I will be going through how to invest in cryptocurrencies in the most simple way possible and give the basics of what they are, how to safeguard your coins and other useful information. By the end of the article, you'll be able to buy any crypto and know how to safeguard it from hackers or if something bad goes wrong with a site.
What are cryptocurrencies
They are digital coins or digital assets and their main features are that they are decentralized, this means that the coins don't rely on essential authorities such as central banks. Since decentralized currency doesn't rely on a bank, it's free from monetary policies that might cause things like inflation, and it's also free from international border transaction fees. Now there are lots of digital coins out there and the most popular, in my view, are bitcoin and ethereum. One of the main underlying features of these coins is that they rely on blockchain technology. Now to put what blockchain is, it's simply it's a ledger moving digital numbers around from one account to the other and allows the network to validate all these transactions and maintain the integrity of these transactions without the reliance of essential authority like a central bank.
This entire process is a lot cheaper and more transparent, now that bitcoin is the most popular digital coin out there, however ethereum is a close second but I will only be writing about bitcoin. Some people buy bitcoin because they see it as a good store of value and want to keep their money elsewhere besides a bank and then other people are investing in bitcoin for the long term.
Why is Bitcoin a good investment
Lots of celebrities, famous people and companies have invested in bitcoin which has caused the value to fluctuate, for example elon musk and tesla invested 1.5 billion dollars of their own money into bitcoin and institutions such as paypal and square have allowed customers to pay bills and businesses in cryptocurrencies. Other companies such as jpmorgan are allowing their users to transfer money in and out of certain exchanges such as coinbase, it's becoming a pretty good store of value because since they're a finite number of bitcoin actually created, as long as there's demand for it which there seems to be demand for it because of widespread adoption then the prices of bitcoin will remain relatively stable and also probably go up over time.
Getting started
First, you will need to sign up for an exchange as they will allow you to buy, sell and hold your cryptocurrency. The most popular right now are coinbase and binance, although some of the apps these days are also selling cryptocurrencies like the cash app. Coinbase is one of the most reputable exchanges out there, as it's raised over 500 million dollars in capital from vc funding, as well as having over 35 million users, it's just become one of the more standard apps or standard places or exchanges to actually buy cryptocurrency.
You can access coinbase on the web or on the app and it's where most people buy their bitcoin. After you sign up for an account with coinbase, you're gonna have to provide some personal information and also take a screenshot or basically a picture of your identification and submit it to them just like as if you were opening a brokerage account but once you're signed up you'll get to a main screen or a dashboard. You can start to buy bitcoin in a number of different methods, such as using your debit card, your bank account or by converting different currencies.
When you do buy bitcoin, coinbase has a fee which some people say it is large and I have to agree with them, but you are using their service and it is a business with a high reputation and good customer service. You will receive confirmation of your submitted order and they will send an email when you are able to use your coins. It will go into your wallet, that coinbase have provided, which is good but if you really want to safeguard your cryptocurrencies, then you will want a hardware wallet.
Physical Wallet ,Offline, Cold Storage
Coinbase stores 98% of their customer funds offline, which means if they ever get hacked, your bitcoin and other currencies will be safe. However, if you wanted more layers of security, you can transfer it to a physical hard wallet, for example a Ledger Nano s or a Trezor. This ensures that only you have control over your coins just incase the exchange or website you store your coins on gets hacked or compromised, as if this happens then you will lose your cryptocurrencies and not able to get them back.
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| Can also buy from Stores, "Ledger Wallet" |
Bitcoin and others are decentralized, so this means that you can't rely on banks to give you any insurance or protection on them. You will need to have a wallet outside of your exchange, if you want to transfer it and be completely 100% safe, as hackers will not have access to your wallet as it is physical. I recommend to get a ledger nano s, ledger nano x or both as one can be used for a back up. Look for different locations to store money in different assets other than just cash because with the pandemic and inflation, it is time to diversify and find ways to increase the economy.
Conclusion
Do your own research when buying cryptocurrencies because there are lots of coins and don't risk any money that you're not afraid to lose. I recommend to have around 3% to 5% of your portfolio allocated to cryptocurrencies, but if you like to risk it and believe in bitcoin then you can go higher to maybe 10%.
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