Have you ever felt like you’re missing out on the latest trend? Maybe you keep hearing whispers about people investing in cryptocurrency at the office dining room or see headlines about Bitcoin soaring in value. You’re curious, but the world of crypto seems complex and intimidating.
This blog post is your friendly guide to navigating the exciting, but sometimes overwhelming, world of cryptocurrency investment. I’ll break down the basics, from what cryptocurrency is to its risks and how to mitigate it.
What is Cryptocurrency?
Before you learn how to invest in cryptocurrency, it is very important to know what cryptocurrency is. Cryptocurrency, or crypto, is a digital currency, meaning it doesn’t have a physical form but runs on a virtual network. The cryptocurrency is built on blockchain technology which ensures that all transactions are securely processed and recorded.
Cryptocurrencies are digital assets that can be bought and sold but unlike stocks, investing in cryptocurrency does not entitle you to legal ownership of a company. Rather, you are investing in a digital asset that you hope will increase in value.
Cryptocurrency has two major distinctions when compared to other forms of currencies. Firstly, cryptocurrency is decentralized which means that it is not owned, backed, or regulated by any government or corporation. And secondly, cryptocurrency can be transferred without using a third-party financial institution like Bank. By contrast, bank account connections are required for well-known peer-to-peer payment systems like Zelle, PayPal, or Venmo to function.
Compared to ways of investment such as investing in mutual funds and gold that are more stable, crypto is highly volatile. So, ensure you read this article till the end to get a head start when investing in cryptocurrency.
How do Beginners Invest in Cryptocurrency?
Now that you’ve grasped what cryptocurrency is, you can explore how you can start investing in cryptocurrency. In simple terms, you need to know how to buy cryptocurrency online and how to trade cryptocurrency online. The most popular place to purchase crypto is cryptocurrency exchanges.
How to Buy Crypto Online?
Just like stock brokers, cryptocurrency exchanges are like a marketplace where you can buy and sell, your routine when investing in cryptocurrency. These exchanges allow you to buy crypto like Bitcoin, and Ethereum using a debit card. There are many to choose from with popular ones being Coinbase, KuCoin, Binance, Bybit, etc. You can also buy any amount of these currencies just like when you buy a piece of land from a hectare.
Things get a little trickier for other cryptocurrencies, sometimes called “altcoins.” Alternative coin, also called Altcoin refers to any cryptocurrency that’s not Bitcoin. Think of Bitcoin as the original king of the crypto castle, and altcoins are all the other contenders for the throne. Examples are Solana, Dogecoin, and the popular BNB.
To buy these, you’ll often need to use Bitcoin or Ethereum first because you can’t usually buy them directly with fiat currency (regular paper money like USD or NGN). But that may change in the future.
Where to Buy Crypto Besides Exchanges?
Besides using exchanges when investing in cryptocurrency, which charges you for each transaction made, you can use other means to buy cryptocurrency online. There is the peer-to-peer (P2P) method where you can buy or sell directly from other crypto traders who are looking to sell/buy coins (cryptocurrencies).
However, if you’re still entirely new to cryptocurrency, it’s best to stick with the exchange for now because peer-to-peer can be slower and a bit risky. Exchanges is a safer way to get started than P2P.
Another option, which is gradually coming to the limelight, is the Bitcoin ATM. According to Statistica, there are 34,000 Bitcoin ATMs all over the world as of January 2024. You can use a Bitcoin ATM to purchase Bitcoin and send it to your wallet (where you keep your cryptocurrency) and use that to buy coins of interest.
Where to Keep Your Cryptocurrency?
Now that you’ve understood how to buy or sell cryptocurrency and where this process can be done, the next thing is to know how you keep your cryptocurrency. That’s going to be in a wallet, a cryptocurrency wallet. This wallet isn’t the physical wallet you keep at the back of your pocket but an electronic store that holds your private keys, keeping your crypto safe and accessible.
There are two types of wallets used in investing in cryptocurrency, the software and the hardware wallet. There are Software wallets that are often used for active trading because they are easily accessible. The hardware wallet, on the other hand, is a physical device, like a USB. It is more secure which is why people often use it to hold currencies that are rare to find or to keep a coin for a long time.
What are the Risks and Benefits of Investing in Cryptocurrency?
Aside from earning money online without investment, every form of investment you’d make has varying degrees of risk and reward. Cryptocurrency isn’t an exception as it comes with its unique pros and cons.
What are the Risks of Investing in Cryptocurrency?
Cryptocurrency prices are known for their wild swings, meaning you could see your investment skyrocket one day and plummet the next. This volatility can be exciting, but it also carries a high risk of losing money.
On top of that, not all cryptocurrencies or platforms are created equal, and some are more vulnerable to hacks or even outright fraud. When it comes to investing in cryptocurrency, it is “buyer beware”, so do your research and invest cautiously.
What are the Benefits of Investing in Cryptocurrency?
One of the beauties of investing in cryptocurrency is that it breaks away from traditional financial systems, allowing users more control over their funds and global access anytime. Unlike other forms of online investment like real estate, they boast the potential for faster transfers and lower fees compared to banks, especially for international transactions.
And most importantly, cryptocurrencies have the potential for high returns, which is actually why most people choose them over normal banking methods.
Conclusion
Investing in cryptocurrency can be both fascinating and intimidating for beginners. However, unlike traditional investment options, cryptocurrency is a highly volatile market fraught with inherent risks.
While you make your decision on how you want to start your crypto journey, don’t get caught up in the hype and rush into decisions. Take time to conduct thorough research. Explore different coins, understand the underlying trends, and carefully evaluate the reputation of various trading platforms.
As good as crypto is, it will be of great benefit to you, as a beginner, to ensure you a personal budget, so as to monitor your expenses and still save. You can have other financial plans like having an ecommerce business where you can reinvest your gains.
Frequently Asked Questions
How do I deposit crypto into my bank account?
Whenever you want to deposit crypto into your account, it means you are also withdrawing from your wallet. To do this, you will open your wallet and request a withdrawal into the fiat currency of your choice. You must have also provided the account details for that fiat currency. This will take 4-6 and it is easy, secure, and simple.
You can also use the P2P method on your cryptocurrency exchange or broker. When using this method, ensure that the peer is verified and has over 80% successful transactions.
How does crypto make you money?
Investing in cryptocurrency can earn you interest on your investments. You can do this through a ” yield farming process,” where you give your cryptocurrency to a platform. Your coin is put in a pool with others in exchange for interest. The amount of interest you gain will solely depend on the platform, the duration, and the type of cryptocurrency.
You can also earn through mining where you dedicate your time to mine a coin that isn’t listed. When it does, you get to convert your mined coin to a fiat currency or other coins.
What is the minimum amount to start cryptocurrency?
The platform you choose often determine the minimum amount you can invest in cryptocurrency. Some platforms allow you to buy coins for as low as $1 while others take it up to $10.
