Guide to Investing in Cryptocurrency

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This is a basic guide and recommendations for where to safely buy digital currencies and learn about cryptocurrency investing.

A lot of buzzing has been going on online about cryptocurrency investments with Bitcoin finally surpassing $20K. Are you wondering how are cryptocurrencies used and is it too late to invest?

Information and success stories are flooding social media networks, blogs, news sites and everyone seems to be talking about investing in crypto.

But why did cryptocurrency investing become so popular so suddenly? And is this type of investment truly as lucrative as everyone claims it to be?

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I’m excited to talk with you all about investing in cryptocurrency for beginners, because who better to discuss an emerging technology than those who are interested in diversifying their investments?

Cryptocurrencies are an important innovation for every generation to know about, but the youth of the world will be the ones truly seizing this exciting invention’s benefits.

What are Cryptocurrencies?

If you are not exactly sure what all the fuss is about cryptocurrencies then the chances are pretty high that you don’t know much about cryptocurrency, to begin with.

A cryptocurrency is a digitalized form of money or a digital asset that is used for online transactions across the globe.

There are quite a few different types of cryptocurrencies that are commonly used by global markets.

These currencies are completely decentralized and don’t belong to any country, government, sector or organization.

The first cryptocurrency was created in 1983 by the American cryptographer, David Chaum.

This electronic money type was called ecash.  Since 1983 cryptocurrencies have developed a lot and have resulted in quite a few different digital currencies.

The most common cryptocurrencies in use include; Bitcoin – the world’s most popular cryptocurrency, Ethereum, Ripple, Cardano, Litecoin, NEM, Stellar, NEO, IOTA, Dash, Monero, Tron and more.

Cryptocurrencies are forms of currency that don’t require central approval to gain their value.

The reason people accept the US dollar is because the US government reassures people of its value.

People accept Bitcoin because its algorithms ensure the currency is valid and its transactions cannot be forged.

That means that no one can manipulate the value of Bitcoin, and no one can track Bitcoin transactions.

Bitcoin (BTC)

This gives Bitcoin many advantages over traditional currency, including unbiased independence as a token of value, and also as an anonymous means of exchanging goods and services.

The unique merits of Bitcoin make it an exciting investment opportunity. Digital currencies such as Bitcoin are gaining popularity by the likes of companies as well.

Altcoins

People the world over have made millions off trading ‘altcoins’, alternative cryptocurrencies to Bitcoin.

However, unless you plan on making this your full-time job, I don’t think it’s worth your time to day trade. Instead, I want to introduce you all to the idea of picking a promising altcoin and sticking with it.  

Altcoins exist for a specific purpose, introducing a new innovation that Bitcoin lacked. Litecoin was the first, and it introduced an algorithm that made it easier to validate transactions.

Then came Dash and Monero, which held far more anonymous transactions, and Namecoin which allows people to exchange cryptocurrencies for URLs, and even Steem which pays people in cryptocurrency for blogging.

There are now literally thousands of altcoins, and it’s impossible for anyone to keep track of them all, but by keeping an ear to the ground you can get in on promising coins before they take off.

What about Ethereum?

If you’re learning about investing in cryptocurrency for beginners then you should probably know about Ethereum. The next biggest coin, besides Bitcoin, is Ethereum.

Ethereum is a pretty complex technology, but in short, it allows people to share computing resources and developments across the blockchain network so that you can build applications that don’t require a central server or a central development team.

This makes applications more secure, allows them to develop and evolve faster, and reduces startup costs for new companies and new developers. Its price is largely impacted by its adoption as a development platform, so when large companies like Microsoft or Bank of America announced their intentions to begin developing on the Ethereum network, its price shot up.

Beginners Guide to Cryptocurrency Investing

The first step is to open an account with an exchange. Coinbase allows you to exchange US dollars for Bitcoin or Ethereum, which can then be transferred to a different exchange.

I used to transfer my Bitcoin from Coinbase to Poloniex, but they have recently begun some sketchy behavior and I’ve withdrawn my funds there.

I now recommend Binance as the best place to trade altcoins. They host frequent giveaways and ICOs (public offerings for new coins, like IPOs) and I have always found their support consistently helpful. They also have the lowest fees out of any major exchange.

What’s next?

Great! So you’ve got some Bitcoin, and you have a Binance exchange, now what?

Well, holding onto Bitcoin itself is a great long-term plan, but if you want to make more in the short term you can pick out promising altcoins.

The key is diversification.

Given Bitcoin’s hegemonic status and high publicity, I see it as a great place to park 50% of my portfolio at any given time.

Beyond that, there are different ways to invest in cryptocurrencies.

Some of these methods involve mining for bitcoins or other currencies, other methods involve buying or earning cryptocurrencies and selling these assets for a greater profit when the value of the cryptocurrency escalates.

You can also use your digital money to shop online from a great variety of e-commerce stores.

More and more online shops are switching over to cryptocurrencies like bitcoin thanks to the popularity of this digital currency.

I would recommend taking a look on BitcoinTalk under the Altcoin Announcements board. Pretty much every new altcoin began here, and they often hold giveaways in these threads.

These threads allow you to understand the new technology, gauge interest by a number of replies and do research on who the developers are and if they will be committed to the new project.

Why are cryptocurrency investments exploding?

You may wonder why cryptocurrency investments became so popular so quickly, right?

Well, it is all about the success and the tremendous growth of the cryptocurrencies.  

Here are a few examples of cryptocurrencies that grew tremendously in just a short time period;

  • Bitcoin’s market price at the beginning of 2016 was valued at $411.99.  At the end of 2020 Bitcoin was valued at $23414.
  • Ethereum was valued at $2.83 at the beginning of 2016 and climbed to $616.90 by the end of 2020.
  • Ripple was valued at $0.006168 in the beginning of 2016 and climbed to $0.36 at the end of 2020.
  • Litecoin was valued at $3.41 at the beginning of 2016 and climbed to $110 by the end of 2020.
  • Monero was valued at $0.448294 at the beginning of 2016 and climbed to an amazing $152.22 at the end of 2020.

Some of these cryptocurrencies doesn’t seem like much growth but if you consider the percentage of growth for one year in crypto value to your normal investment growth then you have to admit that even Ripple would probably have been a better investment when it comes to growth.

The reason why cryptocurrency investments are exploding is that more people have started doing the calculations and have realized that their investments could have doubled or even tripled if they invested in cryptocurrency instead of other types of investments.

This is exactly why so many people have started switching over to cryptocurrency investments.  They can get a much higher growth rate from cryptocurrency than from any other type of investment in much less time.

Is cryptocurrency investing worth your time?

Cryptocurrency investments are a great investment type – but it isn’t for everyone.  A lot of people burn their fingers when they climb into this market.

You really do need to make time for this type of investment and learn more about investments before you dive right in or you can easily end up losing a lot of money.

Cryptocurrencies can be a great investment for you but it is essential to take the right steps when investing and to remember that this is a long-term investment and not a quick buy and sell strategy.

Watch out for pump and dumps

The most important thing is to watch out for pre-mined pump and dumps. Many new coins are created for the sole purpose of the developers giving themselves many coins to start and selling them at an overpriced value to the public.

You have to look for a real purpose for the coin, a uniqueness to it, and actually committed developers with a strong technological resume.

If a coin meets these requirements, it’s worth committing a portion of your portfolio – maybe 10% – to it and seeing if it takes off!

Invest only what you can afford to lose

Last, it’s majorly important to never invest more than you can afford to lose. Contrary to popular belief, Bitcoin is actually less volatile than gold, but altcoins can certainly gain or lose 100% overnight.

Cryptocurrencies should complement your investment portfolio rather than replace it. Once more, if you want to get started investing in cryptocurrency for beginners I would recommend first opening a free account at Coinbase. Coinbase is the most trusted and reliable Bitcoin exchange. In order to buy cryptos, you first need Bitcoin then you can take action and buy cryptocurrencies on Binance.

I hope you liked this write up of investing in cryptocurrency for beginners. 

Good luck, and happy trading!

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Brian Meiggs
Brian Meiggs
Founder of SavingExpert, Brian is an entrepreneur and investor who enjoys working out, reading, spending time with his family and friends, traveling and creating great content. He’s passionate about helping others achieve their financial goals. He uses the free Personal Capital app to manage his cash flow and net worth.

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