When it comes to finances, chances are you’ve heard about cryptocurrencies. Because of the growing interest in crypto assets, governments throughout the world are adopting policies that benefit this emerging sector. Although risky, crypto continues to attract capital because of its huge profit potential.
But before you explore how to start investing in cryptocurrency, let’s get acquainted with the basics.
So, what exactly are these cryptocurrencies?
Bitcoin and other cryptocurrencies are essentially digital versions of traditional physical currencies or fiat currencies. The term “cryptocurrency” refers to any digital coin or token that may be minted and stored digitally. Similar to digital payments utilizing the Indian rupee, you can use cryptocurrencies to buy and sell anything. However, the individual or the company must be prepared to accept the cryptocurrency you are providing against the items or services they are selling.
Digital payments and cryptocurrencies may seem similar, but they are fundamentally different due to their underlying technology and the asset they are based on. Furthermore, unlike the Indian rupee, where you can literally acquire a physical version of the currency if required, cryptocurrencies have no physical presence. That is to say; you can not use cryptocurrency for physical transactions. Starting with Bitcoin in 2009, thousands of cryptocurrencies exist today.
How do cryptocurrencies work?
Institutions such as banks and other financial institutions are relied upon to execute electronic payments as part of regular transactions because of their reliability and security. However, these transactions come with inherent limits. The cryptographic electronic payment system emerged to get around these limitations and does not require any kind of neutral third party to process the transactions.
Almost all cryptocurrencies are built as a ‘peer-to-cash’ network, meaning that they remove middlemen such as banks and regulatory authorities in the process of making payments. As a result, when using cryptocurrency, you can bypass middlemen and make a direct payment to the other party, provided both parties are prepared to accept your chosen cryptocurrency as payment.
Blockchain, a digital ledger, is used to create and store all cryptocurrencies. In most cases all transactions are verified in a decentralized manner. Simply said, Blockchain is a public ledger that records all of the transactions that take place between any two users of a cryptocurrency. It paves the way for an accessible and auditable system that safeguards cryptocurrency transactions.
Bitcoin, Ethereum, and other altcoins are among the most widely used digital currencies, each with its own distinctive blockchain. To get started, newcomers must utilize cryptocurrency exchanges and wallets (A program that lets you store cryptocurrencies offline). This is the most basic way to get involved in the cryptocurrency market.
What do you need to get started?
Now that you are familiar with the basics, let’s see how to start investing in cryptocurrency. Although new cryptocurrency investors may feel overwhelmed by the concept, getting started with investing on a cryptocurrency exchange has very few requirements. To get started, you need the following:
- Personal Identification
- A bank account
- Internet connection
How to invest in cryptocurrencies?
1: Choose your cryptocurrency
It is essential to do your research when choosing your cryptocurrency. Look at sites like CoinMarketCap and others to see how the value of various cryptocurrencies has changed over time. You may also consult renowned professionals for advice. Choosing which cryptocurrency to put your money into is the most challenging part of your cryptocurrency investing journey.
2: Choose a cryptocurrency exchange
The term “cryptocurrency exchange” refers to any online marketplace where cryptocurrencies can be bought and sold. Beginners should invest using a trading platform since it is safer than buying from a solitary trader. You may trade cryptocurrencies on a number of different licensed exchanges like ByteX. Each exchange provides unique advantages, such as lower initial investment amounts, a wider variety of cryptocurrencies, lower maker and taker fees, and so on.
3: Fund your account
Before you can acquire a cryptocurrency, you must first fund your exchange account. Credit cards, debit cards, bank wires, and other standard payment methods can all be used to top off your balance. Some payment methods may incur a lower cost than others on various cryptocurrency exchanges. Therefore, it is strongly suggested that you do extensive research prior to moving ahead.
4: Buy your first cryptocurrency
Now, let’s talk about how to purchase cryptocurrency. This is a relatively simple process. A crypto platform’s full selection of cryptocurrencies will be displayed after you fund your account. Each cryptocurrency you wish to purchase should have a Buy button on your screen. Click on this button to finish the transaction.
It is important to note that there are three types of Buy orders:
- Market order
A market order is a command that executes your buy order automatically at the most favourable market price. It is often carried out immediately or at the earliest convenient moment. The order’s starting price in the order book is typically set based on the current market rate.
- Limit order
A limit order specifies a price at which a cryptocurrency asset may be bought or sold. The price must reach the limit price before a limit order is executed.
- Stop order
A stop order buys or sells a crypto asset when the price hits the stop price. In this scenario, the order converts into a market order and is executed at the next available price in order to preserve the investor’s profit.
- Stop-Limit order
A stop-limit order is a hybrid between stop and limit orders. When the market hits the stop price, limit orders are executed at the specified price.
5: Store your cryptocurrency
This is the single most crucial thing you can do to protect your crypto holdings. While most markets provide some kind of online wallet service, some traders refuse to use them because their accounts may be compromised if the exchange itself is hacked or under attack.
Keeping your cryptocurrency in an offline “cold storage” wallet is a great way to ensure its safety. If you store your assets in a third-party cold wallet, you should be aware that moving your crypto coins may incur a small withdrawal cost to your chosen wallet.
6: Choosing a strategy
Profitability may be significantly improved by implementing Elliott Wave Theory. Elliott Wave Theory is an excellent tool for digital currencies and other speculative assets because of its emphasis on market psychology while looking for long-term price patterns. In addition, before increasing your bitcoin holdings, you could also consult with a professional who specializes in the field. However, one should always start with small investments and extensive independent market study rather than blindly following suggestions.
The easiest method would be dollar cost averaging (DCA), in which you invest a set amount of money in a specific coin on a fixed schedule, regardless of price fluctuations. This reduces the potential loss on the investment as a whole.
The third alternative is the buy-and-hold strategy. Investment in a long-term strategy like this is one of the finest ways to make money in the volatile crypto market. You may diversify your portfolio by buying a variety of cryptocurrencies and holding them for a period of years before realizing a profit. As long as you have invested in trustworthy cryptocurrencies, there is minimal risk involved and no requirement for trading or chart reading experience.
How much money do you need to start a cryptocurrency?
Cryptocurrency investments mostly do not have high entry barriers. In most cases, exchanges have very small minimum deposit amounts. Meanwhile, unlike stocks, cryptocurrencies can be purchased in fractions, making the process even cheaper. However, it is advised not to invest a huge sum at the very beginning if you do not have sufficient experience in this space.
Making periodic investments in smaller amounts is advisable as it reduces the chances of sudden losses.
How do you choose the right cryptocurrency?
Now you might wonder, ‘how to know which cryptocurrency to buy?’. It’s necessary to do some research before investing in cryptocurrencies. As a starting point, you should realize that selecting a cryptocurrency is not analogous to selecting equities on a stock exchange. For shareholders, the stock is a representation of ownership in the firm, while cryptocurrency is only a digital asset with no real-world value.
In the crypto market, supply and demand determine whether or not prices go up or down. If more individuals want to invest and there is a limited supply, the price will go higher. On the other side, if there is a great supply, but fewer individuals are investing, the price will go down.
By reading the white paper the team publishes to drum up support for their cryptocurrency project, you can learn more about the cryptocurrency you are interested in. Examine the crypto’s backers to determine whether they have a proven track record in the financial sector since this might indicate whether or not demand will rise.
When deciding whether or not a certain cryptocurrency is worth investing in, it is wise to seek the opinions of others who have previously made the same investment. Finally, note that if the market cap is large, there may not be an opportunity for it to expand much more; however, a larger market capitalization also means the project is well-established and much less prone to volatility.
How do I know which crypto will pump?
While there is no foolproof way of figuring which altcoin will do 100x next, professional traders usually use a series of technical and fundamental indicators to gauge the direction of a market. They then use the collected data to time their investments and trades.
In the most basic sense, you need to familiarize yourself with how to read cryptocurrency price charts. However, even reading charts is not 100% effective as several external factors and unforeseen events can have an effect on the prices of cryptocurrencies.
Closing note
Investors often stay away from the cryptocurrency market because of the high degree of risk involved. However, there is massive potential for financial gains if you have a firm grasp of how the market works and use the correct strategy. You are bound to do fine if you do your research, invest conscientiously, and abide by the many tips discussed in this article. However, make sure not to invest money you can’t afford to lose. We hope this article answers your question on how to start investing in cryptocurrency.
Important Disclosures:
Certain statements in this document might be forward-looking statements, including those identified by the expressions “anticipate”, “believe”, “plan”, “estimate”, “expect”, “intend”, “target”, “seek”, “will” and similar expressions to the extent they relate to the material produced by Bytex staff member. Forward-looking statements are not historical facts but reflect the current expectations regarding future results or events. Such forward-looking statements reflect current beliefs and are based on information currently available to them. Forward-looking statements are made with assumptions and involve significant risks and uncertainties. Although the forward-looking statements contained in this document are based upon assumptions the author of the material believes to be reasonable, none of Bytex’s staff can assure potential participants and investors that actual results will be consistent with these forward-looking statements. As a result, readers are cautioned not to place undue reliance on these statements as a number of factors could cause actual results or events to differ materially from current expectations
The commentaries contained herein are provided as a general source of information based on information available as of MMMM DD, 2022. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change investment decisions arising from the use or relevance of the information contained here. ByteX. makes no representation or warranty to any participant regarding the legality of any investment, the income or tax consequences, or the suitability of an investment for such investor. Prospective participants must not rely on this document as part of any assessment of any potential participation in buying and selling of virtual currency assets and should not treat the contents of this document as advice relating to legal, taxation, financial, or investment matters. Participants are strongly advised to make their own inquiries and consult their own professional advisers as to the legal, tax, accounting, and related matters concerning the acquisition, holding, or disposal of a virtual currency. All content is original and has been researched and produced by ByteX.