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Cryptocurrency Basics for Newbie Investors

cryptocurrency basicsSince the release of Bitcoin in 2009, cryptocurrencies have skyrocketed. Secured by the decentralized nature of blockchain technology, cryptocurrencies are near impossible to counterfeit or double spend — making it an attractive investment. This is one of the reasons why the value of Bitcoin has regularly been high, topping $8,000 in May 2019. And, it’s why many people are now looking to understand the cryptocurrency basics.

Related: The Top 3 Bitcoin Alternatives

Cryptocurrency Basics For Newbie Investors

Such characteristics, in turn, have made cryptocurrency trading popular, with investors looking to make a profit from any of the 2,200 publicly-traded digital currencies to date, including (but of course, not limited to)

  • Bitcoin (BTC),
  • Ethereum (ETH),
  • Ripple (XRP), and
  • Litecoin (LTC).

So, in case cryptocurrency trading ever piques your interest, here are some basic things to consider:

Keep Learning

As with any foray into something new, you’ll need to accept this fact:

You know little, if not nothing.

In particular, Hackernoon recommends throwing out all preconceived notions on how the cryptocurrency market will behave. Even if you have a background in stock trading or forex, it won’t necessarily translate to success in digital currency trading.

By accepting your knowledge limitations, you are more likely to strive to find out more about this market. Research the basics, and join a community that can help you. Reddit, for instance, has a goldmine of cryptocurrency information you can check out.

Get a Cryptocurrency Wallet

One thing you’ll need as a cryptocurrency trader is a cryptocurrency walletwhich Crypto News describes as a software that lets you send and receive digital currencies.

  • It is essentially a hi-tech (and often virtual) safety deposit box,
  • but with a private key (password), and
  • balance and transaction monitoring capabilities.

It can either be hot or cold, with the former connected to the internet and accessible 24/7, and the latter being an “offline” wallet. You can easily find cryptocurrency wallets online (whether hot or cold), with some of the best being:

  • Coinbase,
  • Mycelium, and
  • Jaxx Liberty.

Then, you can download your wallet of choice and sign up, as if you were creating your own email account.

Get the Right Platform

When choosing a platform, remember to choose something that gives you several options…

  • whether it’s in the digital currencies you can select, or
  • the short-term strategies you can deploy.

In this way, you can start small with multiple digital currencies and diversify your portfolio quickly enough to reduce risk.

For instance, you can choose a platform that offers contract for differences (CFDs). They are, in essence, good ‘trial runs’ for crypto beginners. In fact, Plus500’s platform allows you to trade Crypto CFDs — such as Bitcoin, Ripple XRP, Ethereum and more — by speculating on their price movements, letting you reap the benefits of digital currencies without actually owning them. This will help you get a good understanding of the different cryptocurrency markets if you do decide to purchase actual coins.

Additionally, choose a platform that values your security, and offers two-factor authentication along with some form of fund insurance to protect you with every exchange.

Identifying the Best Coins to Invest In

As with any type of trading, nothing is guaranteed when you trade. But, by exercising due diligence and doing research, you can get a better sense of which coins you should invest in at a particular time.

This year, for instance, Bitcoin, Etherum, and Litecoin are regarded as three of the safest digital currencies to invest in. This is mainly because they are already well established. Moreover, your diligence can help keep you from investing in an altcoin that has turned worthless.

Try to look at who else has invested in the cryptocurrency (are they identifiable?), and take a look at how developed the cryptocurrency is. While being first to invest in a new coin has benefits, especially if it goes well, investing in well-developed coins is the safer option.

Leverage Cryptocurrency Tools

While trading platforms are essential, there are cryptocurrency trading tools you can use to help you succeed. Of note, you can use a charting tool such as Trading View, and Cryptowatch to better visualize the digital currency market.

Calendar services are useful too, like:

  • CoinMarketCal, and
  • Coindar

These can help keep you on top of cryptocurrency-related events such as halving (the slowing down of Bitcoin production, which theoretically increase its value).

Finally, news aggregators, like CryptoPanic and FAWS, will collate digital currency-focused news articles so you can peruse them and make informed investment choices.

Cryptocurrency Basics – Are You On Board?

Investing in cryptocurrency is not some get-rich-quick scheme, but it is an investment option that we could actually add to our ‘20+ Ways to Invest Outside of the Stock Market’ post. Granted, there’s no guarantee that you’ll be the next Dan Conway, a regular guy who made millions trading digital currencies. But, if you follow the above advice, you can be on your way to making some money investing in cryptocurrencies.

What do you think about these cryptocurrency basics? Is crypto trading for you? Why or why not?

 

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AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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