Have you been thinking about getting into the cryptocurrency market? Perhaps you’re looking for a better way to invest and manage your finances. You’re not alone. According to The Independent, a third of millennials will be investing in cryptocurrency in 2018. Many believe that the rise of cryptocurrency will lead to the end of a cash-based society.
It’s easy to see that this “virtual currency” is increasing in popularity. In this post, we will help you understand what cryptocurrency is, why it is beneficial, and how to get started in the cryptocurrency game.
Becoming a digital currency investor isn’t easy. It requires much research, patience, and perseverance. However, if you take the right steps, you can put yourself in a much better financial position.
What Is Cryptocurrency?
Cryptocurrency is a digital currency that functions as a method of exchange. The process uses cryptography to provide secure transactions between individuals. It also verifies transactions to protect both parties. These virtual currencies exist in databases that cannot be altered unless certain conditions are fulfilled.
The digital currencies we have today are not the first. There were attempts at creating this type of unit of exchange during the 90’s. However, none of them caught on because of issues like fraud, non-functioning companies, and financial problems.
In 2009, digital currency made a resurgence when a group of programmers called Satoshi Nakamoto came out with Bitcoin. The current model is similar to peer-to-peer methods that people use to share files.
It is vital that you know how the value of digital currency is assessed. The amount it costs to purchase a unit of cryptocurrency determines its price. Market capitalization — also known as market cap — is the amount of fiat currency that one invests in the digital currency. Fiat currency is the money that we use in our standard domestic exchanges.
Why Do People Invest In Cryptocurrency?
There are several prime benefits of investing in cryptocurrency. These benefits are attracting an increasingly higher number of investors.
Investing in cryptocurrencies typically requires no transaction fees. In some cases, you might have such a charge, but it is usually lower than trading fiat currency. If you are using a third-party service to maintain your bitcoin wallet, you might pay a minimal fee.
Avoiding Identity Theft
Identity theft has become a massive problem for consumers. In 2014, 17.6 million Americans were victims of identity theft. When you pay for a product or service using your credit card, the merchant has access to the account. This is because they use a “pull” method to receive their payment.
On the other hand, cryptocurrency relies on a “push” method in which you send the exact amount that you want to the other party. This means that criminals cannot hack into the system and pull unauthorized funds from your account.
You Own Your Money
Finally, cryptocurrency gives you full ownership over your funds. Using a regular checking or credit account provides control over your money to the bank or credit provider. This means they can arbitrarily limit your access to your funds.
PayPal is a prime example of what can happen when you are at their mercy. If they believe your account has been used in fraud, they can completely freeze your access to your money. Then, you will have to leap over every hurdle they place in your way to regain your funds.
With digital currency, you don’t have to worry about your financial institution’s meddling. You always have direct access to your finances as you are the only one who owns the private and public keys. Nobody else can access your currency unless you give them the key.
How To Get Started
Starting your foray into the world of cryptocurrency isn’t too complicated. In a few steps, you can quickly become a digital currency investor. The first step is to obtain a wallet.
Obtaining A Wallet
Wallets function as bank accounts for cryptocurrency. There are different wallets for different types of currency. For example, if you’re investing in bitcoin, you need a bitcoin wallet.
If you want to set up a wallet is to sign up for an exchange that allows you to trade digital currency. Most of these exchanges will enable you to set up a separate wallet for each type of currency with which you intend to trade.
There are a few different types of wallets from which you can choose. These include:
- Desktop Wallets – A wallet that you download onto your PC or laptop.
- Mobile Wallets – Apps that you can install on your mobile device.
- Online Wallets – These wallets are stored on the internet and allow you to send and receive tokens. With online wallets, there is a risk that it can be hacked.
- Paper Wallets – These are a physical printout that includes your public and private keys with a QR code.
- Hardware Wallets – These are entirely offline. In some cases, you can hold the wallet on a USB drive. Not all currencies are available on hardware wallets.
Choose Your Exchange
Cryptocurrency exchanges are the online areas where you will trade. You can think of it as the stock exchange for digital currencies. Some exchanges will allow you to use fiat currency to purchase certain types of digital currency.
Here are some of the more popular exchanges:
Exchanges will typically allow you to buy currency using a credit card. Usually, they will have a limit on how much you can buy each week.
After you pick the exchange on which you wish to trade, you can get started. In this next section, we will give you some tips that will help you understand how to invest.
First, you must make sure that you have a full understanding of how to trade in Bitcoin. Units of Bitcoin—as well as other units—are divisible up to 10 million units. You are not required to buy a full Bitcoin—it is possible to purchase a “piece” of the currency.
For example, you can buy 0.5 Bitcoin instead of purchasing the full unit. At the time of this writing, it takes $8,645.30 to buy one Bitcoin. You can use this calculator to keep track of the exchange rate. It sounds pretty daunting, right? Don’t be intimidated. Remember, you don’t have to buy a whole Bitcoin if you can’t afford it yet.
It’s also important to understand how to make trades in digital currency. There are several types you can make. You might want to try all three at first to see which type works best for you.
Limit trading enables you to set your desired price at which you wish to sell a token. You can also determine how many tokens you want to have. Limit trading also allows you to automatically fill a sell order at a time when the price of the desired token reaches your price.
For example, if you want to sell a unit when it is worth $7,000, you can automatically set it up so that it doesn’t sell until the unit of currency reaches that amount.
Market trading means that you buy and sell currency at the market rate. This is the fastest way to purchase cryptocurrency if you’re looking for a quick way to trade.
Stop limit trading is similar to limit trading in that it allows you to set up automatic trades. For example, you can create a “stop limit” at $10, which means you will automatically start buying when the price of a particular currency is $10 or less.
Make Sure You Keep Up With The Market
As with the Nasdaq and Dow Jones, it is essential to make sure you are up to date with cryptocurrency. You need to stay on top of cryptocurrency news to make sure you are aware of any trends in the market. If you are not staying abreast of the world of digital currency, you could lose opportunities and money.
Getting started in the world of cryptocurrency can be exciting, and intimidating. It can be especially scary if you have no experience with digital currency. However, it can be a lucrative endeavor if you are willing to invest the time, energy, and finances in making your investments a success.
The tips in this article will give you the knowledge you need to get started on the right foot. However, there is still more information you need. Make sure you do your research first, and you will avoid many of the most common mistakes made by first-time digital currency investors.