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Guide on How to Invest in Cryptocurrency for Beginners

Cryptocurrencies have shown immense volatility since their inception, presenting potential profit opportunities for those interested in trading these digital assets. Coins like Bitcoin and Ethereum have experienced substantial growth since their introduction but have also faced significant declines from their peak values, similar to other popular digital currencies. Seasoned traders have been engaging in crypto speculation for years, but if you’re new to the crypto market, you might wonder how to get started.

To begin investing in cryptocurrency, will guide on how to invest in cryptocurrency and the essential risks you should be cautious about.

1. What is cryptocurrency?

Cryptocurrency is a form of digital or virtual currency that uses cryptography for security. Unlike traditional currencies issued by governments and central banks, cryptocurrencies operate on decentralized networks based on blockchain technology. A blockchain is a distributed and immutable ledger that records all transactions across a network of computers.

The most well-known and widely used cryptocurrency is Bitcoin, which was created in 2009 by an anonymous person or group using the pseudonym Satoshi Nakamoto. Since then, thousands of other cryptocurrencies, often referred to as altcoins, have been developed.


2. Types of cryptocurrencies

Cryptocurrencies encompass a wide variety of virtual currencies that operate on blockchain technology, with over 25,000 types identified as of June 2023, according to Among them, Bitcoin stands as one of the earliest and most renowned cryptocurrencies. All other coin-based virtual currencies are collectively referred to as “altcoins,” representing alternatives to Bitcoin.

In recent years, certain cryptocurrencies have garnered significant attention, boasting large market values and attracting a substantial user and investor base. As of June 2023, the top 10 cryptocurrencies by USD market cap are as follows:

  • Bitcoin
  • Ethereum
  • Tether
  • BNB
  • USDC (US Dollar Coin)
  • XRP
  • Cardano
  • Dogecoin
  • Solana
  • Polygon

However, it remains challenging to predict which coins will ultimately succeed, given the relatively new and evolving nature of the crypto ecosystem, with many cryptocurrencies still in their early stages. While these top coins enjoy considerable prominence, it’s essential to recognize that they, like any investment, carry risks. The potential for significant investment losses is real.

For instance, despite notable gains in 2021, the value of most cryptocurrencies experienced sharp declines in 2022. Therefore, conducting thorough research on each cryptocurrency before invest in cryptocurrency is crucial. Assessing if the investment aligns with your financial goals and risk tolerance is of paramount importance. Careful consideration and understanding of each crypto asset can help mitigate potential risks and enhance investment decision-making.

3. What to consider before investing in cryptocurrency

Investing in cryptocurrency comes with inherent volatility, characterized by significant value fluctuations over short periods, which may be concerning for risk-averse individuals. One critical aspect to keep in mind is that the crypto market allows anyone to launch their cryptocurrency, and regulatory aspects are subject to change, making thorough due diligence essential to avoid falling victim to scams.

Before venturing into invest in cryptocurrency, it’s beneficial to assess your motivations and objectives. Are you looking to capitalize on a trend, or do you have a well-thought-out strategy? According to Feldman’s recommendation, it is crucial never to invest with the belief that you cannot lose. There are no easy paths to making substantial money without risk. Your investment decision should be based on belief in a cryptocurrency’s long-term potential and a willingness to endure significant price fluctuations.

One24h also advises investors to consider the cautious approach, being clear about their intentions and expectations before diving into the cryptocurrency market. A long-term perspective is crucial when dealing with such highly volatile assets. Rapid price movements in the crypto market can tempt investors to make emotionally driven decisions, such as buying out of fear of missing out on price increases or selling out when prices decline. However, these emotionally driven decisions are not sound investing strategies. Taking a rational and long-term approach to investing in such assets is vital for successful outcomes.

Consider before investing in cryptocurrency
Consider before investing in cryptocurrency

4. How to invest in cryptocurrency in 2023?

How to invest in cryptocurrency? Knowing where to buy and securely store it is essential. Fortunately, crypto investing has become increasingly accessible, thanks to a variety of exchanges similar to those used for traditional investments. Setting up an account on these exchanges takes only a few minutes. However, as with any investment, conducting thorough research on a specific cryptocurrency before committing your funds is a wise approach.

If you’re new to cryptocurrency investment and wondering how to get started, the following five steps can serve as a helpful guide:

Step 1: Choose what cryptocurrency to invest in

Similar to evaluating a company’s potential risks and financial health before purchasing its stock, it’s crucial to thoroughly understand and assess the unique characteristics of each cryptocurrency you’re considering for investment. This evaluation process will help you make informed decisions when invest in cryptocurrency.

However, vetting cryptocurrencies can be challenging due to the increasing number of fraudulent activities, such as pump-and-dump schemes, in the crypto space. To protect yourself from falling victim to scams, it’s essential to exercise caution and due diligence. For instance, avoid investing in smaller or newer cryptocurrencies that are heavily promoted on social media platforms, as they may be more susceptible to manipulation.

Keep in mind that the responsibility to analyze the investment risk of a specific cryptocurrency falls on you, and advice from social media experts may not always have your best interests in mind. While investing through a large, reputable platform can reduce your exposure to fraud and cybersecurity risks, it’s essential to acknowledge that the entire cryptocurrency industry lacks comprehensive regulation, making it impossible to completely eliminate these risks. A notable example occurred in 2022 when the reputable platform FTX was found to be mismanaged by bad actors who misappropriated clients’ funds.

Step 2: Select a cryptocurrency exchange

When it comes to invest in cryptocurrency, you’ll need to use an exchange or an investment platform like Stash. However, before selecting an exchange, there are several essential factors you should consider. Firstly, prioritize security to ensure your assets are protected from potential threats. Secondly, compare fees charged by different exchanges to find the most cost-effective option. Additionally, take into account the trading volume, as higher volumes often indicate better liquidity and ease of trading.

Another important consideration is the minimum investment requirement, as some exchanges may have minimum purchase amounts. Finally, check the range of cryptocurrencies available for purchase on a particular exchange, as you’ll want to ensure they offer the specific cryptocurrencies you are interested in acquiring. By carefully evaluating these factors, you can make a well-informed decision when choosing the right exchange for your cryptocurrency investments.

Select a cryptocurrency exchange
Select a cryptocurrency exchange

Step 3: Consider storage and digital wallet options

Cryptocurrency is a digital asset, and to securely store your coins, you’ll need a digital storage solution. One popular option, as suggested by One24h, is to use your investment platform for storage. Many newcomers in the cryptocurrency market prefer this method, as the platform takes responsibility for safeguarding your assets. Make sure to choose a regulated platform with robust security measures and ample financial insurance.

However, if you prefer not to store your cryptocurrency on popular platforms, you can opt for a crypto wallet. These wallets hold the private keys that grant access to your digital identity recorded on the blockchain. There are two main types of wallets: “hot” wallets and “cold” wallets. A hot wallet is connected to the internet and offers convenience, while a cold wallet is a physical offline storage device, like a USB drive, providing higher security.

Step 4: Decide how much to invest

Investing in cryptocurrency is similar to any other investment, and the amount you decide to invest will depend on several factors, such as your financial capacity, risk tolerance, and investment strategy. Additionally, you should take into account the minimum investment requirements and transaction costs, which can vary between different crypto exchanges.

If you are interested in invest in cryptocurrency with a high value per coin, One24h suggests that many exchanges allow you to invest on a dollar basis, so you don’t need to purchase a whole coin. This flexibility enables you to invest in cryptocurrencies like Bitcoin without having to come up with a large sum of money. It’s essential to focus on the total amount you want to invest, rather than the number of coins you want to buy. As a general rule, never invest more than you can afford to lose, and consider diversifying your portfolio to limit specific risks associated with cryptocurrencies. We recommend allocating no more than 2% of your overall portfolio to any single crypto asset. This approach helps manage the potential risks associated with cryptocurrencies.

Step 5: Manage your investments

Cryptocurrency presents a unique investment opportunity as it serves a dual purpose – it can be utilized for transactions or held as a long-term investment. Your approach to managing crypto holdings will depend on your individual investing strategy and objectives. If you’re looking for guidance, you might consider adopting the Stash Way, a philosophy centered around consistent investing, diversification, and long-term investment.

Manage your investments
Manage your investments

5. Pros and Cons of Investing in Cryptocurrency

Pros of investing in cryptocurrency

  • Historically, cryptocurrencies have shown a low correlation with traditional investment classes like stocks and bonds, which could potentially improve risk-adjusted returns for investors.
  • Certain cryptocurrencies, like Bitcoin, are often compared to gold due to their fungible, durable, and scarce nature, which gives them value similar to precious metals.
  • The decentralized and transparent nature of blockchain technology provides robust network integrity and security for cryptocurrencies.

Cons of investing in cryptocurrency

  • The cryptocurrency market is highly volatile, making it challenging to predict price movements, and the reasons behind significant swings in value may not always be clear.
  • While blockchain technology is difficult to hack, individual investors can be vulnerable to hacking and cyber risks associated with online activities.
  • Cryptocurrencies are currently subject to minimal government regulation, leading to a lack of legal protection for investors in the event of any disputes or fraudulent activities, unlike traditional investments that are more regulated.

6. How much should you invest in cryptocurrency?

Experts often advise that investors should allocate only a small portion of their net worth, typically ranging from 1% to 5%, to invest in cryptocurrency. When determining how much of your investment portfolio should be in crypto, it is crucial to exercise caution and avoid investing more than you can afford to lose. While having a modest exposure to cryptocurrency may enhance the risk-adjusted returns of a diversified portfolio, the overall allocation to crypto should be based on your risk tolerance and overall investment strategy.

Diversification within the cryptocurrency market is also an important consideration. Different crypto assets may have distinct long-term use cases and susceptibility to price manipulation. While the entire crypto market is known for its high volatility, larger and more liquid cryptocurrencies may carry relatively lower risk compared to smaller and speculative ones. Nevertheless, even the well-established cryptos experience significant price fluctuations. Thus, it is essential to assess the mix of cryptocurrencies in your portfolio along with the overall allocation to crypto assets.

How much should you invest in cryptocurrency?
How much should you invest in cryptocurrency?

7. How to keep your cryptocurrency secure

Ensuring the security of your crypto investments is a crucial aspect of this type of investing. Here are some helpful tips to keep your crypto assets safe:

  • Choose reputable exchanges and digital wallet providers for your transactions.
  • Secure your access with strong and unique passwords, enable two-factor verification, and use secure internet connections when dealing with your crypto accounts.
  • Stay vigilant against phishing scams that specifically target crypto users, and be cautious when clicking on suspicious links or providing personal information online.
  • Never share your passwords or private keys with anyone, as this information is essential for protecting your crypto holdings. Keep them safe and confidential.

Investing in cryptocurrency is undoubtedly a speculative venture, and seasoned investors often choose to allocate their funds elsewhere. However, for newcomers interested in entering the world of crypto trading, the best approach is to begin cautiously and with small investments. Regularly follow to get useful knowledge!

>>> See more: Unlocking the Secrets: How to Make Money with Cryptocurrency

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Emily TayLor

Hello, Emily TayLor Here. I’m a content Writer. I’m Writing About Life, Food, Finance and Related Contents on Website.

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