One of the necessary steps on the road to financial freedom is investing. You can invest your funds in various goods, such as stocks, foreign currencies and metals. For the past few years, virtual money, or cryptocurrencies, have also come into the public consciousness. In this article, you will learn how to invest in cryptocurrency, which cryptocurrency for beginners is the best choice, and how much money you will need.
Let’s talk about money
To invest, you will need money. How much is up to you, but there are some universal rules to follow:
- Do not invest money you will need in the near term (up to 12 months),
- Don't borrow to invest,
- Start with small amounts, such as $100, and avoid large sums, such as $20,000,
- Diversify your capital,
- Before you invest, learn as much as possible.
To build a diversified cryptocurrency portfolio, you will need a minimum of $100. Higher amounts, such as $300 and $500, increase your opportunities for experimentation. It's a good idea to regularly add more money to your investments - avoid sudden changes in your finances.
Age limits
Before you learn how to get into cryptocurrency investing, keep in mind the formal restrictions. Probably every exchange where you can buy crypto has a clause in its terms of service that prohibits minors from using its services. If you are under 18, focus on gaining knowledge about cryptocurrencies and collecting money.
Choosing an exchange
It's time to choose your investment broker. Although there are many exchanges on the market, in our article we will focus on two: Binance and Coinbase.
Binance
Pros
- over 600 cryptocurrencies traded,
- extremely low commissions,
- large database of articles teaching how to invest in crypto.
Cons:
- complicated user interface
- lack of availability in several countries, including the U.S
Coinbase
Pros
- simple design,
- Popular in the U.S,
- more crypto buying opportunities.
Cons:
- poorer article base, when users might to get a knowledge,
- less advanced trading.
How to invest in crypto in an effective way?
Unfortunately, to make profits in cryptocurrency trading, you should be familiar with the specifics of them. Our crypto guide is not big enough to fit all the necessary information, but we want you to keep in mind the few most important ones:
- Don't succumb to emotions. Most decisions made under the influence of emotions are not correct.
- Avoid checking the value of your portfolio every day, it causes panic.
- Make as few transactions as possible, which will reduce losses on commissions.
- Don't try to buy when the price is the lowest, it's almost impossible.
- Do proper research before you invest in cryptocurrency long-term.
- At first deal with long-term investments, trading is more difficult.
- Never invest in a single cryptocurrency. The absolute minimum is 5 coins, optimally it is about 20.
- Never invest all your funds in cryptocurrencies. This is a very risky group of investment instruments.
Cryptocurrency for beginners
Our guide is aimed at people with no experience, so we will focus on how to invest in cryptocurrency for beginners instead of comparing the most forward-looking projects or investment strategies for traders with a long track record.
The ideal cryptocurrency for beginners will combine several features. First, it should be as stable as possible. Small projects often collapse, and price changes can be as high as 50% per day. Second, it must be available on popular exchanges, which will make it easy to buy and sell later. Third, it must have a promising future to gain in price in the years to come.
There is already an article on our blog with our suggestions for cryptocurrencies to consider in 2022. For beginner investors, we especially recommend Ethereum, Binance Coin and Bitcoin. It is up to you in what proportions you purchase them.
Each of these has its own characteristics: Bitcoin behaves similarly to gold, Ethereum is a model for many other cryptocurrencies, and Binance Coin surprises with its stability.
Wallets
If you've ever read a Bitcoin article or any crypto guide, you've heard of wallets like ledger. What are they for? How do they differ?
Wallets are used to store cryptocurrencies. Comparing them to a bank account will not be a big mistake, but it is worth noting that a bank account, for example, can be accessed by government entities or some bank employees. The only person who has access to a well-secured cryptocurrency wallet is its owner.
The vast majority of wallets allow you to hold many different cryptocurrencies, so you don't need to have separate wallets for each crypto, although it is possible.
There are 3 basic possibilities for your cryptocurrencies:
Hardware wallets (cold wallets)
This is the safest form of cryptocurrency storage. Cold wallets usually look like memory sticks and are connected to computers using USB. Aside from knowing the key, you must have physical access to the wallet! In addition, cold wallets are small and you can easily hide them in your pocket. Although they are not very convenient to use, they are appreciated by people who keep large sums of money on them.
Desktop and mobile wallets (hot wallets)
This is a less secure but very convenient solution, ideal for holding small amounts of cryptocurrency. Hot wallets are programs that install in a few moments and which, provided your computer is password-protected, offer a sufficient level of security. Unfortunately, if you lose access to your computer/phone/drive, you will permanently lose your money.
Wallets on the exchanges
By far the least secure, but also the most comfortable, option is to store cryptocurrencies on exchanges. This provides great liquidity, as you can sell your crypto at any time, but it is very easy to become a victim of phishing or hacking. We recommend that you deposit your cryptocurrencies only if you plan to trade or sell in the near future.
