Before getting into how to invest in Cryptocurrency, let us considered what is Cryptocurrency. Cryptocurrencies are more than just buying your chosen cryptocurrency. As a beginner, you may have many questions in your mind, like what you need to know before investing, how to buy it, and many more.
In this article, we will discuss everything you need to know as a cryptocurrency investor.
Three important things to know before starting to invest in cryptocurrency
1. Cryptocurrency is a high-risk and volatile investment:
Almost all cryptocurrencies are unstable.
Bitcoin is the best example; its value sometimes drops up to 30%, and sometimes it skyrockets.
After gaining popularity in the cryptocurrency market, Bitcoin is doing well, but the results cannot be predicted.
If you want to buy crypto, then you should only buy smart assets in your portfolio.
2. Cryptocurrency is taxable
Cryptocurrency gains are tax-deductible. In 2014, the Internal Revenue Service (IRS) started taxing cryptocurrency gains.
For now, cryptocurrency is subject to capital gains taxes and considered “property.” It means if you buy any cryptocurrency, you have to pay taxes on their profits.
3. Cryptocurrency holdings are not insured by the FDIC:
Your checking and savings accounts will be insured for up to $250,000 each by the FDIC if your bank fails. But in the case of crypto exchanges, you are pretty much out of luck.
We all know that cryptocurrency is not supported by any central bank or government. It means cryptocurrency has no guarantee. You should always be ready to lose if you want to invest in cryptocurrency.
How to buy cryptocurrency?
Some basic steps to buying cryptocurrency are:
Select a exchange:
Choosing a reputable exchange is the most important step. You can buy, sell, and store your cryptocurrency in an exchange.
Now almost all crypto exchanges are simple and user-friendly. Top three best exchanges for crypto in the market are:
1. Crypto.com:
It is one of the best crypto exchanges in the world. It supports hundreds of cryptocurrencies, and also offers an excellent programmes to buy, and sell cryptocurrencies.
2. Etoro:
For investing in stocks, Etoro is a big name.
Etoro offers 30 cryptocurrencies to buy and sell with a simple 1% fee structure. Adding a crypto to your portfolio is an easy step on Etoro.
3. Coinbase:
Coinbase can prove to be an excellent option for beginners. Coinbase is a publicly traded company with more than 73 million users. You can earn free crypto through Coinbase. It is well known for its excellent performance. There are many advantages to Coinbase, but it also has drawbacks, such as the fact that you can’t extract your private key from a cold wallet.
4. Binance.US:
Binance.US fees is lower than Coinbase’s. It offers advanced features to grow and a better selection of cryptocurrencies. This platform is not a dealbreaker, and it is common on crypto platforms.
Choose the cryptos you want to invest in
There are 7500 cryptocurrencies available on the market, so choose the cryptocurrency in which you want to invest.
But crypto platforms only offer a couple dozen. There are some cryptocurrencies with a respectable market cap.
The top-rated crypto is:
Bitcoin (BTC USD):
Bitcoin is the king of cryptocurrencies. You can easily get Bitcoin on almost every popular exchange.
Ethereum (ETH):
Ethereum is the second-most popular cryptocurrency in today’s market. It achieves this through innovation and allowing for the recording of smart contracts on the blockchain.
Binance Coin (BNB):
Binance is the world’s largest coin exchange (Binance.US is the US based version). Binance became popular due to its ability to reduce Binance’s trading fees and its wide acceptance.
Dogecoin (DOGE):
Dogecoin was created as a joke in under 2 hours. But now dogecoin today’s market cap is $85 billion. It is the symbol of speculation, and internet chatter.
The most difficult part is which cryptocurrency should you buy? Cryptocurrencies are so volatile, so it’s very important to choose wisely.
Determine how much crypto to buy
How to invest in Cryptocurrency, and how much crypto should you hold? According to wealth advisors you should have:
• Maybe 10%: so if crypto tanks, you can still retired. But I will not recommend this to investors.
• Secure $100,000 in safe investments because if you manage to secure $100,000 at the age of 35, and keep depositing $100 monthly, no one can stop you to become a millionaire.
Some seasoned investors don’t recommend crypto due to its asymmetric risk profile. It is so unpredictable and very difficult to build future in crypto investment.
Invest small, stick with 5% of your portfolio.
Keep your private keys in a secure wallet
Next decision is how to store your private keys once your buy some crypto.
There are two types of wallets: Hot wallet, and cold wallet. Hot wallets are online, and cold waters are offline. With hot wallet you can trade crypto with ease, and security for protecting them is better than ever.
But in today’s worlds hackers becomes more bolder, which is why many investors especially long-term investors prefer cold wallet to save their private key.
Maintain your investment
Maintain your crypto investment is an important and final step. The steps to maintain your investment is given below:
• Made your main investing dashboard creatively so that you can check your crypto performance over time.
• Crypto is still high volatile, check headlines regularly.
• Crypto investors can join a crypto community via any social media platforms
to get information about new and hot topics.
• Try to learn new cryptos and new implementation
Advantages and disadvantages of investing in cryptocurrency
Advantages
1. Chance of massive gains:
Bitcoin is the most growing currency in crypto market. From last decade, Bitcoin is the best-performing investable asset. There is a high chance of Bitcoin’s skyrocket trajectory.
2. You can earn some for “free”:
You can’t watch short videos to earn free real estate nor can “mine” stocks – but you can do earn either to earn free crypto.
3. Support an emerging technology:
Blockchain nearly start entering every sector such as public, fintech, and medical. These sectors supports investment in crypto.
4. Buying crypto isn’t the only way to invest:
The convenient ways for stock traders to add crypto to their portfolio are crypto and blockchain EFTs. You can add it to their portfolio without exposing themselves to the high risk of holding actual crypto.
Disadvantages
1. Risk of theft, scams, and fraud:
The latest crypto scam “Squid”, saw it’s developers make $3.38 million of investors money. In 2014, nearly 850,000 bitcoins were stolen, and not a single bitcoin has been recovered.
2. High risk of volatility:
Every cryptocurrency is highly volatile, and no one can predict its outcome. That is the reason why most investors recommend limiting your portfolio allocation to 10% at most.
Conclusion
I think its not that difficult to understand how to invest in cryptocurrency. It can be difficult to buy and invest in cryptocurrency. Crypto is risky in many ways but there are many investors who make huge amount of money from cryptocurrency.
If you decide to invest in crypto, stay aware of the risks and educate yourself continuosly. Prepare yourself for the best practises, and keep an eye on the industry.
Frequently Asked Questions (FAQs)
What is cryptocurrency?
Cryptocurrency is a type of digital currency where records are kept and transactions are managed by a decentralized system using cryptography as opposed to a central authority.
How to buy cryptocurrency stocks?
Steps to buy cryptocurrency is:
1. Pick a broker or crypto exchange to purchase cryptocurrency
2. Create and verify your account
3. Deposit cash to invest
4. Place your cryptocurrency order
5. Select a storage method
Best way to buy cryptocurrency?
The best ways to buy cryptocurrency depend on each person. But the overall best ways to buy cryptocurrency are:
1. Cryptocurrency exchanges
2. Peer-to-peer exchanges
3. Bitcoin ATMs
4. Cryptocurrency apps
Where to invest in crypto?
The best places to buy crypto are:
1. Coinbase
2. Binance.US
3. Robinhood
4. eToro
5. Cash App
Investing in cryptocurrency for beginners?
Steps for beginners to know how to invest in cryptocurrency are:
1. Understand what you are investing in
2. Don’t depend on past circumstances
3. Manage your risk
4. Always aware about crypto volatility
5. Don’t invest more than you can afford