In recent years, cryptocurrency as an asset has risen to popularity. Bitcoin (BTC) is the most renowned because it’s the pioneer of the industry. Lots of other alternatives have since popped up, including Ethereum, Ripple, Dash, and Litecoin, among others.
There are still lots of naysayers against the profitability of investing in cryptocurrency. However, the processes involved in the creation and trading of these digital coins are slowly being refined and established.
If you want to try your hand at buying cryptocurrency, here are some simple things you should remember:
1. Study The Market Exhaustively
As with everything else, you have to gain an understanding of the market that you’ll be joining if you want to purchase cryptocurrency for trading. While it’s impossible to become an expert within just a short period, you should have an idea of the basic concepts and processes involved in cryptocurrency.
First, you have to know that this digital asset is created through blockchain technology. A coin is produced every time a computer accomplishes a task in the network. The record of that completion is saved into coded blocks that link together to form a ledger, called the blockchain, which is an ever-growing list of mining transactions.
Because a central authority doesn’t manage cryptocurrency, the records can be viewed by all users. It’s also immutable, which means that the files on the blocks can’t be altered.
Basically, crypto coins are distributed by miners who add transactions to the blockchain. If you want to buy cryptocurrency but don’t want to mine, you can purchase the assets from these miners, which can be individuals or entities that run exchanges.
These are some of the popular cryptocurrencies that you can buy:
- Bitcoin – As mentioned above, Bitcoin is the most renowned cryptocurrency. It was the first established digital asset, from creation to distribution. It’s estimated that there are approximately 17 million of this type of coin in circulation.
- Ethereum – Ethereum stemmed out of Bitcoin’s lack of a scripting language. Unlike BTC, which ends the production after 21 million tokens have been created, Ethereum doesn’t have a limit.
- Litecoin – This digital asset was also developed as an improvement on Bitcoin’s processes. It boasts of shorter transaction turnaround times, minimal fees, and more concentrated miners.
- Ripple – Ripple is different from other cryptocurrencies because it doesn’t operate on blockchain technology. The company focuses on helping users move considerable amounts of money, and allows the transfer of various currencies. Make sure that you search for lowest exchange fees and get the best deals for your investments.
- Bitcoin Cash – It’s an alternative to Bitcoin, which was launched in 2017. The primary difference between Bitcoin Cash and BTC is that the former has a larger block size, which results in faster processing speeds for users.
2. Have A Definite Plan
If you’re planning on trading cryptocurrency, you should know the steps that you’re going to take to ensure the profitability of your investments. Determine the trading strategy that you’ll employ and find the tactic that suits your preferences as well as financial goals.
These are a few of the different cryptocurrency trading strategies:
- Scalping – This plan involves making quick, successive trades in the hopes of accumulating regular profits, even if they’re minimal. Scalping is ideal for those who want to become full-time traders because it requires a lot of time and concentration.
- Day Trading – Day trading is the less aggressive counterpart of scalping. Instead of making trades within a span of a few minutes, you just have to watch out for the fluctuations of the cryptocurrency’s value within 24 hours and deal at the optimal time. Remember that cryptocurrency is Internet-based, so there isn’t really an end to a trading day, unlike with the traditional stock market.
- Swing Trading – With this, you calculate the highest and lowest possible points for the cryptocurrency’s value. Then, you ride the wave and make trades during the times that you feel is best according to your calculations.
3. Determine The Risks You’re Willing To Take
A lot of people are daunted by the thought of investing in cryptocurrency because of its volatility. However, the value of Bitcoin and altcoins have relatively been more stable nowadays.
Some investors also enjoy riding on the digital asset’s volatile nature, and they have earned a profit from this venture. The most crucial thing you should do is to determine the risks you’re willing to take.
This includes putting in money that you’re prepared to lose. The process also entails understanding the level of liquidity you get from a particular cryptocurrency exchange.
Most altcoin exchanges do not have fiat gateways, which means that you cannot easily use real-life currency to purchase this digital asset. Conversely, you can’t convert the value of cryptocurrency and withdraw the equivalent amount when you need it.
4. Know How To Secure Your Cryptocurrency
Because cryptocurrency is a digital asset, you need to look for security measures to ensure that it’s safe from cyber-theft. First, you have to verify that the platform you’re using to buy and trade Bitcoin or other altcoins has put up defenses to guard users’ accounts and funds against hacking.
Next, you may want to consider storing your cryptocurrency offline. You can invest in a tool that’s specially created for this function and keep most of your assets in that device. For your trading needs, you can deposit a particular amount and use those funds accordingly.
5. Stay Updated On Crypto News
Cryptocurrency investors have to keep up with the latest news in the industry to make sound financial decisions. Similar to traditional stocks, people’s perception of this digital asset has a significant influence on the market, so you should monitor your investments’ performance.
Acquiring cryptocurrency has become more accessible because you can now buy them instead of mining the digital asset. Before you invest in the market, though, you have to study the industry exhaustively and create a strategy to ensure the profitability of your venture.
Afterward, determine the risks that you can afford to take. You should also learn how to secure your cryptocurrency, as well as stay updated on industry news to make sound financial decisions.