A lot of people are increasingly excited about the prospect of investing in cryptocurrency. With access to information and brokerage firms available, there is so much potential in this market if you are willing to give it a try. There are many online brokers today whose platforms you can use to invest in cryptocurrency. You must first understand what it means to invest in crypto, and how to go about it.
Before you invest in anything, it is always advisable to understand the core dynamics. First, what are cryptocurrencies? These are digital currencies with the following features:
- Decentralization
A decentralized currency means that you are trading in currencies that lack a central point of control. While fiat currencies have central banks in each country, cryptocurrencies do not. Instead, they are owned and controlled by the community of investors like yourself.
- Peer-to-peer
One of the challenges you experience when dealing with fiat currency is that transfer from your bank to another person’s bank in a different country can be tedious. It will take a few days, and it will also be costly. Once they receive the currency, they also have to incur costs of conversion into their local currency, which means that they will either end up with less money, or you have to send them more to cover the transaction costs.
Peer-to-peer in the case of cryptocurrency means that you can easily transfer your coins to another person in a different part of the world almost instantaneously and without incurring the costs involved in transferring fiat currency. After all, there is no central government or middlemen involved to demand transaction costs.
- Very fast transactions
How many times have you been to a bank and told your transfer will complete in 2-5 business days? This is a problem you don’t get to experience with cryptocurrency. Most transfers will terminate in seconds or a few minutes depending on the cryptocurrency you are trading.
- Affordable
One of the benefits of trading in cryptocurrency is that it lowers the cost of transactions drastically. It is possible to send currency in the value of millions of dollars to recipients in any part of the world, and it will only cost you a few cents.
If you think about these features, investing in cryptocurrency is a good idea. There are a number of online brokerage firms that can help you with this. You just need to be careful so you invest with the right one. At Coincheckup, we encourage investors to perform due diligence on the platform they want to invest in. You are making a financial decision that will impact your investment and your wealth, so it is only fair that you find an online broker that is worth your while.
Factors To Consider When Investing in Cryptocurrency
So what do you need to invest in cryptocurrency? The following section outlines all the important factors you need to consider:
Sufficient Capital
You need to have some money set aside for this investment. How much money depends on what you are comfortable with, and the cryptocurrency you are investing in. Generally, you can purchase cryptocurrencies for as little as $1. This is because there are so many currencies available in the market, and some of their values are so small a dollar could get you quite a number of currencies.
Even when purchasing major cryptocurrencies like Bitcoin, you can still purchase fractions of the currency. For example, at the time of this writing, Bitcoin was trading at $7,290. However, you might not have that much money, but still interested in investing in Bitcoin. If, for example, you have some $50 lying around, you can purchase roughly 0.0069 Bitcoin.
There are many places where you can check the prevailing market price of different cryptocurrencies so you can make an informed decision on which one you can invest in with the money you have. As a rule of thumb, always make sure that you are investing only the amount of money that you can comfortably lose. Like any other investment, there are risks associated with investing in cryptocurrency, so invest wisely.
Storage Facility
You must have a digital purse where you will store your currencies once you buy them. There are many digital wallets out there, designed with backup, send and receive features to make your work easier.
For someone to send some crypto to your digital wallet, you must share the wallet address with them. This is like your account number. The backup feature in your digital wallet is to help you backup your public and private keys in a safe location offline. You can keep this in a flash disk or even write it down somewhere. Imagine a situation where a few years down the line, the cryptocurrency in your wallet is worth so much, but since you lost access to your keys, you cannot access your wealth. Remember that in the world of cryptocurrency, anything is possible. You might wake up a few weeks from now and find Bitcoins trading at $20,000, so it is important that you do your best to protect your investment.
Find a Reliable Exchange
An exchange is a platform where buyers and sellers trade digital currencies. This is no different from the exchanges you come across at the stock market. There are different types of exchanges you can use. These include merchant exchanges and trading exchanges.
Even as you plan to invest in cryptocurrency, one thing that you should remember all the time is that this is an investment market that is highly unpredictable. Things change so fast, and you must be very fast and sharp to take advantage when things go your way. There is no definite way to determine whether the price of Bitcoin, for example, will rise of fall in the future. This is unlike the traditional investment markets where you can predict that floods in a certain area will cause the price of a given stock to fall. However, what we know for a fact is that changes in Bitcoin prices usually affect a lot of other cryptocurrencies.
