As a newcomer, you need to know what exactly is cryptocurrency. Start by asking for reviews from those who already have an idea about this new form of digital investment.
Apparently, crypto is considered a cryptic concept that seems to be largely misunderstood by many people.
So, if you are finding difficulties in understanding this technology that runs cryptocurrency, just know you are not alone.
In this beginners guide, you are going to learn how you can invest in cryptocurrency, how it works, and what you need to get started.
Cryptocurrency in Perspective
The first thing to ask yourself even before you start investing in crypto is “what really is cryptocurrency”?
. Theoretically, this is a virtual currency that is held and then distributed online.
It is just a digital asset designed to make investors gain or lose value in what looks like stocks and bonds.
Unlike the cash currency that incorporates metal coins and paper bills, crypto comes in the form of a virtual token, coin, or unit.
In this case, you can buy a token, coin, or unit from a company that facilitates trade in cryptocurrency.
You can also trade, buy and sell crypto from those who own cryptocurrency.
How Cryptocurrency Works
Just like the real estate market and stocks, cryptocurrency’s value is tied to the marketplace.
However, there is no physical property or asset that is affected by the crypto’s dynamics of the local economy.
Plus, its value is not tied to corporate profits.
Instead, its value remains entirely dependent on the investors’ ability and willingness to buy cryptocurrency units.
In simpler terms, crypto’s value is based solely on nothing tangible but consumer interest and desire to buy cryptocurrency.
For instance, if more people buy cryptocurrency, then its value will go up and vice versa.
What You Need Before You Invest In Crypto
The idea of investing in cryptocurrency is great yet so daunting to new investors like you.
Of course, this form of investment comes with its own requirements that need to be fulfilled before you get started.
These requirements include:
- Your personal identification documents
- Your bank account information
- Your security internet connection
Once you have these requirements ready, your next step should be to buy your first cryptocurrency.
In this regard, you may make your first transaction through a trusted stockbroker.
But keep in your mind that most, if not all, of your financial and personal information will be stored on a file by the time you start trading in crypto.
Helpful Tips Before Investing in your First Crypto
Below are some of the important things you need to know before you start trading in cryptocurrency:
Capital Gains Tax
For the sake of tax purposes, you should consider crypto as an asset just like you would consider a property or stock.
In this sense, you will have to pay capital gains tax whenever you sell your crypt and make some profits.
It is wise to consider crypto as a short-term investment instead of a long-term one.
This is attributed to the fact that cryptocurrency is one of the volatile assets known today.
In addition, cryptocurrency is high-risk because its value can decrease at a short moment’s notice.
How To Invest In Crypto
If you have made up your mind to try your luck in cryptocurrency, then you should have an idea of what you need.
Bear in mind that every crypto is a little bit different from the other. So, to purchase your first crypto for profit, you will have to cover a few important steps.
For example, investing in digital currencies such as Bitcoin and Litecoin, you will need to follow these steps:
Step 1: Select the Most Appropriate Cryptocurrency Exchange
The first step entails choosing the right exchange to purchase from. This is more or less the same as choosing a broker when buying stocks.
After selecting the exchange you wish to start investing in crypto with, your next task will be to open an account with them.
Many options regarding your opening of a crypto account are available. The most popular ones include
Coinbase, Binance, Kraken, Gemin, GDAX, and Bitfinex.
Step 2: Start Buying Crypto
Use your debit card to purchase cryptocurrency. In this case, you may choose between Bitcoin and Ethereum.
Since you are among the first-time investors, you are advised to purchase a fraction of a coin.
A single coin is usually valued at hundreds or thousands of dollars at a given time.
Fortunately, most exchanges will allow you to purchase just a fraction of a coin and this is more affordable than buying a whole coin.
A fee will be charged for each transaction you make when buying or selling your crypto.
Step 3: Store Your Crypto In a “Wallet”
Once you have bought a unit, token, or coin, it automatically gets added to your wallet.
This is not an actual wallet, It is just a virtual wallet that you receive after opening your cryptocurrency account with an exchange.
Your wallet will keep the codes for your cryptocurrency. Two types of wallets are in use today: hardware wallets and software wallets.
A hardware wallet is simply a physical device used to hold cryptocurrency. This device resembles a USB drive and is more secure than using a software wallet.
However, you don’t need it that much unless you are trading in large portions of cryptocurrency.
The software wallet, on the other hand, is simply a software program designed to hold your cryptocurrency.
You need this type of wallet for your active crypto trading. Luckily, you will undoubtedldy have one when you open your crypt account within an exchange.
So, do you think cryptocurrency is a good investment for beginners like you?
Even though crypto is a high-risk investment, you are likely to make a substantial amount of profit in a short time.
This happens more often when everyone starts purchasing the cryptocurrency, making its value increase sharply.
Look at crypto influencers websites, and understand who is getting and has good reviews – these are more likely to provide trustworthy advice as a beginner investor.
You can make a big return on your crypto investment when you sell your units early or at the right time.
After all, the value of cryptocurrency depends on rising demand in the crypto market because cryptocurrency tokens/units have no real intrinsic value.