As cryptocurrency investing grows increasingly popular, you may be wondering where and how to start investing in crypto and whether it's even a good idea. This guide will educate you on how to start investing in cryptocurrency and how it works.
- What is Cryptocurrency?
- How Does Cryptocurrency Work?
- How to Invest in Cryptocurrency for Beginners
- Where to Invest in Cryptocurrency
What is Cryptocurrency?
A cryptocurrency (crypto) is a digital asset that may be exchanged without using a central monetary authority such as a government or bank. On the other hand, cryptocurrencies are created using cryptographic processes that allow users to buy, sell, and trade them safely.
Cryptocurrencies are underpinned by blockchain technology, which keeps track of who owns assets and keeps a tamper-resistant record of transactions.
Cryptocurrency individual units are referred to as tokens or coins, depending on how they are utilized. Some are meant to be used as trade units for goods and services, while others are meant to be used as stores of value, and yet others can be used to participate in specific software programs like games and financial products. Bitcoin, Ethereum, Litecoin, and Ripple are some of the most well-known cryptocurrencies.
How Does Cryptocurrency Work?
The usage of blockchain ledger technology is one of the fundamental technologies underlying cryptocurrencies. These public databases log transactions and cannot be altered once fresh data (a block) is added to the existing chain. This openness and permanence ensure that cryptocurrency isn't duplicated, spent twice, or manipulated. Cryptocurrencies may have their own distinctive blockchains. Bitcoin, Ethereum, and Binance are examples of cryptocurrencies with different blockchains.
Cryptocurrencies work in a decentralized manner in that people and businesses worldwide utilize their computers to assist in the operation of blockchains in exchange for monetary rewards. Because the database and computer power are distributed, there is no one point of control, such as a firm or government, over what occurs.
How to Invest in Cryptocurrency for Beginners
When it comes to investing in cryptocurrencies, there are numerous options. To begin investing in cryptocurrencies, one must first have a thorough understanding of the subject. It is also crucial to understand the risk and legislation that may apply depending on one's jurisdiction to make decisions accordingly.
How to Start Investing in Crypto
- Sign up on a cryptocurrency exchange. To invest in cryptocurrencies, you'll need to open an account with a cryptocurrency exchange. To open an account with a crypto brokerage, you will need to provide personal identifying information such as your address, date of birth, official state issued identification, and email address, as well as other Know Your Customer (KYC) requirements.
- Fund your account. Once you've signed up with an exchange, you'll need to fund your account by connecting your bank account. The majority of cryptocurrency brokers or exchanges accept debit cards and wire payments.
- Choose a crypto token or tokens that match your portfolio. In the crypto market, there are numerous options. You must, however, understand how cryptos fit in with your other investments.
- Placing an order. You can use your broker or exchange's web or mobile platform to place an order. If you wish to buy cryptocurrencies, go to "buy," select the order type, enter the number of coins you want to acquire, and confirm the order. Orders to "sell" follow the same procedure.
- Store your cryptocurrency in a wallet: Once you have acquired a unit of cryptocurrency, it will be added to a wallet received when you sign up for an account on the exchange or broker platform. The wallet will store all of your cryptocurrency codes.
Software wallets and hardware wallets are the two forms of cryptocurrency wallets. A software wallet is a program that stores your cryptocurrency, whereas a hardware wallet is a physical device that stores cryptocurrency. Both are secure, but hardware wallets offer the most safety because they are not connected to the internet.
Things to Know Before Investing in Cryptocurrency
- Capital Gains Tax. In many countries, cryptocurrency is treated as an asset, similar to a stock or a piece of real estate, for tax purposes. If you profit from the sale of cryptocurrencies, you would need to pay capital gains tax on the profit. Keep this in mind when planning your year's budget and preparing for taxes.
- Short Term Investing. Because cryptocurrency is such a volatile asset, many investors view it as a short term rather than long term investment. Crypto will likely become a solid investment in the future, with long term ownership yielding considerable profits. However, that is a huge "maybe."
- Keep an emergency fund for backup. Cryptocurrencies are extremely volatile. Prices fluctuate considerably. Investors should set up an emergency fund before investing in assets to cover unexpected costs. Before purchasing any cryptocurrency, ensure you have enough cash saved in case an emergency occurs. You can be compelled to sell all of your assets at a loss if you don't have a backup.
- Before taking any action, do your own research (DYOR). Spend some time researching projects before you start investing in cryptocurrency to see if they have viability and are something you are interested in holding as an investment.
Where to Invest in Cryptocurrency
There are over 100 online brokers or exchanges where you can invest in cryptocurrency. However, not all of them are reliable, which is why Olymp Trade is a great broker to choose. Olymp Trade offers Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Basic Alt Index, which are all available on Olymp Trade as underlying assets. Because Olymp Trade never makes you hold your crypto assets, there is less risk while you’re still able to profit off the volatile crypto market.
Additionally, you can deposit and withdraw from your Olymp Trade (OT) account with both Tether (USDT) and BTC adding further flexibility and access to other great markets in addition to crypto such as stocks, forex, and commodities. All of these features without the stress of managing multiple broker accounts in several different currencies types.
Try it out!Trade Crypto with Olymp Trade
Risk warning: The content of the article does not constitute investment advice and you are solely responsible for your trading activity and/or trading results.