A Beginner’s Guide To Investing In Cryptocurrency In 2022
In a world where the word “cryptocurrency” is on everyone’s lips, you might be wondering what it means, or how it works as an investment.
Over the past 10 years, cryptocurrencies have grown in popularity and value, making them a center of attention to enthusiasts and investors. To give you more insight on this topic, we’ve compiled some information that will guide you on how cryptocurrency works and how to start investing.
If you are interested in learning about the crypto market, the Dohrnii Academy can help you gain knowledge that will give you an edge.
What Is Cryptocurrency?
Cryptocurrency is a digital currency that operates differently from the traditional currencies we use every day. It’s decentralized which means the process of carrying out transactions is not managed by one organization. Examples of cryptocurrencies include; Bitcoin, Ethereum, Litecoin, etc.
No central authority retains the exclusive right to control these digital assets; instead, individuals control their assets with anonymity.
How Does Cryptocurrency Work?
You might be wondering how the value of a cryptocurrency unit is determined. Just like stocks and real estate, cryptocurrency values are also tied to the marketplace, but not exactly the same way.
To understand it, you need to know the basic principle of demand and supply — when demand is greater than supply, there will be scarcity. You can guess what happens when there’s little availability of what many people need. Yeah, the value increases!
Some of the factors that influence the value of cryptocurrencies are:
- Wider adoption — If there is an increase in the demand of a cryptocurrency, and supply is limited, this will lead to scarcity, thereby increasing the value of the cryptocurrency.
- Low demand — if the demand for a cryptocurrency drops and the supply remains constant, more units of the cryptocurrency will be in circulation.
The concept is quite interesting because you’re probably new to the whole idea. However, it can be a great opportunity to invest and gain ROI if you’re willing to learn and master how it works.
Volatile assets are assets that experience price changes quickly within a short timeframe, and that’s why investing in crypto can yield high returns if you can study the market and take advantage of quick fluctuations. But volatility can also mean losing money very quickly. This is why it’s important to have the right knowledge.
What Do You Need To Invest In Cryptocurrency Using a Centralised Exchange?
Here are the keen requirements you need, to start your crypto journey:
- Personal identification documents
- Bank card, Bank account or peer-to-peer (p2p).
- Secure internet connection
Now that you have what you need, let’s get started.
How To Invest In Cryptocurrency using a centralised exchange
1. Choose A Cryptocurrency Exchange
It is important that you pick an exchange to buy crypto from. After making your choice, you need to create an account with them.
Here is a list of popular crypto exchanges you can create an account with:
2. Buy Cryptocurrency on a centralised exchange
Centralised exchange platforms give you access to buy different cryptos like Bitcoin and Ethereum with your bank card and bank transfers. You can buy a fraction of a coin, which is great for first-time investors.
3. Store Your Cryptocurrency in a “Wallet”
After buying a unit of crypto, it will be added to your virtual “wallet.” This wallet will contain all the necessary information about your cryptocurrency.
There are two (2) types of crypto wallets:
- Centralised wallets: These are wallets held with a centralised exchange. The user does not hold his private keys, which is often debated in the crypto space.
- Decentralised wallets: There are several types of decentralised wallets. A decentralised wallet gives the user full control over his private keys. The downside here is that if the user loses his private key, no one can help them retrieve their digital assets.
How to Invest in the Right Coins and Companies
Now that you’re familiar with the basics, you need to decide on the coins you want to invest in, and the centralised exchange you want to use for these investments.
As a beginner, you should choose a reputable project with a solid whitepaper. You should also invest in tokens with strong fundamentals, like Bitcoin and Ethereum. This will reduce your risk exposure.
Binance is a perfect example of a company you can start with. This is not to tell you what to use or invest in, but to show you a good starting point.
Here are a few tips to guide you while you invest.
- You should be able to hold your token for the long term. This is a fundamental rule in the crypto world, they call this HODL.
- Consider investing in BTC and ETH before other cryptocurrencies. Though the latter could offer a quick reward, it is more complex and risky.
- Investing in ICOs (initial coin offerings) and low-cost altcoins is profitable. However, they can also be very risky. Try alternative investments with extreme care. A lot of things can go wrong with risky investments. As a beginner, it is better to stick with the top-performing coins and companies.
- Learn how to research and study cryptocurrencies before deciding to invest. Find out the people that back the cryptocurrency you are interested in.
- Also, make sure they have a website and social media pages with a good following. This will give you an insight into whether the project has a strong community or not.
- You must take extra steps to protect yourself and your capital. Don’t invest more than you can afford to lose!
Summary
Cryptocurrency is a high-risk and volatile market. As a newbie looking to invest in crypto, it is pertinent to study the market trends and the coins to invest in, as it is the only way to ensure a safe and profitable long-term investment.
