How to Invest in Cryptocurrencies

Cryptocurrencies have become the latest craze among investors and individual traders. The digital assets have exploded in both value and popularity, and for a good reason.

According to information from Bitinfocharts, a cryptocurrency tracking company, there could be up to 100,000 individuals that have become millionaires from investing in Bitcoin, the largest cryptocurrency by market cap. One of the biggest reasons individuals have yet to invest in digital currency, it because they don’t know how to get started.

If that sounds like you and you are interested in getting involved, keep reading this guide and learn how to invest in cryptocurrencies like a pro, so you don’t miss out on the action.

What Are Cryptocurrencies?

Cryptocurrencies are just like any other form of payment – they can be exchanged for other goods or services, just like the U.S dollar (USD). However, they also have a few key differences that make them unique and so attractive to investors.

One of the most significant differences between cryptocurrencies and traditional currencies is the technology behind cryptocurrencies called blockchain technology. The blockchain is a means of storing encrypted transaction data (or blocks) on a secure network that cannot be edited or modified. New blocks can only be added when all the members of the network agree that the information is correct and identical.

The blockchain technology creates a decentralized environment in which members of the network have access to the records, but they cannot be altered or destroyed. Primarily, for this reason, companies have begun to adopt the new technology, and investors have started to pile into big cryptocurrency names like Bitcoin, Ethereum, and Binance Coin.

The Different Types of Cryptocurrency

Before you start investing in cryptocurrencies, it’s critical to know the difference between the different types and what they entail. Learning the differences in digital currencies can help you decide which one is right for you and where you should distribute your capital.

There are a few different types of cryptocurrencies. These include:

  • Bitcoin
  • Tokens
  • And Coins

Each type of cryptocurrency is unique and offers various advantages for investing and using them.

Bitcoin

Bitcoin is widely considered the first major cryptocurrency to hit the scene in 2008 when an individual called Satoshi Nakamoto mined the first block to start the blockchain. The person behind the name Satoshi is unknown to the world and remains anonymous.

The digital currency was developed to support peer-to-peer transactions on a decentralized network. Instead of having an intermediary (such as a bank), the records are kept on an encrypted public system. With a current value of $43,607 at the time of this writing, Bitcoin has transformed from a speculative asset into an asset class all in itself.

With more companies and other institutions adopting Bitcoin as a form of payment, it will be exciting to see where the digital asset will go from here.

Coins

Just like Bitcoin, other cryptocurrency coins run on their own blockchain network. Crypto coins can include the following:

  • Bitcoin (BTC)
  • Litecoin (LTC)
  • Dogecoin (DOGE)
  • And Ethereum (ETH)

You may notice these are also some of the largest and most popular cryptocurrencies currently on the market. Crypto coins are often used as a form of payment to purchase goods or services. Some of these coins are making their way into the mainstream and being accepted by major retailers. For example, the latest in Ethereum news is that the cryptocurrency is now an acceptable form of payment for Shopify retailers.

Tokens

Tokens are slightly different than coins. Instead of running on their own blockchain, crypto tokens will run on another’s blockchain network. There are thousands of tokens in circulation currently, such as:

  • U.S Dollar coin (USDC)
  • Tether (USDT)
  • Uniswap (UNI)
  • Chainlink (LINK)

You may or may not recognize these names as crypto tokens tend to be less popular than crypto coins. Tokens are often used for or serve another purpose other than just as a form of payment. They can be developed for a specific app, and they can even be used to serve as a medium of value for a physical good like a house.

How to Invest in Cryptocurrencies

Now that you know exactly what you are investing in, it’s about time to begin investing in cryptocurrencies and start earning a profit.

The first step in investing in cryptocurrencies is choosing a broker or exchange to purchase the digital assets through. You can think of it as the same as a stockbroker when purchasing shares of a company. There are a few things you should take into consideration when using crypto brokers or exchanges, including:

  • What fees they charge
  • The cryptocurrency selection
  • And added features (such as education or earned interest)

Certain exchanges may also offer bonuses for joining, something to keep a lookout for. Some of the more popular exchanges include Coinbase and Bitfinex, two of the biggest exchanges individuals use to invest with.

The next step when it comes to investing in cryptocurrencies is to consider what digital asset you would like to own.

  • Do you believe Bitcoin will remain on top as the largest cryptocurrency?
  • Is Ethereum the next biggest development?
  • Will another coin emerge and take over the reins?

These are a few questions you should ask yourself when you’re thinking of investing in a digital asset long term.

The next step in the investing process is storing the cryptocurrency. To store the digital assets, you will need a wallet to hold them and store them securely. There are different forms of crypto wallets you can choose from – either as software or hardware.

  • Software wallets – Are computer software applications installed on your device designed to hold cryptocurrencies.
  • Hardware wallets – Are pieces of hardware specifically created for the safe storage of cryptocurrencies.

Either way, you decide to go for storing cryptocurrencies, you should keep in mind these are encrypted devices. If you forget the password, there may be no other way of accessing them.

Keep up With the Latest in Cryptocurrency

Now that you know how to invest in cryptocurrencies, you need to keep up with the latest happenings and developments in the cryptocurrency world. These digital assets can be volatile at times, meaning they can change value relatively quickly, making keeping up with the news a must.

For the latest developments in cryptocurrency and other helpful financial articles, check out the rest of our blog!

You Might Also Like

Leave a Comment

Your email address will not be published. Required fields are marked *