An advice how to start a cryptocurrency adventure. Some tips to get you started
One can make quite a good money on cryptocurrencies, which more than one investor has learned about. The users of Bitcoin and of other famous cryptocurrencies include quite a huge group of people for whom digital currencies are above all a source of profit and not a payment method. Taking their volatile exchange rate into account, profitable investments should not surprise anyone. Maybe you would too like to make money on cryptocurrencies?
Get prepared before you start investing
The Internet offers plenty of opportunities for making money in an easy and effortless way. A relatively small number of people uses them, though. Vast majority of Internet users don’t realize that with a little bit of motivation one can make more or less Regular profits from different enterprises. One fairly lucrative activity is buying and selling cryptocurrencies.
We have already explained in our previous articles why the price of Bitcoin and of other digital currencies changes so often. Sudden changes of the exchange rate on one hand put investors at the Risk of losses, but on the other they help get suddenly rich. That’s why the topic of cryptocurrencies keeps coming back in the media like a boomerang. A growing number of Internet users is choosing long-term investments that – as it turns out – bring profits. Cryptocurrency exchanges are pretty much crowded with people seeking easy money. What is particularly important, however, investing on an exchange requires a decent substantive preparation. Without getting an initial orientation in the area of exchange operations, it is not possible to efficiently manage over one’s financial resources. Cryptocurrencies how to start investing? A complete newbie could therefore use a good guide or at least a website like ours.
Bitcoin: how to start? A guide
Before you begin on your journey with cryptocurrencies, it would be good for you to first learn how they differ from traditional money and what they were created for. They are also referred to as Virtual or digital coins, although they are actually closed systems that store information on how much someone owns in agreed upon units. The basis of such systems’ operation are the so-called blockchains, which are collections of transactions registered by the system. Each transaction executed using a particular digital currency is recorded on the chain and the system uses it to calculate how much money individual users have.
Cryptocurrencies such as Bitcoin or Ethereum have an entirely virtual nature – you can’t withdraw them at an ATM, you won’t put them in your wallet. Whereas selected shopping and service facilities do have special “ATMs” for Bitcoin users, they only allow to exchange BTC for traditional currencies, such as USD or Euro (or the other way round).
Which begs the question: How and where to buy cryptocurrencies? And where to store them after, if virtual money has no physical form?
There are different places where it is possible to purchase bitcoin and other cryptocurrencies. For those who are just starting on their journey with digital money, a perfect solution will be exchange agents – both brick&mortar and online ones. The alternative are exchanges, but these are more like an option for investors. Either way, one should not store their funds in an exchange account. A much more secure safekeeping are Electronic wallets, about which we will write a little bit more further down in the article.
Currently the most famous cryptocurrency on the market is the Bitcoin created in 2009. The second place on the podium – if statistical data is to be believed – belongs to the Ethereum cryptocurrency. There are also many other famous cryptocurrencies, such as Binance Coin, Stellar, IOTA, Bitcoin Cash, Litecoin or NEO. Each of them, however, has a way lower number of users than the pioneering Bitcoin, which can be used to pay at many shopping and service facilities around the world.
Bitcoin and cryptocurrencies: how do they differ from traditional money?
A traditional currency is controlled by state and banking institutions, which maintain stability of the monetary system. A cryptocurrency isn’t subject to control from any external institution – that doesn’t mean, though, that it has no protective measures to protect Internet users from robberies or potential system malfunctions.
The first part of the word cryptocurrency indicates the connection of virtual money with cryptography – a field of study related to information encryption. Cryptocurrency systems such as Bitcoin come with technologically advanced security measures that allow the whole thing to work as intended and make the transactions between users completely secure. It is based on clear and transparent rules: every transaction gets recorded in the chain of blocks, it cannot be erased or overwritten. Thanks to the blockchain technology, every user can check the public ledger that contains information on the conducted transaction at any time.
Unlike traditional currencies, a cryptocurrency has a limited supply. For instance, the Bitcoin system has a limit of 21 million BTC. After crossing that threshold, it won’t be possible to mine any more coins out of the system’s resources. Another characteristic that makes virtual currencies different from traditional ones is anonymity – Internet users can pay for products and services the incognito way. Within a traditional financial system, bank transfers are made from a specific account that has a first and last name assigned to it. Payments using BTC or other cryptocurrencies don’t entail this inconvenience. When using a cryptocurrency account (or more like a wallet), we’re not at the Risk of being exposed. We can make payments anonymously, without worrying that anyone will identify us.
The exchange rate of a traditional currency depends to a large degree on macroeconomic factors such as the economic situation in the country and worldwide, different kinds of legal regulations etc. The price of a cryptocurrency is formed to a certain degree independently from conditions of this type. That’s why it is prone to much more frequent and sudden fluctuations. That’s the reason behind such huge interest in cryptocurrencies among investors who, in hopes of a Profitable sale in the future, decide to buy large sums.
Cryptocurrencies also differ from traditional currencies in the speed of international transactions. A bank transfer may take a few days before it comes through. Payments made with cryptocurrencies, on the other hand, take place in an instant, regardless of the country the end recipient is from. All we have to do is know the public key of their wallet in order to Quickly and efficiently wire money.
Cryptocurrencies: how to start investing?
There are many different ways to invest in cryptocurrencies. The easiest way is to buy bitcoins low and sell high. Obviously it requires freezing the money for some time, although the frequent and sudden changes to the exchange rate are in favor of this kind of investments. You can keep your money in an electronic wallet for a longer time, hoping for a bigger profit once The price will rise. This is where exchanges come to help, where investors make more or less profitable transactions with each other. You may also start your journey with investments from the so called mining, or “digging”, which is a way to mine new “coins” out of the system’s resources. However, you are going to need fast and expensive computers, the “cryptocurrency miners”, which will keep the system alive and allow Internet users to make payments.
Plenty of beginning traders commit a cardinal mistake by drowning a whole lot of money in uncertain, dubious enterprises. Meanwhile, all of the investments on the cryptocurrency market come with a Risk. They may bring profits, but also losses. That’s why one shouldn’t invest the amounts that in the event of a failure could diminish the capital significantly. The cryptocurrency market is very volatile – it’s something to keep in mind. It’s not enough to learn how the blockchain technology or Coinbase type platforms work to know how to invest. If you want to invest responsibly, you should get your information firsthand – preferably from experienced investors on web forums or from specialized portals like ours. Of course even in-depth knowledge on cryptocurrencies won’t protect you from the Risk, but it will definitely minimize it significantly.
An unquestionable convenience is the fact that cryptocurrencies can be divided down to eight decimal places. Which means you don’t have to buy a whole bitcoin right away (or any other digital currency). You can easily purchase a smaller part of a particular unit.
Cryptocurrencies: how to start on an exchange?
The first step on the path to success is opening an account on a cryptocurrency exchange. Exchanges of this type are divided into the ones where only traditional money is exchanged and the ones where all financial operations are conducted using cryptocurrencies only. One of the most famous and at the same time the simplest exchanges is Coinbase – a perfect website for Beginning investors. Of course there are many other exchanges on the Internet, but this one has many unique advantages: you can pay with credit and debit cards there, buying cryptocurrencies is very easy, and the users can expect attractive bonuses when buying the Bitcoin cryptocurrency or other digital currencies. Registering on the website doesn’t cause any problems, either.
How to register an account on Coinbase? A step-by-step guide
On the Coinbase exchange you can buy such cryptocurrencies as Bitcoin, Ethereum, Stellar or IOTA. In order to start investing, first you need to open an Account on the website. It’s incredibly easy: all you have to do is visit the coinbase.com website and fill out a form where, on top of first and last name, you need to provide your e-mail address and password. The website’s users don’t use nicknames. It is very important to provide your real personal data as stated in the identity document. Using an alias might delay Identity verification. The e-mail address should also be entered properly, as important notifications will be sent there, and right after registering – an activating link.
After clicking the link, a new window will open in the browser where you need to enter your login and password. After logging in on the website you get access to all the functionalities. The Identity verification can be temporarily skipped, but it allows you to buy cryptocurrencies inaccessible to unverified users. On top of that, your account will be more secure. Identity verification is mandatory on nearly all cryptocurrency exchanges.
Cryptocurrency exchange agent – an alternative to exchanges
An exchange isn’t the only place where you can buy cryptocurrencies. One alternative are cryptocurrency exchange agents – brick&mortar or online (only operating on the Internet). You will find a whole lot of exchange agents online. Before you use any offer, however, first compare it with the offers of other exchanges. The cryptocurrency exchange rates might differ between individual exchange agents, as they are set by their owners. For example, with one exchange agent the price for the bitcoin currency will be USD 36,181, while with another – USD 35,989. The differences might be significant, which makes it a good idea to first check at least a few offers. It is the best to use Trustworthy rankings where the exchange rates are listed in a bar.
Exchange agents charge their clients commissions that revolve around 5%. On top of that, the price is often inflated. Digital assets can be bought cheaper on an exchange, but before you open an account on such website as Coinbase for example, first learn how an exchange works. For those completely unfamiliar with the topic of cryptocurrencies, a better option will be an exchange agent, despite the unquestionable downsides.
Bitcoin: how to start? And where to store cryptocurrencies?
Traditional money can be stored in a bank account, a wallet or any other place suitable for that. Cryptocurrencies are of a one hundred percent virtual nature, which means you can’t hide them in a sock or under a mattress. Which doesn’t mean that they are just suspended in vacuum. If you want to start investing in cryptocurrencies, you are going to need a so-called cryptocurrency wallet. It’s your private cache for digital assets.
There are different kinds of wallets. The most general division is between cold and Hot wallets. The former work in an offline mode, which means they provide higher level of security. The latter are constantly connected online, which creates a Risk of the funds or private keys being stolen.
The easier to use option is without a doubt a Hot wallet: it allows to Quickly and efficiently conduct transactions, is easy to configure, the assets are available from every device connected to the Internet. A cold wallet takes a little more effort to configure and causes additional difficulties in conducting transactions with other users of a particular cryptocurrency. It is one hundred times safer, though – it is harder to obtain private keys stored on a physical medium.
A more detailed division includes Hardware wallets, desktop wallets and ones that operate in a web browser. It is worth its price, as it is definitely the most secure way to store cryptocurrencies. In appearance, such wallet looks like a pendrive, although it works differently. A desktop wallet is simply a software installed on the computer that the user can use to connect directly to the cryptocurrency system. The least secure and often chosen by Internet users option is a browser wallet, available on every device with network connection. In order to open a wallet of this type, all you have to do is register on a special website. Such wallet is better not to be used to store large amounts, as it might make an easy loot for cyber criminals.
Cryptocurrencies: how to start making money?
You want to conquer the market? You should know what criteria to follow when evaluating individual projects. It’s a bad idea to do it blindly. Rushed decisions are never good. Don’t just follow opinions of your friends or reports in the media. Some of the traders fall victim to the FOMO syndrome (fear of not buying in case of an upward trend or of losing in case of a sudden price drop). It is not a reasonable Investment strategy – neither on the cryptocurrency market nor on traditional exchanges.
Before you purchase a cryptocurrency for investment purposes, ask yourself the question of whether the money you wish to invest has a chance of making it on the market. Does it really solve some problem that applies to other cryptocurrencies? Or is it only an imitation of them? It’s a good idea to focus on what will make people want to use a particular cryptocurrency. For example, the Ethereum currency was made to provide Internet users with ability to sign a so-called smart contract, which wasn’t provided by other platforms, including Bitcoin. This exact advantage led to the success of Ethereum on the cryptocurrency market. Other famous cryptocurrency, Lightning Network (LN), makes very fast transfers between accounts possible.
It’s also a good idea to check out if the authors of a particular project already have some achievements to their name, where they have worked before and whether they can boast rich experience. After all, the development of a cryptocurrency system is mainly owed to the Developers and programmers. If the creators of the Bitcoin cryptocurrency hadn’t constantly upgraded their work, maybe the market would have gotten dominated by some other cryptocurrency, like Ethereum for example. A good team makes the foundation of a project’s success.
Now you know how to start making money on cryptocurrencies, so it’s time to turn plans into actions! In case of any doubts, you can always read our guide again. We also encourage you to check out other articles on the website – the topic of cryptocurrencies is extensive enough to require beginners to absorb quite a lot of information.