Although cryptocurrencies have prevailed in the market for quite a while now, their popularity has been increasing gradually over the years. When it first came out in 2009, Bitcoin was considered nothing more than an exciting and interesting element.
Analysts could, however, see the potential that cryptocurrencies were holding in the future.
The increasing value of these cryptocurrencies day by day has led them to gain huge attention as a form of investment to earn a lot. Here in this article, we will elucidate on the general aspect and how to invest in cryptocurrencies.
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What is Cryptocurrency?
A cryptocurrency is basically a form of payment, a digital currency that acts as an online exchange and can allow you to purchase goods and services. It is based on the technology of blockchain. It secures online transactions using an online ledger with powerful cryptography.
The blockchain’s registration, information, and distribution aren’t controlled by any single institution. It generally functions as a record of digital transactions that is not dependent on any central bank. Today, there are thousands of cryptocurrencies available to us. The most popular of all is Bitcoin which is also the first and most recognizable cryptocurrency.
How to Buy Cryptocurrency?
Most of the cryptocurrencies are available for purchase over various platforms with US dollars. Some other sites might ask for bitcoins or other cryptocurrencies as the only mode of payment. You will need a wallet and an online app to hold your currencies.
In the beginning, you can create an exchange, and you can eventually transfer real money to buy cryptocurrencies. Popular cryptocurrency trading exchanges such as Coinbase allow you to both create a wallet and buy or sell cryptocurrencies.
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What are the Top Cryptocurrencies by Market Capitalization?
|Binance Coin||$87 billion|
How to Invest in Cryptocurrencies?
Allow a Small Percentage of Your Portfolio to Cryptocurrencies
The guide for how to invest in cryptocurrencies begins with deciding how much of your portfolio you need to allocate to it. This rational decision is, however, a bit difficult to make. The reason behind this is the recent advancements in the price of Bitcoin.
However, you need to keep your greed under control while investing in this, even considering the rising value of the cryptos. You must ensure that you dedicate only a small percentage (5-10%) of your portfolio for these cryptocurrencies to occupy.
You must realize that investing in cryptocurrencies is not the same as investing in stocks or any other thing. It does not offer any dividends or interests. Cryptocurrencies will prove to be a great investment as long as their value keeps increasing and remains stagnant.
Choose Your Cryptocurrency
This is the most important part of knowing how to invest in cryptocurrencies. You are already aware that there are thousands of cryptocurrencies available to us. There are even more cryptocurrencies being introduced all the time. This fact has to be counterbalanced by the reality that it has only been a decade, and hundreds of cryptos have come and gone already.
However, in 2021, the most dominant crypto remains to be Bitcoin which has been gaining huge attention all along. It proves to be the most reliable among all the forms of cryptocurrencies available. Due to its position, reliability, and value, you must choose to invest in Bitcoin.
If you want to consider any other cryptocurrency, it should occupy a much smaller position on your portfolio. However, you must know that all this is very uncertain. Many of them have either flatlined or disappeared after appearing in the market for the past decade. You have to realize the fact that all your investments could go to absolute zero.
Choose a Platform to Buy Cryptocurrencies
Not all of the usual financial platforms have cryptocurrencies available with them. Hence, this process of how to invest in cryptocurrencies can be of little trouble. You won’t find any offerings of cryptocurrencies through any bank or brokerage firm.
You will be allowed on certain dedicated cryptocurrency exchanges where you will be limited to buy, hold, and sell the same. Let us have a look at some of the platforms:
- Robinhood Brokerage
Store Your Cryptocurrency
You will need a cryptocurrency wallet to finally store all your cryptos. Even though it is a complex process due to the number of cryptocurrencies available, we will try to make it simpler for you. In a basic sense, a cryptocurrency wallet is a secured software program that will allow you to store public and private keys that gets you connected to the blockchain where the cryptocurrency exists.
With your public key and private key, you will be able to get access to your cryptocurrencies. However, they are not generally stored in the wallet. The keys are known as such because they are encrypted and will only allow you to unlock the cryptos on the blockchain. Apart from all these features, a digital wallet records transactions and your currency balance that are stored on the blockchain.
Cryptocurrencies have had a very irregular variation in value. Although it is a great form of investment today, it is extremely risky if you are short on funds.
Now that you have a complete overview of how to invest in cryptocurrencies, it is completely your decision whether you want to take part in this wild ride or not.