Crypto Investing For Beginners

The crypto world has expanded swiftly, growing from $800 billion in 2022 to an impressive $1.11 trillion in 2023. This is clear: cryptocurrencies are fast becoming a top choice for investment. With more and more beginners drawn to this market, getting a handle on the trends and preparing to participate is vital.

This article will explain why cryptocurrencies offer an attractive investment opportunity compared to other assets and walk you through your first steps into this exciting new financial frontier.

Benefits of Investing In Crypto

Although cryptocurrencies are often viewed as a highly volatile and risky asset class, it's essential to recognize that this volatility can frequently be a positive attribute. It can generate crypto millionaires at a pace unparalleled in any other investment arena. Therefore, before investing, let's first understand why cryptocurrencies are so beneficial.

●    Potential for Remarkable Returns

Cryptocurrencies are renowned for their considerable potential for growth and, consequently, high returns on investment. Take Bitcoin and Ethereum, for example. Over the past half-decade, they have witnessed astonishing growth rates of around 1000% and 500%, outshining traditional asset classes such as the Nifty 50 stock market index, which increased by approximately 65% during the same period.

●    Deflationary Nature

The concept of inflation pertains to the decrease in the purchasing power of a currency. Consider the dollar; its value today is significantly lower than it could command in the 1900s due to the cumulative effect of inflation, often caused by excessive printing of money. In contrast, certain cryptocurrencies like Bitcoin exhibit a deflationary nature where their value tends to increase over time. This can be attributed to the limited supply of these cryptocurrencies, such as the 21 million cap for Bitcoin, unlike the infinite printing capacity of fiat currencies.

●    Ease of Trading

Today, purchasing and selling cryptocurrencies is an incredibly straightforward process. With just a few clicks, users can trade their desired cryptocurrencies. Moreover, novel concepts like yield farming and staking allow crypto investors to passively gain interest on their holdings.

●    Accessibility Around the Clock

Unlike traditional stock markets and banks that operate within confined hours and shut down over weekends, cryptocurrencies are available for trading 24/7, all year round. This becomes a crucial advantage during emergencies where immediate liquidation of assets or fund transfers may be required without having to depend on traditional banks or intermediaries.

Speed and Efficiency

The ease and speed at which cryptocurrencies can be transferred globally outstrip traditional banking systems. While an international bank transfer could take up to two days due to an array of intermediaries, cryptocurrency transactions can be completed within minutes and at a significantly lower cost.

This brief overview merely scratches the surface of the many advantages of investing in cryptocurrencies, explaining the increasing enthusiasm surrounding this market. So, what's the best way to kickstart your crypto investing journey?

Step-By-Step Guide To Start Cryptocurrency Investing

Despite the overall belief that cryptocurrencies are highly complicated assets and not for everyone, investing in crypto is a very straightforward process with several steps.

1.  Choose Which Cryptocurrency To Invest In

The first step is deciding on the specific cryptocurrency you wish to invest in. Many options are available, with Bitcoin and Ethereum being the most popular. Each cryptocurrency has its unique features, applications, and potential for growth. Understanding these differences will enable you to make a more informed decision.

2. Select A Cryptocurrency Exchange

After choosing the cryptocurrency, the next step is selecting a reliable cryptocurrency exchange platform. These platforms allow you to buy, sell, and store digital assets. Some popular exchanges include Coinbase, Binance, and Kraken. When choosing an exchange, it's essential to consider factors such as security measures, transaction fees, and user-friendliness.

3. Explore Storage And Digital Wallet Options

You will need a cryptocurrency wallet to store your digital assets. These wallets come in various forms, such as online (web) wallets, mobile wallets, desktop wallets, and hardware wallets. Each type offers different levels of security and convenience. Your choice would depend on your specific needs and the value of the cryptocurrency you intend to hold.

4. Decide How Much To Invest

This involves setting aside a certain amount of your income or savings for investing in cryptocurrency. As a rule of thumb, only invest what you can afford to lose due to the market's inherent volatility.

5. Manage Your Assets

Lastly, managing your investment is crucial. This involves regularly monitoring your portfolio, staying updated on market trends, and making necessary investment adjustments. Also, consider seeking advice from financial advisors or experts to make more informed investment decisions.

How To Choose The right crypto asset

Determining the right crypto asset for investment is arguably the most important and challenging step in your crypto investing journey. With over 23 thousand cryptocurrencies today and, importantly, so many scam projects, it’s not easy to identify the right one. Here’re a few tips on what to look at when choosing crypto for investing.

●    Market Capitalization

Generally, the larger the market cap, the lower the volatility, and the higher the liquidity, facilitating effortless entry and exit from trading positions. Conversely, smaller market cap cryptos often possess a higher risk-reward ratio but can exhibit superior growth potential given well-defined tokenomics, roadmap, utility, and a strong backing team. These are often termed 'crypto gems.' Hence, if you're open to accepting some risk for higher returns, these could prove a better choice over established large-cap cryptos like Bitcoin or Ethereum.

●    Supply

Understanding whether a coin has a limited supply is crucial. Assess how many coins are in circulation and the amount that can be mined. This directly influences the future price of the cryptocurrency. Bitcoin is a classic example: with limited supply and increasing demand, its value is bound to increase once all coins have been mined.

●    Whitepaper & Roadmap

Always ensure that your chosen cryptocurrency has a whitepaper detailing the coin's purpose, utility, and underlying technology. A roadmap outlining the project's plans and objectives helps assess the seriousness and commitment of the team, safeguarding against pump-and-dump schemes.

●    Utility

Among all factors, the utility of a coin is vital in determining its future. A coin lacking a real use case will struggle to attract investor interest and maintain competitiveness in the long run.

●    Team

Given the industry's penchant for anonymity, it's essential to scrutinize the development team. Legitimate projects often opt for audits, KYC verification, and transparency and host AMAs (Ask Me Anything) with their community, signaling their trustworthiness and long-term commitment.

Bottom Line

Originally designed to facilitate secure, swift, and cost-effective transactions, cryptocurrencies have evolved into a dynamic and potentially lucrative investment opportunity. To put it in perspective, a mere thousand-dollar investment in Bitcoin a decade ago could have catapulted you to millionaire status today.

However, as rewarding these assets may be, it's crucial to underscore that investing in crypto isn't akin to winning a lottery but a domain necessitating a deep understanding of the market. Therefore, as you venture into this sphere, remember that it's your knowledge and wisdom and not only luck that will guide you towards achieving success in your crypto investing journey.