Just like everything else in life, you simply don’t put money in a venture without knowing what you are investing in. Don’t get caught up in fear of missing out and jump into the bandwagon without sufficient information. Therefore, before we delve into how to invest in Cryptocurrency, let’s take a look into what it really is, what problems it solves, and how it works.
What Problem Does Cryptocurrency Solve?
When you go to the grocery store or the mall to do some shopping, you two payment options, primarily. You could use cash, but who wants to carry a bunch of bills or coins when they can just swipe their card and get the same result? Well, according to a 2016 consumer payment survey by Total System Services (TSYS), 35 percent of consumers prefer to use their debit cards, 40 percent chose credits. Only 11 percent of the consumers who participated in the survey said that they prefer to use cash so yeah, not a lot.
But why do we prefer to use our bankcards instead of cash? Well, for starters, it’s convenient. When you hand your card to the cashier, he/she will contact the bank check if you are good for the money. If the answer is in the affirmative, the payment is accepted, and the bank records the transfer of the agreed amount from your account to the store and takes a cut for facilitating the transaction. But what if you wanted to remove the bank from the equation?
How Cryptocurrency Works
You would be looking for someone (or a group of ‘someones’) you can trust to keep these records and not cheat or alter them in any way, and that’s where Cryptocurrencies come in. Cryptos are an entry into the huge global ledger called the Blockchain. Blockchain records all Cryptocurrency transactions. The idea behind Blockchain and Cryptocurrencies is to eliminate any central record of transactions.
Instead, millions of copies of the ledger are distributed around the world where each owner of each copy keeps a record of every transaction. When you purchase something using Cryptocurrency, the store asks all the record keepers if you’re good for the money and if they all say that you have enough, they’ll let the store know, and each will record the transaction. If someone tries to alter their records, it won’t match the rest of the copies the payment will not be accepted.
Features of Cryptocurrency
One bookkeeper — randomly selected — will be rewarded with some of the newly created cryptocurrency after each transaction is complete. Cryptocurrency is digital currency; it only exists electronically. Bitcoin is the most popular Cryptocurrency. It’s decentralized, meaning that it doesn’t have a regulatory body or a central issuing authority. Basically, this means that no person or organization that:
• Figures out how many Bitcoins to produce.
• Decides when to make more Bitcoins.
• Keeps track of the Bitcoins.
• Investigates fraud.
Bitcoin first came into the financial world in 2009. Back then; they didn’t have any perceived value attached to them. Tens of Bitcoins could have been worth a bunch of pennies. As of March 2018, one Bitcoin averages to around $10,000. Bitcoin bookkeepers, also called miners, get a payout when they add a new block of transactions. Now that you have an idea of how Bitcoin and other cryptocurrencies work, how can you make money from them?
Investing in Cryptocurrency
Why invest in cryptocurrency in the first place? Well, there are there many reasons to invest in cryptocurrency, but three of them stand out. First, you will invest in cryptocurrency because you like and understand technology. Secondly, you support the vision of free and hard money for the whole world, the social vision behind cryptocurrencies. Lastly, we all anticipate the inevitable fall of the dollar imperium, and you definitely want to hedge your net worth against it.
Where Do You Start?
Your first step will be to open up an account at any single exchange. A cryptocurrency exchange is a website where you can buy, sell, or trade cryptocurrency in exchange for traditional currency such as the US dollar or other digital currencies. Opening an account will give you access to fancy trading tools so you can trade professionally. Some of the most popular Bitcoin exchanges are:
• Kraken. Both beginner and sophisticated traders can use this exchange. It offers margin, leverage, stop loss, and other advanced trading and order tools. Depositing and withdrawing money is very fast.
• Cryptsy. Headquartered in Florida, United States, Cryptsy launched in 2013 and is one of the fastest growing cryptocurrency exchanges. Here, you can trade Bitcoins, Altcoins, Litecoin, Mazacoin, Dogecoin, etc.
• Coinbase. Based in San Francisco, California, Coinbase is a top Bitcoin exchange that also acts as a Bitcoin processor. It’s a wallet that you can use to store, spend, buy, sell, and accept Bitcoins.
• Bitfinex. Bitfinex launched in 2013 and has since grown to one of the biggest exchanges if trading volume (US dollars) is anything to go by. You can sell or buy Darkcoins, Litecoins, and Bitcoins. Bitfinex offers liquidity swaps, short selling, margin trading and other advanced trading tools.
• BTCChina. Launched in 2011, BTCChina is one of the oldest and the largest cryptocurrency exchanges in the world. Primarily, it supports trading done in Chinese currency for both Litecoins and Bitcoins. Withdrawals and deposits in US and Hongkong dollars are also accepted.
Connect your new crypto trading account to your bank account and transfer some money. Remember to start small and work your way up. Don’t be greed; it’s a process. For instance, deposit $500 into your exchange account — Kraken and Coinbase are recommended for beginners — and start trading. Get the big two, say take the $500 and split it in half for Bitcoin and Ethereum.
Continue researching and educating yourself on all cryptocurrencies to understand all the variables that manipulate the prices. Try to talk to experts and public figures attached to these Cryptocurrencies, understand what is going on internally. Use the information you have gathered to reallocate your investment. Its baby steps, who knows, today your investment is worth $500, tomorrow it could be $10,000 and few hundred thousand in the next few weeks.