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There are so many cryptocurrencies present in the digital world today. This digital currency market has already reached a cap of more than $275 billion. As the crypto space is huge, entering it can be tough, especially if you are a novice investor.
Before starting out, you need to do a scrupulous research in the digital currency domain. You must know fundamental facts about cryptocurrency before you immerse yourself in deep crypto water. By doing this, you can obtain high profits and avoid costly errors. In this article, we will cover the most essential points that will help you take your first steps in the crypto market and easily buy Bitcoin, as well as any other cryptocurrency.
Crypto Tokens vs. Crypto Coins
A crypto coin is an encrypted form of digital currency. This coin can be used to make online payments. It is typically a value unit that functions on its individual blockchain without any association with other platforms. On the other hand, a crypto token is a representation of digital assets that are tradable and exchangeable. It can range from voting rights to commodities. It does not run on its own platform and uses Ethereum in most cases. Hence, Ethereum is a blockchain platform that crypto tokens use.
Bitcoin vs. Altcoins
The first ever cryptocurrency was Bitcoin. It is primarily a currency in an electronic form. Bitcoins exist in the virtual world wherein you don’t need to move money through banks or store them in vaults. In contrast to Bitcoin, altcoins came into the cryptocurrency arena as an alternative when people started to face some issues down the Bitcoin road. Altcoins emerged as “improved versions of Bitcoin” trying to make the use of cryptocurrency easier. As a rule, they have faster transactions, improved distribution methods, and advanced protocol algorithms as compared to Bitcoin.
How to Start Investing in Cryptocurrency?
Decide on a Wallet
Any cryptocurrency wallet helps you send, store, and receive digital currency (for instance, Bitcoin) in a way that is secure. It is digital in nature and almost all cryptocurrencies have a tailor-made wallet. You must utilize a wallet that supports the cryptocurrency of your choice. Have a look at the various types of cryptocurrency wallets offered to customers:
- Hardware wallet: A hardware wallet holds your cryptocurrency in the most secure way as it is an offline medium of storage. Usually, they resemble memory sticks and some of them even have screens for better user-friendliness. You can still make transactions using hardware wallets.
- Desktop wallet: As the name implies, it is generally a software application that should be installed on your computer. It is still a safe storage option, but once your computer is hacked or infected with malware, your wallet can also be harmed.
- Paper wallet: Simply put, it is a QR code printed for both public as well as private keys. You can receive as well as send cryptocurrency with the help of this wallet. This is another reliable way of storing your cryptocurrency.
- Online wallet: It is based in the web. Cryptocurrency exchanges usually offer this type of storage to their customers. In some of these wallets, private data is encrypted and afterward sent to an online server. Still, it is the least secure storage medium as it can be easily hacked into.
- Mobile wallet: This is an app designed specifically to be accessed from a mobile phone. Mobile wallets operate in a similar way to desktop wallets.
In order to use a cryptocurrency wallet, you first have to set it up. You then have to choose the feature that allows you to send and receive cryptocurrency. Do check your cryptocurrency wallet address before making any transactions – this will help you transfer cryptocurrency smoothly. And here comes a golden rule: Always back up your wallet!
Choose a reliable and safe exchange
To buy, sell or trade cryptocurrency, use only trusted and reliable exchanges like CEX.IO, for example. CEX.IO is highly recommended for beginners as it offers a clear interface that helps you in purchasing cryptocurrency without any hassle. You can even use a credit card for those purposes, and it will take you several clicks, literally. CEX.IO works at a global level and allows for trading Bitcoin, Ethereum, Bitcoin Cash and various other popular coins.
Trading your cryptocurrency
While trading cryptocurrencies, you will come across 3 types of orders: market, limit, and stop-loss orders. A market order allows you to sell and buy cryptocurrency at the market price that is currently going. On the other hand, when placing a limit order, you will have it executed at a set price or at a more profitable rate. The stop-loss order speaks for itself – it is fulfilled automatically once a particular price condition is met. This means it functions as a limit order and prevents a trader from losing their funds.
Safeguarding your cryptocurrency
Keeping your cryptocurrency secure within an exchange is of prime importance. To be on the safe side, activate 2-Factor Authentication, i.e. 2FA, for all accounts that you have. In addition to this, use strong passwords for all your crypto and email accounts. Besides, try to keep small amounts of cryptocurrency in your online wallets to hedge against the risks of hacking.
Important do’s and don’ts in crypto investing
Follow these do’s and don’ts in crypto investing in order to make a well-informed decision when you embark on this journey:
- Do your own research before you start investing in cryptocurrency. Understand blockchain and all the security measures you need to take;
- Do not invest in the things that are not clear to you;
- Do try to start with a small amount of cryptocurrency in order to understand the dynamics of the cryptocurrency market;
- Do not just focus on Bitcoin as there are many other cryptocurrencies out there that are worth considering.
Conclusion
Cryptocurrencies have taken the world by storm with their technological and innovative brilliance. Prospective investors are given a huge opportunity but only when they clearly understand what they are getting into. Sufficient knowledge of cryptocurrencies can only be achieved by combining theory and practice. After mastering the “building blocks”, you can easily find the preferable niche in the crypto world and enjoy the returns without any trouble.