Cryptocurrencies have been around longer than you think, but in 2017, Bitcoin and the whole cryptocurrency train exploded into fame and reached mainstream media. Bitcoin reached skyrocketing prices that made people instant millionaires, their jaws hanging in amazement.
Before, people heard the term ‘cryptocurrency’ buzzing in closed circles but didn’t give much thought to it. Who would think an online coin could ever hold any value?
If you were once part of the population who were floored with surprise about the rise of Bitcoin, you’re probably curious how a digital coin transformed the lives of tech-savvy crypto enthusiasts all over the world. Before diving headfirst into the bizarre and captivating world of cryptocurrencies, peruse this comprehensive list. Investing is not a laughing matter and should be taken with complete seriousness. It’s money we’re talking about after all!
Buckle up because you’re in for a rich and informative ride. Learn about the basics before dipping your hand into the digital pot of gold!
As with all things in the world, new inventions surface because they provide answers to problems deemed impossible to solve. The same goes for Bitcoin and other cryptocurrencies. In 2009, pseudonymous inventor Satoshi Nakamoto published his whitepaper containing all the information about bitcoin.
In a nutshell, Bitcoin is a decentralized digital coin that can be bought and exchanged through the internet without the supervision of intermediaries such as banks. All transactions are verified by people scattered all over the world called ‘miners’. After transactions are proven to be legit, they are stored in an open-source public ledger called the ‘blockchain’.
You can use your Bitcoin in buying things such as coffee from Starbucks or licensing software from Microsoft. More and more establishments are welcoming the use of cryptocurrencies in their business and this helps a lot in the mainstream adoption of this revolutionary technology.
Crypto Wonders: Fast, Cheap, Secure
Crypto is fast, cheap, and secure. In contrast to the traditional banking system, transactions with cryptocurrencies happen in under a few minutes, sometimes in the space of seconds.
For example, Ripple makes instantaneous money transfer possible. It’s a digital coin that runs on a system that seeks to modernize the banking system. Imagine the amount of money and time everyone would save if all banks in the world were to adopt this technology!
Because cryptos remove the need for middlemen when confirming transactions, there are no additional fees that have to be paid.
The best thing about cryptocurrency is its indomitable security. Some people think that it’s not secure because there’s no central authority governing these digital coins. This could not be farther from the truth.
Each block in the blockchain contains information about the block that came before it. This string of information creates the ‘chain’ that links them all together. If you want to alter, say the number of bitcoins transferred to a certain account, you’ll have to unscramble all the hashes contained in all blocks down to the very first block in the chain. This is pretty much an impossible task. Additionally, the public ledger does not reveal your identity even though it contains all transactions verified in the chain. Instead, your persona is hidden under an address. This pseudonymity consoles those who are wary that their information will be broadcasted to the public.
Now that you’ve digested the basics of cryptocurrency and what it offers to the world, it’s time to dive headfirst into investment 101.
Five tips for the crypto investment newbie
Just like in every investment in life, you have to consider the risks that come with it. You’ll have to commit fully to it and this requires a lot of time and patience.
While this applies to all kinds of investments, there are more aspects you should consider when it comes to investing in cryptocurrencies. Since its market is still relatively new compared to other markets in the world, there is a lot of room for volatility. Its prices can spike up in a matter of days and drop in just a second.
Similar to other markets, it’s hard to predict how the movement of prices will go. As a precaution to this uncertainty, it’s safe to say that when buying cryptocurrencies, you should only invest money that you are willing to lose.
It could be the extra bucks you saved for a rainy day or the bonus you received for your excellent performance in the office. No matter what, don’t invest money that you’ve set aside for emergencies. In the simplest words, losing the money you have invested in digital assets should not result in your life collapsing into shambles.
One of the most important things to do is to research cryptocurrencies. You don’t have to delve into the intricacies of the industry for this. What’s important is that you understand the underlying technology that makes the system work.
To get a better understanding of the coin you’re planning to invest in, you can check its published whitepaper. They’re all available online for free, so check them out. If it’s too incoherent or doesn’t present a strong case, you might want to rethink investing in that specific coin.
The whitepaper explains what the project is all about including its vision and solution to real-world problems. Sure, there’s going to be a lot of technical jargon in it. But if the vision isn’t crystal clear then it defeats the purpose of letting the public know about the project and what it stands for.
- Market Capitalization
A lot of people consider a coin’s price as the deciding factor when investing. While this may sound true, there’s also a lot of things you should check aside from the price. One of these is market capitalization which is the product of the coin’s price multiplied by the total number of coins in circulation.
This gives you an idea of how many people are using it and if more coins are added to the circulation after transactions are verified. More coins in circulation means more verified transactions. If people and businesses are confident enough in using this coin in their everyday transactions, then it’s a good sign.
Aside from the market capitalization, it’s also of utmost importance to know about the coin’s utility. Right now, there are more than a thousand altcoins in the market. Each coin is different in one way or another as long as they follow the fundamentals of a decentralized coin that is not governed by any central authority and is kept in a public ledger.
Each coin serves a different purpose and you have to understand the utility it’s offering to the system. What makes it different from others? Do you vouch for its vision? Do you see it being resilient and surviving turbulent times?
Examples of coins with specific utilities are Ethereum (ETH) and Ripple (XRP). Ethereum introduced the idea of Smart Contracts where not only currencies are verified in the decentralized blockchain but also other assets such as services and products. Ripple, on the other hand, focuses on elevating the Jurassic banking system into a modernized position to keep up with the times.
2. Diversify your investments
After you’ve done your homework and you’re just one educational vlog away from being an expert, it’s time to narrow the scope of your research. When people hear ‘cryptocurrency’, the first thing that comes to mind is Bitcoin and rightfully so, since it’s the best digital coin in terms of price, market cap, and overall performance. It’s also the most popular.
When it comes to investing in cryptocurrencies, the general public tends to invest solely in bitcoin. While that’s good and all, there’s another opportunity for growth in other coins. Investing in more than one coin increases your chances of having more return. Additionally, it’s a savvy move to invest while the prices of altcoins are still low.
- Altcoins: Learn all about ‘em
There are plenty of other coins with huge potential that are waiting for their deciding bull run just like how bitcoin had its own in 2017. Research is key! There are plenty of options waiting for you in the crypto market. Who knows? Your next coin could skyrocket.
- Starting Small
Once you’ve decided which coins to put your money into, you can now proceed to buy them. You can do this in exchange sites where your fiat money is exchanged into your desired coin.
Now the next question is, how much should you spend on your investment? Test the waters first and start small with a few coins here and there. Once you’ve got the hang of it or you’re satisfied with how things are progressing, you can slot in more bucks and increase your investment.
Again, you should consider the volatility of the crypto market. It’s better to be cautious with your money so start small and wait patiently for its price to increase.
3. Be Secure
Once all that is settled, it’s time to make sure that your investments are secured and padlocked in safe wallets. You might be thinking, isn’t the blockchain already tamper-proof? Why do you have to take extra precautions with your coins? The answer lies in exchange sites.
While blockchains provide reliable security that makes sure all transactions cannot be altered, exchange sites are not as safe. There have been cases before where exchange sites such as Bithump, Bitfinex, and Bitstamp were compromised and details about its customers were leaked. As ironic as it might sound, an exchange site is a vulnerable place to leave your valuables at.
However, crypto exchanges are still the safest place to buy crypto. Trusted sites such as Coinbase and Binance are recognized as indomitable exchange sites. The next best thing to do to counter cyber hacks is to invest in wallets where you can safely store your coins. So after exchanging fiat money into your desired coins, you can immediately transfer them into your own wallet.
- Hot Wallets vs Cold Wallets
Even with wallets, there is a safe and even safer option because you can never be too cautious especially when it comes to money. Enter the hot wallet vs cold wallet debate. In a nutshell, they both serve as storage for your coins. The difference lies in whether they are connected to the Internet or not.
Hot wallets are the ones that are accessible through the Internet. This is the more common option because it offers easy access to your coins where you can instantly transfer them after making an exchange. If you plan on using your coins for everyday transactions, this option is recommended.
This does come with a risk though. Hot wallets are linked to the internet and as with all things that are connected to the Internet (except the blockchain), it can still be prone to hacks. Note that hot wallets are third-party apps that are independent of the blockchain which means you should choose them wisely.
For a more cautious person, a cold wallet is the only way to go. It comes as a hardware device like a flash drive. This means it’s not on the internet and is immune to cyber-attacks. A cold wallet provides the highest level of security for your coins and it makes sure that only you have access to your private keys.
The only downside is it’s not as accessible compared to hot wallets. Overall, however, it still provides high security that would make you sleep peacefully at night without worrying over your digital investments.
4. Track your progress
After all that hard work is done and your eggs are safe in their hot or cold baskets, all that’s left to do is to see how the market changes. Since the crypto market is highly volatile where prices can change in a matter of seconds, it is of utmost importance that you keep track of how your coins are doing in terms of price.
Luckily, there are mobile apps that aid you in checking your investments wherever you are and whenever you want. Some of these are Blockfolio and Delta.
The most popular option is Blockfolio. It has a useful option where you can be alerted when a coin reaches a certain price. This way, you won’t even have to check every minute. Blockfolio offers a wide array of features such as a news feed to keep you up to date.
Delta is a faster option. Compared to Blockfolio, it updates the prices faster and more accurately as well. However, it doesn’t offer the diverse features that the latter has.
5. Know when to sell
When it comes to reaping the fruits of your investment, there is never a perfect time. It depends mostly on your situation and the price of the coin. The common answer to the question of when you should sell your coins is when the price is high.
If you’re looking for instant returns, then go ahead and sell your coins. If you’re looking forward to seeing where the market may go, hold onto your coins first and see what happens.
The temptation to make short-term gains with digital coins is always there especially during a bull run because you never know how long it’s going to last. People find it easier to exit once their investment reaches the price they want and that’s okay, too. .
Growing with the market
There are a lot of things to consider before getting your feet wet and diving into the world of crypto investments. The most important thing to consider is whether you’re 100% ready to battle the tides of the market. Hopefully, this list helped you in your preparations. Now, you’re prepared to ride the waves of the investment world.