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How To Start Investing In Cryptocurrency, College Guide
It was in 2009 when bitcoin first came out. Even though there are people who see the potential of cryptocurrency, no one was interested in making it an investment. For starters, not everyone understands how it works, let alone how to invest it.
Fast forward today, there are hundreds of cryptocurrencies available in the market. Some of them disappeared as quickly as they appeared, but Bitcoin remained the sole standard-bearer of the currency.
Over the past few years, the price of Bitcoin skyrocketed, that people are saying that cryptocurrency is the future and can serve as an alternative global currency. Some lucky investors have turned their small investments into millions, so more people are eager to invest in cryptocurrency. The question is, how do you start investing in cryptocurrency, and is it worth it?
Before we jump into that, let us first understand what cryptocurrency is and how it works.
Cryptocurrency is based on blockchain technology. It is a chain of information that contains registration and distribution that any single institution does not control. It works as a digital record of all the transactions and is independent of central banks.
Trying to learn all the technical details about blockchain technology would take a whole new article all for itself and might be too overwhelming to some. To explain it in the simplest way possible, blockchains allow the buyers and sellers to transact business directly, removing the middleman.
It would eliminate the transaction fees, which is why cryptocurrency has attracted a lot of investors. Another major attraction of cryptocurrency is that you can own and use it anonymously, plus the price explosion has made it one of the best investments to date.
Now you understand what cryptocurrency is, let us proceed to the step-by-step guide on investing in Cryptocurrency.
How To Invest In Cryptocurrency
Follow these steps if you want to invest.
Do Not Allocate Everything To Cryptocurrencies
This is a rule of thumb in any investment. Never put all your eggs in one basket. It goes the same with cryptocurrency. How much you want to invest would depend on your risk appetite. Ideally, you should only invest around 5% of your portfolio, 10% at the most.
Even though the price of many cryptocurrencies has increased dramatically, it should not be your only indicator, as you should also consider their volatility. In investing with cryptocurrency, there are a few points you should remember.
The cryptocurrency was never meant to be an investment but rather serve as an alternative to sovereign currencies and as a medium of exchange. Its value is determined by the market and is not manipulated, unlike with the current currencies.
Keep in mind that investing in cryptocurrency is not like investing in stocks, where over time, you earn dividends and interest. It just depends on its price increase.
Choose Your Cryptocurrency
As mentioned, there are thousands of cryptocurrencies in the market and what makes things more complicated is that there are still more coming every day. Here is the top 10 Bitcoin ranking as of 2021.
- USD Coin
- Bitcoin Cash
When choosing which cryptocurrency you should get, it would be better to stick to those who rank on top of the list as they tend to be more stable compared to others. Do not be blinded by the sudden jump in prices of other cryptocurrencies.
Remember, there are cryptocurrencies that either flatlined or totally disappeared over the last decade, so be careful when trying to make a choice.
Choose A Platform To Buy Cryptocurrencies
One of the drawbacks of buying cryptocurrency is that not all financial places sell them. Banks do not offer them, and that includes investment brokerage firms. You are only limited to transacting on dedicated cryptocurrency exchanges.
So there you have it, how to invest in cryptocurrency. Make sure that you fully understand what you are getting into. Keep in mind that like any other investment, the returns for investing in Cryptocurrency is not guaranteed.
Before pulling that trigger, make sure you fully understand what you are getting into and calculate all the risk that comes with it. It is a life-changing decision that one must not rush into.
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