With so many different options, new investors may feel overwhelmed with where to start. Presently, the global crypto market tops $2.7 trillion, so educating yourself and jumping in is the best way to get started. This article will help new crypto investors choose cryptocurrencies that are right for them and discuss what they need to think about when investing for the first time.
Learn how to educate yourself about cryptocurrencies
One struggle with cryptocurrencies is that the arena is full of misinformation and potential scams. It’s important to educate yourself but also to understand how to educate yourself about cryptocurrencies. For example, many websites will purport to give you valuable information, but really they exist only as a front to lure you into buying a cryptocurrency that they are developing.
One way to avoid this problem is by gathering information only from trusted sources. Below, we’ve compiled a list of some websites that we think provide the best information when it comes to cryptocurrencies:
- Investopedia – a great resource for general information, such as defining what cryptocurrencies are and other terminology.
- CoinMarketCap.com – this website is useful because it provides an unbiased look into how various coins are performing in the market.
- CoinBase.com – Coinbase is one of the largest cryptocurrency exchanges in the United States.
- YouTube – believe it or not, YouTube is a great resource. Many individuals upload videos detailing and explaining cryptocurrencies and potential new investment opportunities.
- Wikipedia – Wikipedia is also an excellent source of information, especially when learning about crypto vocabulary.
Do you need a financial advisor?
Today, some major investment groups are beginning to offer cryptocurrencies as a potential investment opportunity. However, these advisors are unnecessary because you can buy crypto yourself from a trusted exchange. The most popular exchange in the United States is Coinbase, but other alternatives like Gemini also exist. If you already have a financial advisor, check with them to see if they offer cryptocurrencies.
Educating yourself is worth the time
It’s important to spend the time to educate yourself before buying cryptocurrencies. Many cryptos function similarly to traditional investments and financial instruments like stocks, bonds, and even futures. Your average investor would most likely not purchase them without a significant amount of research first. The same logic applies to cryptocurrencies.
Although cryptocurrencies are not as complicated as these other investments, the point is that educating yourself can help avoid making a poor investment.
Storing cryptocurrency
Bitcoin and other cryptos can be confusing at first. One thing to keep in mind is that cryptocurrencies do not function as a normal bank account. They use cryptography to secure themselves, and they are stored in what is called a wallet.
Wallets can come in any number of forms. There are paper wallets, software wallets, and hardware wallets. A wallet stores your cryptocurrency holdings using cryptographically generated strings of data called keys. One of these keys, the public key, is used to send money to another wallet. The private key is used to access your wallet and funds. By design, cryptocurrencies are very secure and use a lot of energy to verify transactions.
However, the security aspect can also be confusing, which is why many cryptocurrency exchanges allow you to store your holdings in a digital wallet on their platform. They also let you connect your checking account to make deposits, purchases, and withdrawals easier. Keeping your holdings on a crypto exchange is less secure than a hardware wallet, but it simplifies buying and selling.
How do you decide which crypto to buy?
Some of the key principles of finance are understanding risk management, rate of return, and portfolio management. These principles can also be applied to cryptocurrencies. Investments are typically rated based on their risk level and the amount of return they are expected to generate. Usually, more risky investments have a greater return. Cryptocurrencies are some of the riskiest investments, as evidenced by their wide price swings but also huge growth.
Of course, all cryptocurrencies are not equally as risky. Newer cryptos are riskier than tried and true investments like Bitcoin and Ethereum. When deciding what to buy, it’s important to keep these ideas in mind.
Think about your risk level as an investor – can you afford to lose the money you’re using to make this purchase? What level of return do you want for your investment? The most stable investments are found in the top 100 cryptocurrencies on Coinmarketcap. These cryptocurrencies typically have the highest volume of trading and market cap. This is no guarantee of success, but usually, higher trading volumes indicate a more trustworthy investment.
Finally, remember to diversify and do not rely on a single cryptocurrency as your vehicle for financial success.
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