Investing is putting money into a property/asset or a commercial venture to earn profits. Therefore, investing in cryptocurrency translates to putting money in cryptocurrency to make a profit. Cryptocurrency is the asset here.
However, you need to be well informed before making any investment steps like wagering at an online casino, buying crypto, and lending crypto.
This article explains cryptocurrency, what you need to invest in it, and the pros and cons of cryptocurrency investment.
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Overview of Cryptocurrency
Cryptocurrency is a term used to refer to virtual digital currency. The first cryptocurrency (Bitcoin) was invented in 2008 and hit the market in 2009. Bitcoin is the most dominant among all other cryptocurrencies; all other cryptocurrencies are called altcoins.
Unlike traditional fiat currencies, cryptocurrency doesn’t have a centralized governing body. Banks control the conventional fiat currency, but there is no third party to manage cryptocurrency.
Also, the standard money is in the form of notes and actual tangible coins, but cryptocurrency is purely virtual.
What You Need to Invest in Crypto
Before you make any plans or take any steps to invest in cryptocurrency, you’ll first need to understand what you are getting into. It is the same way you would learn about the stock exchange, bonds, or shares before investing in them.
For cryptocurrency, you need to know about storage, the exchange means, and the type of cryptocurrency to invest in.
You may wonder why you need storage for something virtual. In this era of the internet, storing any information is vital, whether online or offline. You keep your cryptocurrency in a wallet.
A wallet can be in software form or hardware. Under software, you may decide to have a hosted wallet or a non-custodial wallet.
A hosted wallet also called a custodian wallet, is where you sign up on a platform that will store your cryptocurrency. Having a third party to store crypto for you doesn’t mean they have control over it.
A non-custodian wallet is where you only get access to the software, but you have your private keys with you. If you lose or forget your private keys, you lose access to your crypto.
For a hardware wallet, you have a physical gadget like a USB drive where you store your cryptocurrency. It is completely offline and more secure. However, you may not need a hardware wallet unless you want to buy a large amount of crypto.
Once you have a storage unit, you think of how to acquire the cryptocurrency for investment. A cryptocurrency exchange platform is where you go when you want to buy or sell crypto.
You can buy cryptocurrency from a trading platform. The business is between a buyer and a seller, but they interact with the platform. The seller bought his crypto and is selling it at a profit.
You may also buy crypto from a broker. These platforms have cryptocurrency in their possession and sell to interested buyers.
The last platform where you can buy cryptocurrency is a P2P platform. A buyer interacts directly with the seller.
You have the options to choose from and may consider factors like the number of cryptos offered by a platform, transaction fees charged, and even how you pay for the crypto.
Type of Cryptocurrency
Bitcoin is the most traded digital currency. However, there are thousands of other cryptocurrencies called altcoins in existence. Examples are Ethereum, Cardano, Binance Coin, Dogecoin, and USD Coin, to name a few.
The value of a cryptocurrency may be a factor to consider when deciding which one you want to invest in. You will note that most cryptocurrencies fluctuate in their values from time to time. So it would be best if you first did your research to know what you’ll settle on.
Pros and Cons of Crypto Investment
Cryptocurrency offers diversity because there are thousands of coins to choose from. The mind of an investor is always on diversification. Cryptocurrency, also decentralized, makes transactions faster and cheaper than traditional banking.
The main disadvantage is that cryptocurrency doesn’t have a central governing body. You don’t insure your funds. If the value of cryptocurrency keeps depreciating, there is nowhere to go for help in case of a loss. We advise you to invest the amount that you can afford to lose.
You need thorough knowledge before investing in cryptocurrency. You should understand the details before deciding. Also, you should weigh the advantages and disadvantages.
More importantly, cryptocurrency is still very volatile, so you need to invest what you can afford to lose.