By now you must have known about Bitcoin. Then you must also know that the digital currency is currently the most valuable asset in the world. Trading with digital currency can surely change your life. So in this article, we will discuss the steps to invest in cryptocurrency.
When Bitcoin was first invented in 2009, it was nothing more than a compelling phenomenon. Technicians and futurists could see the future improvement of digital currency in general but were not convinced enough for investment. But as years passed and with the emergence of new cryptos, Bitcoin became a standard bearer of this currency.
Cryptocurrency And The Stock Market
Investors and spectaculars did not miss the opportunity of cryptocurrency. Some even started to view digital currency as an alternative option for fiat currency such as U.S Dollars, Euros. Along with that, the trading platform of cryptocurrency has also drawn a large number of explorers. They have started to bet on cryptocurrency, Bitcoin in specific. They are not really concerned with the basics. Sudden price rise and valuation are the two things that draw their attention.
What Is A Cryptocurrency And How Does It Work?
Cryptocurrency is a technology that is based on the blockchain algorithm. That is a chain of information that is not controlled by any external body. It is completely decentralized.
The best thing about a blockchain technology is the fact that it eliminates the interference of any middle man or any central bank. It enables the users to carry on the transaction among themselves.
What Do We Consider As The Main Attractions Of Cryptocurrency?
Presently at this moment, there are two very basic attractions of cryptocurrency. There are:
- You can own a digital currency and use that anonymously without revealing any information about you.
- Cryptocurrency is subject to an explosion of the price that gives the users the feel of investment.
And those who have invested in digital currency before the increase in 2017, then that would be the best investment in their investment portfolio.
How To Invest In Cryptocurrency? – Step By Step Guide
By this time you have understood that in order to buy cryptocurrencies you cannot go to any local bank or any brokerage firm. There is a different system altogether that exists for cryptocurrency purchases and holdings. It is still viewed as exotic in the sphere of financial institutions. Since the concept of digital currency is still not very old and familiar, most of the financial institutions do not want to deal with it.
Read the steps below if you wish to invest in cryptocurrency.
Step 1: Allot A Small Part Of Your Portfolio In Cryptocurrency
Before starting to invest you first have to decide the amount from your portfolio that you want to invest in cryptocurrency.
- Initially, you should begin with allocating a small part of your portfolio to cryptocurrencies. The exact amount depends on you.
- You have to understand that investing in cryptocurrency and investing in stocks is not the same. In the case of stock when the company earns profit you get a part of it but that is not the case with cryptocurrency. The crypto company’s profit is not shared with the users. You only get the value of the coin you are holding.
- Initially, digital currencies were not formulated for investment. They were created to enable an alternative medium of transaction.
- And finally, cryptocurrency is not yet successful in being a medium of transaction as only a limited number of merchants or organizations accept cryptocurrencies.
Step 2: Choose Your Digital Currency
In this step, you may get a bit confused as there are not one but thousands of cryptocurrencies in the market. This is because, with the growing popularity of Bitcoin, many started to formulate their own cryptocurrencies.
But Bitcoin still remains one of the most assertive digital currencies for May 2021. Currently, it is the largest cryptocurrency that exists in the market. It is also that crypto to draw more investment attention and dollars. After Bitcoin there are other coins like Ethereum and after the two come to the rest like Zcash, Dash, Litecoin, etc.
Step 3: Choose The Correct Platform To Buy Cryptocurrency
One of the setbacks of buying digital currency is that it is not readily available in financial places like central banks or brokerage firms. So for everything your activity will be constrained within cryptocurrency exchanges. Some of the exchanges are Binance, Coinbase, Coinmama, Kraken, Bitstamp, etc.
You can assume these exchanges as the brokerage firms that are designed especially for digital currencies. Each platform offers trading and cryptos and you have to pay them a fee.
Step 4: Storing Your Crypto
Cryptocurrency is mainly stored in a crypto wallet which can be either a hot wallet or a cold wallet. A cryptocurrency wallet is a set of programs that creates a place for you to avail your cryptos. You will be provided with a “private key” that will allow you to avail all your coins and do transactions as well. These are called keys as they allow you to unlock your wallet.
- Online Wallets/Hot wallets: As the name suggests these wallets are formed, used, and kept online. The user can avail of these wallets from the web.
- Hardware Wallets/Cold Wallet: These are hardware wallets that come in the form of a USB that needs to be connected to a computer or a mobile to avail the information. These USB like sticks store all your information and are safer than that of hot wallets.
If you have reached till this step effectively then you have successfully initiated the process to invest in cryptocurrency.
There will be ups and downs in the valuation as digital currencies are highly fluctuating in nature. All you need is patience and a good understanding of the crypto market. A good analysis will help you to make better investment decisions.
If you are planning to invest in cryptocurrency be ready for fluctuations. There will be instability as digital currencies provide far less certainty than that of traditional investments. So while you invest in digital currency just remember that what goes up, also comes down.
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