Cryptocurrencies are becoming an increasingly mainstream investment option. While the price of individual digital coins has fluctuated wildly over the past year, this is expected as they reach a new phase of adoption. With that said, there’s still much to learn about investing in Cryptocurrencies without losing all your money
Much like stocks, investing in Cryptocurrencies involves a high degree of risk — which is why you shouldn’t do it without thoroughly researching and understanding the market first. Fortunately, this doesn’t have to be as scary as it sounds if you have a careful strategy before buying. Here’s how to buy cryptocurrency without breaking the bank
What is cryptocurrency?
Cryptocurrencies are digital assets that use cryptography to secure transactions, control inflation, and verify transfer proprieties. They are decentralized, meaning they don’t rely on a third party or government to function. Instead, they are managed by a computer network that verifies transactions and enforces trust in the system. Once you understand the underlying technology, you’ll be more informed about when to buy and sell.
Cryptocurrencies are electronically created and stored as tokens. Generally, these tokens are easily transferable, allowing for fast and reliable transactions. Cryptocurrencies can be traded online or exchanged with other people via physical cash or online banking systems.
How to buy Bitcoin
The good thing about Bitcoin is that it’s the most established cryptocurrency. You can’t directly buy any of the other top Cryptocurrencies. Instead, you buy Bitcoin and exchange it for other digital assets. This way, you get exposure to the entire cryptocurrency ecosystem without holding multiple coins.
It’s also actively traded, so the price is generally more stable than other digital assets. You’ll first have to create an account with a Bitcoin exchange to buy Bitcoin. (We’ve listed a few below.) You can either open an account with a broker or exchange it yourself. Once you have an account at a fair exchange, you can buy Bitcoin by transferring money into the exchange’s account.
How to buy other Cryptocurrencies
A cryptocurrency wallet is a software program that stores your coins and allows you to send and receive them using a digital address. Most exchanges let you buy only one cryptocurrency. You’ll have to use a cryptocurrency wallet if you want to buy more than one coin. Once you get a wallet, you can transfer your Bitcoin or Ether to the wallet.
Then, you can buy any other cryptocurrency available on that exchange by trading your coins for the one you want. Some exchanges let you buy Ethereum with Bitcoin to trade Ethereum for other currencies at a lower price. Many exchanges also allow you to trade Ethereum for Bitcoin, so you can cash out your coins at a higher price and buy other coins.
Some tips when buying cryptocurrency
- Research the market.
Before you buy a bunch of coins, you’ll want to learn as much as possible about the cryptocurrency market and its underlying technology. You’ll need to understand both the upsides and the potential risks of investing in the market.
- Only trade what you can afford to lose.
This is even more important when trading Cryptocurrencies because they are open to hackers. If you trade only a small amount of money, you risk losing it all if the market goes against you.
- Don’t invest more than you can afford to lose.
Even if the cryptocurrency market looks promising, you should only invest as much as you can afford to lose if something goes wrong.
- Don’t get caught up in day trading.
Investing in Cryptocurrencies is a long-term play. Weigh the potential rewards against the risks before continuously investing little money to make a quick profit.
- Check for new regulations.
When you invest in a market that’s still very new, you risk new regulations completely changing the market dynamics. If the government decides to crack down on Cryptocurrencies, it could crash the market.
Cryptocurrencies are a fascinating investment opportunity that is still in their infancy. However, you have to approach this market with caution. Investing in this market without researching it and understanding the risks is a recipe for disaster. If you do your research, follow some basic guidelines, and keep your losses small, you should be able to invest in this market with a relatively small amount of money and still make a decent return.