Cryptocurrency investment can be of many types. There is Bitcoin, Ethereum, Binance, etc. Bitcoin is seen as the best type of cryptocurrency investment that already exists. So, this leads me to this important question. What does cryptocurrency investment mean? Are you curious about its potential and wondering how to get started? This article will provide you with all the necessary information on how to start investing in cryptocurrency and the strategy you need for cryptocurrency investment.
Key Point
- Before investing in cryptocurrency, it is important to understand the basic principles of cryptocurrency investment, including its volatility and impact on market sentiment.
- Beginners should start with small investments and carefully choose between brokers like Robinhood and SoFi, which offer security but may have higher fees, or exchanges like Coinbase for more flexibility.
- Creating an account involves KYC procedures, and funding it can be done through various methods like bank transfers or credit cards, but be cautious of additional costs with credit cards.
- Use strategies like not investing more than you can afford to lose, employing dollar cost averaging for regular purchases, and initially sticking to major cryptocurrencies like Bitcoin and Ethereum.
- Conduct thorough research on the projects behind cryptocurrencies, focusing on real-world adoption potential, technical specs, and community engagement, and avoiding putting all investments into one major crypto.
Cryptocurrency Investment
Many people are now into cryptocurrency investing, and investors are interested in the cryptocurrency market, especially now that there is an optimistic outlook for rising prices. However, every investor has unique needs and considerations when investing in crypto. So, it is very important to understand the basics of cryptocurrency investment before going into it.
If you are a beginner in cryptocurrency investment, it might be intimidating for you. But like I said earlier, being informed about the basic steps is the first major step to cryptocurrency investing. The first step is to know the available investment options. For instance, you should be aware that pension funds and hedge funds cannot invest directly in cryptocurrencies because of their agreements with investors, so this option is out of reach for some. Additionally, cryptocurrency is highly unstable in price, and the value is based on market sentiment, which can quickly change with time and significantly impact the prices.
I remember the first time I tried cryptocurrency. It was in 2017 when Bitcoin was on the rapid rise. As a beginner, I was intimidated by the complexity of crypto. I investigated many investment options, but the unstable market price was an obstacle. One morning, I checked my profile and discovered that it had dropped 20% because of the change in market sentiment. It was my first experience and a reminder of how things can change in the crypto world. This experience taught me how to prepare for cryptocurrency investment challenges, which involve careful planning and a willingness to learn.
Now, you understand that it is important for new investors to research the projects behind the cryptocurrencies that interest them. Just like Warren Buffet advises against investing in businesses you don’t understand, the same thing applies to cryptocurrency. Moreover, Blockchain technology can be complex, so I advise you to research it before investing.
How to Start Cryptocurrency Investment
If you are a cryptocurrency beginner, it can be challenging to fully understand the process of buying digital currencies. So, you can learn how to start your cryptocurrency investment journey by following these basic steps, which I explained below.
#1. Pick a Broker or Cryptocurrency Exchange
Two ways to buy bitcoin or other cryptocurrencies are through a broker or a crypto exchange.
- Cryptocurrency Brokers make buying crypto easy and simple, but they may charge a higher fee or restrict moving holdings off platforms like Robin Hood and SoFi. Many investors prefer holding coins in crypto wallets offered by these platforms for security. Moreover, this same applies to me. After reading many Bitcoin articles, I decided to use Robinhood to buy my first Bitcoin because I wanted to get a fraction of it. However, I later realized that it charged a higher fee than other platforms, and another limitation was that I could not transfer my Bitcoin to a personal wallet. So, I moved to SoFi, another popular broker platform. SoFi was easy to understand, and they offered some educational resources that helped me understand cryptocurrency investment better. However, I couldn’t move my coins off their platform like Robinhood. However, I learned that Robinhood and SoFi make it easy to buy and sell cryptocurrencies and give your assets some security. So, I suggest you ensure you have control over your digital assets to protect them from hackers or platform restrictions.
- Cryptocurrency Exchanges: crypto exchanges like Coinbase, Gemini, and binance.US provide platforms for buying and selling digital currencies. But, these platforms can be overbearing for a beginner. Even though it offers user-friendly options that make purchasing easier, its fees are higher than those of standard trading platforms. So, if you want to minimize your expenses, you will ensure that you master the standard trading platforms before or after you buy your first cryptocurrency.
#2. Set Up an Account
After choosing your crypto broker or exchange, the next is to create an account. This is where you sign up and provide personal information to authenticate who you are. It is often known as the “know your customer” or KYC procedure. This may involve inputting your information, such as your passport or driver’s license. Sometimes, you may be required to provide a photo of yourself for identification purposes. This is important for security purposes and regulatory compliance.
I recall when I first set up my cryptocurrency account, I had to snap a selfie and upload it with my passport details to get my account verified. So ensure you have the required documents ready, capture your face clearly, review all your information before submitting it, and stay informed on the private policies of the platform you use to understand how your data will be handled. Below is a checklist that will guide you in setting up an account on popular exchanges like Coinbase or Binance, including KYC procedures and funding the account.
Kryptoteck Checklist on How to Set Up a Crypto Account
#3. Add Funds to Invest
You must ensure you have funds in your account before you can start investing in cryptocurrency. There are ways to add money to your account. You can connect your bank to it or initiate a wire transfer and use a credit or debit card to make the payment. The deposit method and the broker or exchange you choose will determine when funds will become available in your account. Although some of these exchanges allow credit card deposits, they usually come with risks and additional costs. Credit card companies put crypto purchases in the cash advances category, leading to higher interest and extra fees.
#4. Initiate Your Cryptocurrency Transaction
You are ready to buy crypto once you have funds in your account. You will decide the crypto you want to purchase by entering the symbols, for example, BTC for Bitcoin. Also, state the quantity of coins you want to buy. A fractional share of a valuable cryptocurrency, such as Bitcoin or Ethereum, can be bought on some exchanges and through brokers. This accessibility guarantees that people without large resources can still invest. Besides, this aspect was profitable when I first started cryptocurrency investment.
By starting small, it gave me the opportunity to get comfortable with the market without risking more than I could afford to lose. So, if you are a beginner, I suggest that you don’t get pressured to start your cryptocurrency investment with a large sum immediately. I advise you to start with a small amount as a test and understand how the market works. Also, try to join an online forum or local meetups to help you learn from experienced investors whose insights will be an experience you will learn a lot from.
Cryptocurrency Investment Strategy
The success of your cryptocurrency investment deepens your strategy; your strategy is your key to success in investing. Besides, the instability in price, technical difficulties, and regulatory uncertainty can overwhelm a beginner. Below, I have explained some key strategies of crypto investing that will help you become successful in cryptocurrency investing.
#1. Never Invest More Than You Can Afford to Lose
You should keep in mind that cryptocurrencies are volatile assets that one can gain or lose important value in a single day. So, I suggest that you invest an amount of capital that you are fully prepared to lose if there is a market change. Make sure you have enough savings before investing your funds in crypto. This strategy requires that you do not invest more than 5% in your portfolio. This will help you get the necessary knowledge, expose you to potential gains, and ensure that losing won’t have a big impact on your portfolio.
#2. Use Dollar Cost Averaging
This cryptocurrency investment strategy is about making small and recurring purchases on a set schedule, weekly or monthly. So, set it up to automatically buy through an exchange instead of buying manually each time. When I was new in crypto, I was always anxious about the right time to buy, which made me spend hours watching charts to predict the best moment. It was an exhausting experience, which left me frustrated sometimes. However, my approach changed when my friend told me about the dollar cost-averaging strategy. This exchange strategy helped me make my purchases and relieved me from worrying about market volatility.
Using dollar cost averaging will help you avoid the stress of guessing the best time to buy crypto. It will also help you to buy when the price is low and buy less when it’s high. You may pay a few more fees for transactions because you are making more purchases, but the extra cost is worth it since you get more benefits.
#3. Research and Stick to the Fundamentals
When it comes to cryptocurrency investment, it is important to vet your investment using metrics that are different from those of the stock market. These sometimes include evaluating the real-world adoption potential, reviewing technical specifications, researching the founders and developers, scanning community engagement, and evaluating competitors. There was a time when I spent hours sitting through whitepapers and community forums to point out promising projects from those that were merely exaggerated. That was when I came across Ethereum because it stood out. It had active development teams, strong community support, and innovative smart contract functions. I did thorough research and discovered that Ethereum had a significant edge in terms of real-world capabilities. These findings gave me the confidence to invest more.
#4. Stick to the Major Cryptocurrencies
This is another investment strategy in cryptocurrency that states that one should stick to established cryptocurrencies like Bitcoin and Ethereum. This is because these popular coins have gone through some ups and downs in the market and are linked to many financial products like EFTs and derivatives markets.
I suggest you focus on larger crypto because Bitcoin and Ethereum have adapted through difficulties and maintained a positive outlook; this is not so with new coins now. Their ability to survive multiple important market cycles shows they can withstand tough times. For a beginner, I suggest that you stick to major cryptocurrencies for stable foundations, but as you grow, you can still take some of your profits from your investments in the major crypto and invest in promising new projects. I don’t see why you should put all your investment into one major crypto. But always try to balance your portfolio according to the risk you can tolerate. Here is a video that will guide you more on the investing strategies of cryptocurrency
Is Cryptocurrency a Good Investment?
Investing in cryptocurrencies involves multiple risks, including capital loss, government regulations, fraud, and hacking. You may also lose your capital. Mark Hastings, a partner at Quillon Law, warns investors that they must tread carefully in the unusual financial environment of cryptocurrency or risk large losses.
How Does Crypto Make You Money?
There are various ways in which cryptocurrencies can generate revenue for you. Decentralized finance applications allow you to lend your cryptocurrency with interest, stake a suitable one on a blockchain or on certain exchanges for rewards, or hold on to it and hope its market value rises.
Is Cryptocurrency Real Money?
Bitcoin payments exist just as digital entries in an online database tracking particular transactions, not as physical cash carried around and traded in the real world. The transactions are kept in a public ledger when you move cryptocurrency funds.
Which Crypto Gives the Highest Return?
Bitcoin, the first and largest cryptocurrency by market capitalization, has been on the market since 2009. In the last year, Bitcoin provided a 500% return, making it a tremendously rewarding investment.
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