent meant to be used for long term storage .
Thus, unless you use a service built for long term storage, like Coinbase, youll likely want to look into other wallet options.
For long term holding one will likely want to choose an offline wallet where they can securely store their cryptocurrency.
Like methods for obtaining cryptocurrency, wallet options all have their pros and cons to consider. Coinbase is a simple solution, but an offline wallet where you control your private keys has its own range of benefits despite the complexities.
Learn more about cryptocurrency wallets.
TIP: A cryptocurrency wallet is a place where you store encrypted passwords that represent coins and a cryptocurrency exchange is like a stock exchange or like a currency exchange in a foreign airport . Just like if you want to trade stocks you need a bank account and access to the stock exchange, it is the same deal with cryptocurrency.
TIP: When it comes time to send cryptocurrency from an exchange to exchange or exchange to wallet youll need to pay a transaction fee. Litecoin is a good choice for moving from exchange to exchange because it is traded on most exchanges, has low fees, and has quick transaction speeds.
Thousands Of Cryptocurrency Tokens To Choose From
First and foremost, we like the fact that there are now thousands of cryptocurrency projects in the market.
And as such, in a similar nature to the thousands of stocks listed on the NYSE and NASDAQ, you are sure to find a cryptocurrency that aligns with your financial goals.
For example, if you’re simply looking to dip your toes into cryptocurrency for the first time, then you might decide to stick with established and large-cap projects like Bitcoin and Ethereum.
In comparison to lower-cap tokens, these cryptocurrency projects are less volatile, albeit, the upside potential might be more limited.
On the other hand, you might also consider investing in less established cryptocurrencies with a smaller market capitalization. These tokens will appeal to investors that have a higher risk tolerance and wish to target greater profit margins.
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Is Cryptocurrency A Good Investment
Like all asset classes, there is no guarantee that you will make money from a cryptocurrency investment. Moreover, it is important to remember that cryptocurrencies are volatile and speculative.
Therefore, before you decide to invest in cryptocurrency – it’s important to consider both the benefits and risks. Newbies should consider starting out with best beginner crypto to invest in.
How Does Cryptocurrency Gain Value
Cryptocurrency gains value primarily through the laws of demand and supply. When a coins demand starts to soar, its value increases and vice versa.
This is the primary reason why you might notice slight price variations on exchanges. For instance, the price of Bitcoin on a platform like Binance might be $50,500, while one BTC goes for $50,700 on Coinbase.
Although these variations represent the exchange demand and supply metrics differences, they can be aggregated to find Bitcoins true value.
Another factor that affects a cryptocurrencys value is scarcity. Cryptocurrencies tend to be more valuable once theyre scarce.
For instance, Bitcoin has a hard cap of 21 million, meaning that only 21 million BTC units will ever be produced. Once this happens, Bitcoin becomes increasingly rare and more valuable.
The digital assets utility is another factor that affects the value of a cryptocurrency. As the use case for a coin rises, the value would follow suit. Some exchanges offer discounts on trading fees and cash back on their crypto cards to customers who own their native digital assets.
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What Is A Cryptocurrency
A cryptocurrency or digital currency is an online form of money, made secure by cryptography. Cryptography is the process of encrypting information with an algorithm to prevent third parties from accessing it without authorization.
The first cryptocurrency that started this trend was Bitcoin in 2009, which remains the most valuable cryptocurrency on the market.
Some of the most common uses of cryptocurrencies are for payments between two peers, for online purchases, and as an investment tool.
Decide How Much To Invest
Just like any investing, the amount you choose to put into crypto will depend on many factors, such as your budget, risk tolerance, and investing strategy. Youll also want to consider any minimum investment requirements and transaction costs, which vary across crypto exchanges.
If you want to invest in a cryptocurrency with a high value per coin, Feldman points out, most exchanges allow you to invest on a dollar basis, rather than buying a whole coin, so you dont have to come up with tens of thousands of dollars to invest in Bitcoin, for example. Focus on the total dollars you want to invest and not the number of coins you want to buy. Also, always remember, never invest more than you can afford to lose
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Cryptocurrency Investing And Trading Strategies
So, youve done your research and you have found a couple of crypto assets that youd like to invest in. What now? Well, its important to find a crypto trading strategy and stick to it. Most successful beginners tend to use trading strategies such as dollar-cost averaging, holding, and buying the dip. These strategies arent exclusive to the cryptocurrency market. They are proven investing methods that have been successfully implemented in more traditional financial markets like the stock market, bond market, derivatives market and more.
What Makes Cryptocurrencies Different From Fiat Money
Fiat money money like the American or Canadian dollar is issued by the government, meaning theres a central authority that controls its value, interest rates, and supply . Many view this degree of government involvement in the mechanics of the free market as manipulation and as an archaic attempt to manage a vast and complex economic system. A noble intention at best, a catalyst of hyperinflation that makes wealth building very difficult for the average person, at worst.
Cryptocurrencies, on the other hand, are decentralized all transactions are done peer-to-peer or through smart contracts and theres no authority overseeing them. Many people consider this a massive advantage over traditional money, because it gives them full control of their assets.
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The Best Cryptocurrency To Invest In
Although it’s great that you have thousands of digital tokens to choose from, knowing which cryptocurrency to invest in can be a cumbersome and challenging process.
With that said, if this is your first time investing in cryptocurrency – you might want to consider some of the solid projects discussed below.
Wait For Crypto Exchange
Exchange traded funds are popular investments that let you buy exposure to hundreds of individual holdings in one fell swoop. This means they provide immediate diversification and are less risky than selecting individual investments.
There is a huge appetite for cryptocurrency ETFs, which allow you to invest in many cryptocurrencies at once. The first cryptocurrency ETFs started to be rolled out to private investors in Autumn 2021.
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Learn The Uses Of Both Hot And Cold Wallets
While crypto exists digitally, you can still have a way of storing them online and offlinethrough hot wallets and cold wallets. If you are a beginner, the ease of access to hot offline wallets will prove to be more useful and versatile. Cold wallets, however, do offer more protection from hackers and other miscreants. As part of your journey into diversifying your assets, learn to use both types of wallets.