A Beginner’s Guide To Buying Cryptocurrency
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The global cryptocurrency market capital is now worth $1.06 trillion. Cryptocurrency was once considered a fad but now appears to have some staying power.
A cryptocurrency is a digital currency that is encrypted to secure transactions. Cryptocurrencies do not have a central bank or governmental involvement.
Bitcoin, for example, is the most traded virtual coin. Bitcoin is popular because of its security, accessibility, liquidity, user anonymity, transparency, and high return potential. Ethereum, the second virtual coin in popularity after Bitcoin, has similar traits, like private transactions and independence from central authorities.
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Decentralization is the basis for crypto operations. Bitcoin, Ethereum, and most other currencies rely on a distributed ledger technology that records financial transactions. In a blockchain, this feature of virtual coins refers to transferring decision-making and control from centralized entities like central banks and state governments to a distributed network. Decentralized finances are not new concepts and come with benefits like the ones below:
- Decision making. There is no government manipulating the currency.
- Better data reliability. Data reliability in traditional financial systems is questionable, as the data exchange and storage stages open the door to corruption and fraud.
- Secure. The larger the blockchain, the smaller the possibility of hacking it. Most cryptosystems disallow the chance of a single bad actor corrupting them. Even if attackers compromise a node within their network, it is improbable that they can jeopardize the whole system.
Two of the most popular virtual coins
Bitcoin (BTC) was the first widely adopted cryptocurrency. Its price movement impacts the rest of the crypto market to a large extent. Bitcoin’s value is volatile.
Bitcoin’s popularity inspired developers worldwide to create other virtual coins.
Bitcoin is a speculative investment tool and shares many features and functions with gold in that they are considered good stores of value. Bitcoin’s price fluctuates widely. If you want to diversify your investment portfolio further from stocks, bonds, silver, and gold and are wondering how to buy Bitcoin, consider the following essential crypto tips:
- Choose the most popular exchange. The more well-known the platform you trade on, the higher your trust to use it and the more secure you and your virtual coins are.
- Expect Volatility. Only buy bitcoin if you are able to accept potential losses, both financially and mentally.
Ethereum comes second after Bitcoin in the cryptocurrency’s popularity top. Crypto traders mix Bitcoin and Ether to diversify their digital coin portfolios.
Ethereum differs from Bitcoin in a few aspects. It is a ledger technology used to build new programs and find applications in areas like NFTs.
Be aware of the factors that influence Ether’s price, like whales or the people that own large amounts of crypto, Ethereum 2.0 staking, competition, regulations, and supply.
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Common sense is crucial when you buy crypto.
You’ll need to do some crypto market research before deciding on the digital coin you will invest in.
There are many cryptocurrency tips out there that help your investment decision-making, and some of the most crucial ones to keep in mind are the following:
- Don’t get excited over a cryptocurrency. Instead, take a step back and consider if you can handle the volatility and potential losses
- Diversify your crypto portfolio. Remember the saying, “don’t put all your eggs in one basket” before you buy crypto because the market prices of these investments are volatile.
- Don’t panic-sell when prices get low. Prices rise and fall daily, tempting you to trade your virtual coin without using long-term thinking.
Getting caught up in the hype of news headlines is not unusual, so you should consider some common crypto mistakes people make.
- Don’t buy just because the price is low. Instead, consider why they’re down and how this can impact your future profits.
- Don’t go all in. Distrustful trading platforms suggest you invest as much as possible to maximize your money, but this is just a way to the poor house. Investing can be profitable, considering you first ponder what cryptocurrency you buy.
- Don’t forget crypto key phrases and passwords. Doing this would be similar to losing the keys to your bank vault.
- Don’t fall for scams. The most common crypto scams you need to be careful of are cloud multiplier scams, malicious wallet software, and fake coins.
Bitcoin and other cryptocurrencies appear to have staying power. They are becoming widely accepted currencies. Until their volatility decreases, only buy what you can afford to lose. Investing in cryptocurrency is speculative, but there is an opportunity to make money.
Rachel is an Austin blogger, educator, mom, wife, young breast cancer survivor writing about health, saving money, and living a happy life in Austin, Texas.
Rachel has written for HuffPost and Hometalk and has been featured on KXAN, Studio 512, Fox 7 Austin, and CBS Austin.