How to Get Started Investing in Cryptocurrency
November 9, 2021
Over the years, cryptocurrency has reached sky-high values, those beyond anybody’s predictions. The global interest in digital currency has also increased unimaginably in a short duration. This article will tell you all you need to know about getting started investing in cryptocurrency so that you can decide what’s right for you and make decisions accordingly.
Before we begin, let us try and understand the idea behind cryptocurrency -
What is cryptocurrency?
Theoretically, cryptocurrency is a virtual currency that’s traded online. In real life, it is an asset like stocks and bonds that may gain or lose value. But unlike them, it is digital.
So, if a cash currency includes paper bills and metal coins, a cryptocurrency uses a virtual token or a unit. These get purchased from any company facilitating cryptocurrency exchanges.
What makes it different from the standard currency is that crypto is decentralized. That means it cannot get governed by any central authority.
The largest and most popular cryptocurrency till now is Bitcoin. And all other cryptocurrencies other than that are referred to as ‘altcoins’.
How does cryptocurrency work?
’What gives cryptocurrency unit its value?’ is a fairly common question. Well, its value gets determined by market factors. For example, how is the value of a property determined? It gets priced higher if, let us say, it’s in a desirable location, is luxurious or if it’s in a neighbourhood that has a chance of increase in pricing. What about stocks? The success of a company generally determines the value of its stock.
Cryptocurrency values are also dependent on the marketplace but in a different manner. It is dependent on the preference of people and whether they wish to buy its units or not.
Yes, that’s correct. The cryptocurrency value entirely depends on consumer interest. If more people buy crypto, its value increases, and if fewer people buy it, the value falls.
That is one of the reasons why cryptocurrency can get you high returns if you take advantage of the marketplace surges at the right time.
What do you need to invest in cryptocurrency?
Although the idea of investing in cryptocurrency can seem difficult if you are a beginner, the requirements to get started are pretty simple. All you need is -
- Personal identification documents
- Bank account information
- Secure internet connection
How to invest in cryptocurrency in 3 steps?
Once you’ve decided to take the leap, the next step is to begin investing. How do you do that? Here are three simple steps -
- Choose a cryptocurrency exchange.
- Start purchasing cryptocurrency.
- Store your cryptocurrency in a “wallet”.
1) Choose a cryptocurrency exchange -
At first, you need to choose a crypto exchange where you can buy the digital currency. It is similar to opting for a broker for investing in stocks. So, once you register yourself on a crypto trading platform and create an account with them, you can begin your cryptocurrency investment journey. Some popular crypto platforms include Mesha, Coinbase, Binance, WazirX, CoinDCX etc.
2) Start purchasing cryptocurrency -
Most exchanges offer various options for buying crypto and even allow you to buy a fraction of a coin. Similar to a stockbroker, they also charge fees for each transaction that you make.
3) Store your cryptocurrency in a “wallet” -
After you’ve purchased a cryptocurrency, it automatically gets added to a digital wallet. This wallet holds codes for all your cryptocurrency.
There are essentially two kinds of wallets: software wallets and hardware wallets. A software wallet is a program that holds your crypto and gets used for active trading. You can get this when you open an account with any exchange. On the other hand, a hardware wallet is a physical device holding crypto. It looks like a USB and is more secure than a software wallet.
What are the different cryptocurrencies?
There are various cryptocurrencies available for you to choose from and begin investing. Bitcoin is said to be the father of them all. It has been around for over ten years and is the largest cryptocurrency in the world. It has a market cap of about $128 billion.
Various other cryptocurrencies that you can buy are:
Litecoin: Litecoin is similar to Bitcoin but has shorter transaction limits and lower fees.
Ethereum: Its network gets used to store data and run decentralized applications.
Cardano: It is a blockchain-based cryptocurrency used primarily to store private data.