How to Invest in Cryptocurrency: Beginner's Guide
Wondering if you should get involved in the crypto market? Based on reports, the global crypto market capitalization is now over $1.5 Trillion -- with Bitcoin taking the lead with the most market share, which constitutes more than $770 billion.
It is safe to say crypto is moving the markets with record-high numbers. And whether the world likes it or not, these figures cannot be ignored. Also, Innovative technologies like the Metaverse and Non-fungible tokens (NFTs) show us that crypto is the future of finance!
Still, the world of cryptocurrencies can be cryptic. Beginners may find it challenging to choose from more than 18,000 cryptocurrency options listed in the market.
So, how do you know the right coins to buy? How do you purchase crypto? No worries! Follow our step-by-step guide to help you make your first crypto purchase.
What is Cryptocurrency and Blockchain Technology?
Having a basic understanding of what cryptocurrencies are, and the role that Blockchain performs is necessary if you want to invest in them.
Cryptocurrencies are leading the pathway for decentralized finance and alternative investments. These digital assets are regarded as virtual currencies and can be used to facilitate retail payments, day-to-day transactions, cross-border transactions, and more.
Cryptocurrency was created to be faster and more efficient than traditional banking payments. It utilizes a digital ledger called blockchain to keep records of transactions, payment time stamps, and data in the form of blocks. Once recorded, transactions on the blockchain cannot be altered.
What is a Blockchain?
Blockchain is a digital ledger powered by a network of computers. It is a secure and reliable financial system because it cannot be hacked, or managed by one entity. Instead, it relies on different people's computation power to function through a process called mining. In addition to effectively managing transactions, the blockchain also controls the issuance of new coins.
How to Invest In Cryptocurrencies in 5 Easy Steps
Now that you have an idea of how cryptocurrencies and blockchain work. You are ready to own your own coins! To do this follow these simple steps we have laid out for you.
Step 1: Choose an Exchange
Choose a reputable exchange or broker that is user-friendly and easy to register. Here are the top 5 crypto exchanges in the U.S that offer a wide variety of tokens for you to choose from. They also have a brilliant user interface that is easy to navigate and is beginner-friendly.
Binance is the largest crypto exchange in the world by trading volume. This means they are highly reputable and your money is safe with them.
Why We Love Binance?
- Wide variety of Crypto to choose from (350+ tokens)
- Low fees and commissions
- Advanced trading features
- Quick and easy registration and verification
- Loads of unregulated tokens (shitcoins)
Coinbase is the second-largest crypto exchange in the U.S. They have been around for some time and have dedicated communities on social media.
Why We love Coinbase?
- Best for Beginners
- Wide variety of cryptocurrency coins to choose from (200+ tokens)
- Educational materials
- Expensive trading fees
Etoro is a top broker for forex, stocks, and crypto. They are very reputable with more than 15 years of experience.
Why We Love Etoro?
- Social trading feature: You can copy the trades of other experienced traders and profit.
- Beginner-friendly interface
- Reasonable trading fees
- Offers fewer crypto coins
FTX is another major crypto exchange in the U.S. They have a wide variety of product offerings asides from buying crypto. For instance, you can buy, sell, or mint NFTs and stake cryptocurrencies on their platform.
Why We Love FTM?
- Competitive fees
- Easy registration
- Decent amount of crypto pairs
- Supports NFTs
- Better suited for advanced traders
Kraken is an established crypto exchange and Bank. The exchange facilitates the trade of crypto and fiat currencies and provides crypto market price information to Bloomberg terminal.
Why We Love Kraken?
- Buy crypto with as little as $10
- Educational materials
- Decent amount of crypto (95+)
- Advanced trading features
- Expensive fees
Step 2: Set Up Your Trading Account
After choosing a crypto exchange or broker, the next thing to do is set up a trading account on their platform. For this, you will need to provide a few personal information and documents like a government-issued ID for verification. This is per regulatory laws such as KYC and AML. All brokers are required to verify users' identities, so do not fret! Your personal details are safe.
Step 3: Choose a Crypto token You Want to Buy
Bitcoin (BTC), Ethereum(ETH), Binance Coin (BNB), Solana (SOL), Dogecoin (DOGE) Shiba Inu (SHIB), and Tether(USDT), are usually the first options of crypto new users want to buy. They are quite popular and have a lot of hype on social media.
There are countless other cryptocurrencies in the market. But is always a good idea to choose one of the top 100 crypto coins in the world because they are more established and have a good reputation. Of course, you will still need to do your own research (DYOR) before investing in any of them, but sticking to reputable tokens will keep you on the safe side.
Knowing the right coin to buy is completely dependent on the research you conduct. You will need to analyze the price history of a token and study its fundamentals to learn if its a good choice. You can also read the whitepaper to learn more about the company behind the coin. For instance, Binance Coin (BNB) was a no-brainer! It is the native token of the largest crypto exchange in the world. The token grew as the company achieved massive growth milestones.
Step 4: Buy your first Crypto
After selecting the token or coin of your choice, then its time to invest! To do this you will need to exchange your fiat money for crypto. The exchange platform you're using will have a lot of payment methods available for you to buy crypto. Choose one of these payments methods and exchange your fiat money for the value in crypto.
It is always wise not to invest too much into cryptocurrencies. This is because they are extremely volatile assets and can reduce in value just as quickly as they skyrocket in price.
Step 5: Set Up Your Wallet
After buying crypto from an exchange, you can either store your coins on the exchange's wallet or transfer them into your own wallet, where only you have the seed phrase and private key. In this case, you will need to register for a hot wallet like Metamask or Trust wallet. After setting up your wallet, you can transfer crypto from your exchange to your wallet and from your wallet to your exchange wallet. Just always make sure to double-check your wallet addresses to make sure there's no error.
Note: If you mistakenly send your crypto to the wrong address, your coins will be lost forever!
Best Practices For Trading Cryptocurrencies
Trading cryptocurrencies is far more complex than the hype that it receives on social media. Yes, the gains are promising, but so are the losses. Apply these best practices when trading crypto, for the best results.
- Buy Low, Sell High: In the rule book of trading crypto, buy low/sell high is your best bet. This way you can maximize gains and decrease probable losses.
- Risk Management: Managing your risk while trading will help you not make costly decisions. Create a trading plan that effectively averts risk.
- Conduct Technical analysis: Technical analysis is all about studying the price chart of a particular coin. The chart reveals the buy/sell history and price movements throughout the day. With this, you can tell if there will be a price breakout or not.
How to Sell Your Crypto
If you buy a Crypto and you're ready to trade it for another, all you need to do is, go to your exchange's wallet and trade it for another. For instance, If you've bought BTC and you would like to exchange it for ETH, all you need to do is sell it on the exchange.
When To sell Your Crypto
When is the right time to sell a coin? Many newbie traders are often plagued by this question. Well, you can sell your crypto whenever you like. But the best time to sell it is when the price is higher than when you bought it.
Buying crypto is easy, but selling it is usually a more difficult decision to make. If you sell too early and the crypto price increases, you risk leaving gains on the table. And if you sell too late and the crypto price plunges, you’ve probably missed an opportunity to profit. This is where traders are at a crossroads.
The best strategy is to sell when the crypto reaches your price target: If you promised yourself that you would sell your crypto if it ever came back to your buy price or a price target you set, dump it without hesitation.
This content should not be treated as investment advice. Cryptocurrency is a highly risky and speculative market.