The Ultimate Guide for Beginners: How to Start Investing in Cryptocurrency in 2020
With Bitcoin reaching new levels – it’s now at its highest price since October last year – interest has once again piqued and people are wanting to get involved.
But one can often feel confused about how to get started in investing, especially with little cryptocurrency knowledge. The information out there can be daunting – often conflicting. What cryptocurrency do you invest in? Where do you buy it? How do you buy it? What if you want to get rid of it and buy a different coin or token?
Here we’ve tried to condense it down for the beginner so even the absolute amateur can get involved.
1. Do the Research to Understand Your Investment
This is the most important point – and one would-be investors so often overlook. You need to make sure you know exactly what you are investing in: Read the whitepaper, research the creators and the company and be sure it is something you feel is worthwhile – and not a scam.
By reading forums, such as those on Reddit (r/Bitcoincash, for example), and speaking to people who have invested already, you are likely to get a good idea of what it is you will be putting your money into and eventually.
As the crypto world is ever-changing, following the news is vital, too. And not just about fluctuating prices. New technologies, changes to the laws, and the latest products related to your chosen coin or token are all things you should keep an eye on if you want to get the best out of your investment.
Reputable news sources such as Coindesk or Cointelegraph can help keep you in the loop.
2. Find out what cryptocurrency works for you
This is important as there are a huge amount of coins and tokens to choose from. Not only should you be finding a coin that will get you decent financial returns but one that could prove useful, too.
Essential questions to ask should be:
- Do I want to make a long-term investment and wait to make a return?
Many investors (but not all) like to hodl their cryptocurrency (hold the cryptocurrency, rather than sell it, and wait for its value to increase). Is that what you want to do? If so, it is best to buy Bitcoin or Ethereum rather than, say, Ripple or Dash.
- Do I want to use the cryptocurrency to pay for everyday goods?
Rather than invest in a coin that would be good just for hodling, you could buy a coin or token that could prove useful. Of course, you would still want to invest in something you believe will increase in value, but a currency such as Bitcoin Cash (designed for everyday purchases) or Ripple (created to send money overseas) could prove worthwhile too. Then, you would have a chance to really use the currency and experience the way it works first hand, rather than just leaving it in a crypto wallet.
- Is the cryptocurrency you are investing in legal where you are?
Some cryptocurrencies are banned in certain countries. And this is something you definitely need to pay attention to – you don’t want to have your assets confiscated. Pay attention to this, as some cryptocurrencies in certain countries may be illegal but others not covered by law.
These are questions that can be answered following thorough research.
3. Find a crypto exchange
This is important: depending on cryptocurrency, where will you buy it? Some cryptocurrencies cannot be found on certain exchanges – and can actually be downright difficult to find. And some exchanges are even banned in a number of countries. You will most probably want to find an exchange that accepts fiat currency and even then, it may be difficult depending on the laws in your country. Will you want one that you can use on your mobile?
It is also important to be sure of security. The exchange ideally should keep customer deposits offline, in cold storage. This protects funds from hacks. Of course, some exchanges can boast better security than others. Some exchanges may also insure users’ funds too.
Again, adequate research will help find an exchange that will cater to your needs but some can be notoriously hard to navigate. As a beginner investing in crypto, Coinbase will suffice more than, say, Kraken. You will want to find a place where the process will be as easy as possible.
4. Get a crypto wallet
Finding the right wallet (a tool store and use your crypto) is also a task that requires a lot of thought. Cryptocurrency wallets are essentially programs that store your public and private keys and interface with various blockchains allowing you to monitor the balance, send money and conduct other operations.
Though there are different types of wallets, and depending on your investment, having the right one is crucial. Mobile wallets on your phone are ideal for everyday purchases – but not great for storing huge amounts of crypto. Hardware wallets that store a user’s private keys on a hardware device like a USB are good for large amounts of cryptocurrency. While desktop wallets, downloaded and installed on a PC or laptop, offer good security, if your computer crashes, you are in trouble.
Online wallets are useful as they store your keys on a cloud and are accessible from any location. But they are also vulnerable to hacks.
By far the most secure wallet is a paper wallet – a physical copy or printout of your public and private keys, or software that is used to securely generate a pair of keys which are then printed.
You may want an everyday wallet they can use to pay for goods and services, or a long-term storage solution. A hybrid wallet for buying and holding cryptocurrency is also an option too.
For beginners, a wallet such as Exodus would be useful. While someone wanting to keep their funds private may want to use the Samourai wallet. Researching all of these to find out what works for you and then which brand to trust is key, and having more than one type of wallet is also possible too.
5.Find a Blockchain Community
As touched on in the research section, speaking to people is not only essential for finding out which cryptocurrency you want to buy but for when you actually own the cryptocurrency and want to know how to use it.
Having a community is essential – be it forums, chat groups, or threads on Twitter – and having access to people who can tell you how things work is absolutely necessary for the beginner.
Websites and apps that are helpful for the first-time investor include Bitcointalk, the largest and most influential crypto community on the web; Telegram, a messaging service used heavily by the crypto community; and forums on Reddit.
6. Try Using Crypto Yourself
Finally, using the product yourself is essential for the first-time investor.
It may be difficult to go into your local coffee shop and buy a drink with your Bitcoin or Litecoin or Monero (then again, it may not) so try anything – even sending cryptocurrency between wallets. Playing around with it is what will give you an idea of how the technology works. And knowing how it works is important if you are going to build a decent portfolio.
Contributed by Anonymous Rabbit