Digital assets are an exciting investment opportunity. However, newcomers risk losing all their money if they don’t familiarize themselves with the cryptocurrency market. This article outlines five things crypto newcomers should know.
1. What is Crypto
If you’re new to this arena, you might be wondering, what is crypto? Cryptocurrency is a virtual or digital currency that secures its transactions using cryptography. Crypto doesn’t have a central regulating or issuing authority that maintains or manages its value. It uses a decentralized system to issue new units and record transactions.
2. How Crypto Works
Crypto runs on a blockchain, a distributed public ledger where the currency holders hold and update all transaction records. Cryptocurrency units are developed via mining, which utilizes computer power to resolve complex mathematical problems for generating coins. You can also buy crypto from brokers and store it in a wallet.
Owning cryptocurrency means you own nothing tangible. All you have is a key that lets you move a unit of measure or record from one individual to the next without a third party. While you can invest in crypto like you would other assets, you can also use it to buy goods and services.
3. How to Buy Crypto
Learning how to buy crypto safely is essential. Start by picking a preferred platform between dedicated crypto exchanges and traditional brokers. When looking at various platforms, determine the cryptocurrencies they offer, the fees they charge, the educational resources provided, security features, and withdrawal and storage options. Upon choosing your platform, fund your account so you can start trading. Crypto exchanges may allow you to buy cryptocurrency using fiat currencies, including the Euro, British Pound, US Dollar, and debit or credit cards.
Other platforms may accept wire and ACH transfers. Nevertheless, the accepted payment method plus the withdrawal or deposit time differs from one exchange to another. Once you’ve funded your account, it’s time to place your order, which can be via mobile, exchange’s web, or broker platform. You can invest in bitcoin trusts, bitcoin mutual funds, or blockchain EFTs or stocks. The best choice will depend on how much risk you’re willing to take and your investment goals.
4. How to Store Cryptocurrency
Upon purchasing your cryptocurrency, you should keep it safe to safeguard it from theft or hacking. You can store your digital assets in the following:
- Custodial wallet: In this wallet, another party, like a cryptocurrency exchange, keeps your digital currency
- Cold wallet: It’s hardware for storing crypto offline. It has the highest security level
- Hot wallet: It’s an application for storing cryptocurrency online. It comes with a security risk
- Physical or paper wallet: The physical storage for private cryptocurrency keys. It’s a free way of keeping crypto offline, but there’s a risk of losing the wallet
5. Diversify your Crypto Portfolio
Diversifying your crypto portfolio enables you to reduce your holdings’ investment risk. By spreading your investments across different cryptocurrencies, you can create a cryptocurrency portfolio that is less susceptible to the volatility of any single asset. You can diversify your portfolio by:
- Investing in several crypto coins, such as payment, security, utility, governance, basic attention, gaming, and NFT tokens
- Expanding into other industries, including healthcare, supply chain, transportation, real estate, entertainment, private equity, and more
- Asset class, like bonds, stocks, and real estate
- Account types and investment vehicles, including digital wallets, taxable brokerage accounts, crypto IRA, and decentralized financial products
Endnote
Investing in cryptocurrency is risky, especially if you’re new to crypto. Familiarize yourself with these things that crypto newbies should know.