What is Crypto?
You may have heard the term “cryptocurrency” bandied about in recent months and years, but what is it?
Cryptocurrency is a digital or virtual currency that uses cryptography to secure transactions and control the creation of new units.
Cryptocurrency is decentralized, meaning it doesn’t belong to any government or financial institution. This makes crypto very appealing to many people who are interested in trading altcoins and making profits from price fluctuations.
Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Since then, many other cryptocurrencies have been made, including Ethereum, Litecoin, and Ripple.
So what is cryptocurrency? How does it work? And why are so many people interested in trading altcoins?
People are interested in cryptocurrency because it offers a number of advantages over traditional currency: it’s secure, it can be used for anonymous transactions, and it allows people to bypass government control over the currency.
Crypto offers the opportunity to build a decentralized system of currency that can be based on majority consensus.
Bitcoin allows purchases to be private because transactions can be made anonymously. This crypto also offers users a degree of freedom that fiat currency cannot match. For many, this freedom is worth the investment.
Also, international payments are easy and cheap because bitcoins are not tied to any country or are subject to regulation. Small businesses may like them because there are no credit card fees. Some people just buy bitcoins as an investment, hoping that they’ll go up in value.
This level of anonymity might also be attractive to people who are trying to evade taxes or launder money. Cryptocurrencies are also favored by libertarians and technophiles who believe that traditional financial institutions are too centralised and vulnerable to manipulation.
How Much Money Should You Invest in Crypto?
Many people ask how much they should start to invest in crypto when they are first starting. This is a common question as many may not truly understand investing basics. There are no worries of judgment as we are all at our own learning level. We each need to start somewhere.
A good rule of thumb we suggest is not to invest more than you can afford to lose. When first starting to invest, a fair amount maybe 5-10% of your net monthly income. With this small amount to be the starter amount to learn with, it should not be painful to lose.
With this percentage, regardless if you work part-time or have an office job, this small amount invested should be a comfortable amount.
As you get your rhythm of learning the principles of crypto, then you will feel confident investing more.
HODL – Depending on if you plan to invest in crypto for long periods of time or if you intend to trade, you may have heard the term HODL. This means to ”Hold On for Dear Life” by keeping the crypto usually for over 1 year or more. The longer you hold the crypto, the bigger the gains. This may be similar to the stock market.
Some crypto investors may tend to HODL and trade throughout their portfolio. If you feel comfortable having a mix in your crypto portfolio, you of course can choose to do so.
Choosing Crypto Exchanges
Depending on how you plan to invest as mentioned above, may determine which exchanges you may use or how many. Some investors may be fine with buying one part of a Bitcoin for $100 and HODLing. Others may want to trade and use different exchanges for different coins.
Depending on which country you reside in will determine which exchanges you may use. Such as, Binance.com is deemed a good exchange but Americans can only use Binance.us.
With that, it’s important to look into each exchange deeply by getting their Whitepapers. These documents should provide transparency of who the organization is, information about the coin, and where they are located.
Americans may see exchanges located outside the United States as a concern. The US government requires US citizens to pay taxes on “trades, withdrawals or sales” of cryptocurrency. The exclusion is when you purchase. That is the only transaction not taxed.
Make sure you review each exchange’s fees of what they charge. The fees are usually minimal and can be cheaper than U.S. bank fees.
Each transaction you make, including trades will incur a fee. The more you trade, the more fees you may be charged.
Some exchanges offer incentives for signing up. These can include bonuses from friends or links. For example, one person may encourage you to use their link to sign up with Coinbase which will result in both you and the other person receiving $10 towards crypto just for clicking on the referral link.
Not a bad way to get started!
Here is a link to get you started with $10 from Coinbase. Here’s another for 10% extra with Kraken.
Funding Your Crypto Account
Just like a bank, you will need to fund your crypto account with cash money. To do this, the exchange will need to access your bank account. A pop-up window may appear for you to log in to your bank and enter your credentials.
This may seem sketchy to some, as safety could be a concern. (Check out this here for more security!)
Once you complete the information and transfer your first small amount (under $100), it may take a day or two for the funds to be available.
This means you may be delayed if you want to purchase crypto right away. If you have been thinking about buying certain coins, you may want to get this step completed before you want to make a timely purchase.
Other methods of payment include bank debit cards, wire transfers, and Apple Pay.
Some exchanges do let you use a credit card. You will just need to check with each exchange of your choice if that payment is accepted.
Choosing Crypto Wallets
Crypto wallets are software that is linked to the blockchain that monitors and executes crypto transactions. It’s basically like a personalized bank account for your crypto.
Every crypto wallet is going to have a public key as well as a private key. The public key is basically like your mailbox. It’s the one that everyone can see and people can send cryptocurrencies to that address.
There’s the private key and this is the key to your mailbox. The private key is going to allow you to sign off your transactions and validate your public key. If it’s not your keys that means it’s not your crypto.
To truly own cryptocurrencies, you need to own the wallets that have the keys that represent your unique digital wallet identification.
If you want to hold your crypto yourself and manage it yourself, you need an actual hard crypto wallet. This will be your hardware wallet. This is a storage device like the Ledger or Trezor. Ledger and Trezor are probably the most popular brands for hardware wallets. These are highly secure ways of holding your crypto.
A mobile wallet is another type of crypto wallet. These are mobile apps and your crypto is stored there. Popular examples of these are Exodus, MetaMask, and Atomic. These need to be disconnected from the internet when not in use.
Desktop wallets are installed on your desktop itself and they offer a little bit more advanced features and more autonomy. However, depending on the security of your computer may make your device and wallet quite vulnerable. If you install this, you may also want to disconnect from the internet when not in use.
A paper wallet is a document that includes your keys and a QR code. This is fairly secure because to steal your wallet, people will need to steal this piece of paper so you’ll want to secure your paper wallet in something like a fireproof safe.
With this, it’s best to have more than one wallet. You may want to have two hot and cold wallets for extra security.
Picking Bitcoin or Altcoin
Cryptocurrencies have become increasingly popular in recent years with many new coins being created every day.
Some characteristics to look at for each coin are the market cap, trading volume, circulating supply, price, and total coins.
This information should also be available in the crypto coins white paper.
Some of the best-known crypto assets include Bitcoin and Ethereum.
Some popular ones include Tether, Polka Dot, Cardano, Ripple, Litecoin, Binance coin, Stellar, Doge, Uniswap, Chainlink, Zengold, Shibu Inu, NEAR, MATIC, USDT, Project tokens, and there are many more out there!
The list of crypto coins is endless and new ones are created every day. You will want to subscribe to a crypto news source like CoinDesk.com to keep up with the latest news.
Determining Coin Value
What dictates the value of a cryptocurrency? Just like any other market, the value of crypto depends on how much people want to buy and sell it for; if there is an abundance in supply but little demand then prices will go down accordingly.
When too many buyers compete against one another seeking that same good (like Bitcoin), its price can increase drastically due largely because fewer individuals have access or wish to participate.
The value of cryptocurrency is determined by how much people are willing to pay for them. If there isn’t enough demand, then prices will go down as more units enter the market and sit on shelves collecting dust; however if too many coins exist with little available supply, such as Bitcoin, buyers may be able to achieve higher rates.
The market determines the value of a Bitcoin: how many people are willing to buy or sell it at a given price. The more people who want to buy Bitcoin, the higher the price goes. The more people who want to sell Bitcoin, the lower the price goes.
This makes Bitcoin and other cryptocurrencies a volatile investment, but one with the potential for high returns.
Risks of Investing
The volatility of cryptocurrencies is a major drawback, but people are still investing in them. The recent rise of interest can be attributed to investors seeking out potential opportunities for gainful investment during what might otherwise seem like an endless casino night at the stock exchange!
The value may be volatile (think Bitcoin), but even though you can never know exactly what your investment will be worth tomorrow- there’ll always be an investor who discovers them just in time so they’re making money off these fluctuations as well.
The most stable long-term winners for crypto will be Bitcoin and Ethereum. These are relatively stable; they’re not stable at all compared to many other investments like stocks and bonds, but for crypto, these two are pretty good.
With Bitcoin or Ethereum, these types of coins have volatile short-term price movements. Cryptocurrency is all about extremes.
In some cases, this includes experiencing large gains as well!
Remember, when investing, when you have a greater risk that means you have the potential for greater returns. When you have greater returns the price shoots up astronomical. This also presents greater risks as well.
There isn’t an easy answer when picking which one should give traders peace from fear while still remaining profitable over time.
Do your due diligence. Read the whitepapers prior to investing.
There are many people making a lot of money on crypto. And there is also some losing money.
This goes back to the rule of thumb, don’t invest more than you can afford to lose.
Keeping Crypto Safe
Cryptocurrency has the potential for a lot of value. Some investors have become wealthy because of crypto investing in a short period of time. Because of the high-value crypto offers, hackers, scammers, cybercriminals, and thieves want your crypto!
Just like cash, you need to take active measures to protect your money.
Here are some safety measures to help you protect your crypto investments:
Never ever give anyone nor any company your Private Keys-Ever! If you do, you can guarantee your money will be gone.
Never give your 24 secret word phrases. They are Yours!
Never click on a link from a text or email from any crypto exchange or wallet. It most likely is phishing and a scam to steal your credentials.
If you use a VPN, always use the same IP address with that VPN.
Always create a new email used only for crypto. Make one for each crypto exchange if possible.
Use a cold wallet – A cold wallet is not connected to the internet, which makes it less vulnerable to hackers.
Use a reputable exchange – Make sure you are using a reputable exchange that has a good security track record.
Keep your computer safe – Make sure your computer is protected with anti-virus software and keep your software up to date.
Be vigilant – Always be aware of what you are doing online and be cautious about where you share your information.
Cryptocurrency can be considered an easy in to investment world. Many have been able to increase their assets and grow their wealth since Bitcoin’s inception.
There is plenty of information available to help any newbie learn more about Bitcoin to get started.
There are many reasons to invest in crypto and many coins to choose from. It’s critical to know how to secure your crypto investments safely. One simple careless step and you could lose a ton of money.
Nonetheless, it’s better to get started now rather than later. Just make sure you take the steps to keep your crypto secure along the way.