Buy Cryptocurrency: How to get started with investing in cryptocurrency?
Unless you are from Iceage, you must have heard about cryptocurrency. More than that, you must have seen people investing in cryptocurrency ormining cryptocurrencyto earn few extra bucks. You too are attracted to this lightning and want to try your luck here. Sure, there is a risk but as Mark Zuckerberg says “Biggest risk is not taking a risk at all”
This guide is for those who want to take a risk and reap all the good the cryptoverse has. As part of this guide, you will learn the following:
- Brief on cryptocurrency and rise of cryptocurrency as an investment market
- How to buy cryptocurrency?
- Where to store your crypto assets?
- Understanding the market fluctuations(risks and
- Frequently asked questions
Let’s begin right away.
What is cryptocurrency & is it worth your money?
Ever since the internet era has happened, things around all of us have changed. So far we’ve been searching for information on the internet and now we have money on the internet. Cryptocurrency is the money of the internet and doesn’t even exist. It is a digital cash system with no owner and is super safe, fast and really cheap.
To break the ice, imagine cryptocurrency as a piece of code that has a monetary value. You buy that piece of code in exchange of fiat currency and use that piece of code to buy anything from anyone who accepts it.
Another way you can imagine cryptocurrency is to think of it like equities or stocks of a public company. However, unlike stocks, cryptocurrency can be used to buy products/services. This is the only difference between cryptocurrency and stocks. So cryptocurrency and stocks are one and the same.
However, cryptocurrency has more potential than just being a safer, faster and cheaper mode of investment with high return. Cryptocurrency is a decentralized peer to peer cash flow system that does not require any middlemen to function. The traditional banking system that exists right now is centralized and there are so many middlemen. Because of the middlemen, the fees charged to trust out money in their institutions is so damn high. Furthermore, the time taken to transfer funds across international borders take weeks.
Cryptocurrency eliminates these problems completely. Since the cryptocurrency flow on the internet, it is fast, it is safe and fees charged is negligible as there are no middlemen. All above this there is no administrator always governing the system. Furthermore, cryptocurrency runs on blockchain technology which is a public ledger distributed across the globe. Instead of having information on one single central server, the information on blockchain network is spread throughout the globe. A single node on the network in most case is as small as a personal computer and many such personal computers come together and power the whole network. We have a detailed guide on Cryptocurrency and Blockchain, we highly recommend you to go through it and come back here for better understanding.
Rise of cryptocurrency as an investment asset
Bitcoin was the first of its kind and of course, Satoshi Nakamoto, the anonymous developer of Bitcoin, did not invent the cryptocurrency to play the role of the costliest stock or equity in the world. But when it came to the public and when people started using it in the day to day lives, the price of single Bitcoin using skyrocketed. So high that by Dec’17 it almost touched $20k mark.
Why did this happen?
Just one word as the answer for this, awareness. As more and more people were aware bitcoin’s existence and started using it the price kept flying high and higher. The price of bitcoin was fluctuating similar to any stock in the stock market. It is a chain that affects the price of any cryptocurrency. People buy cryptocurrency then either spend it or retain it till the price rises and then sell it/ exchange to reap profit and the cycle continues. Unfortunately, in most cases people buy cryptocurrency only as an investment and a negligible percentage of people spend it on buying products/services.
Now that cryptocurrency is an investment asset and you realize why? Let us tell you how to invest in it.
How to buy Cryptocurrency?
Before we explain the whole process, let us introduce the key players in this chain.
Investors: You are the most important player in this chain, it’s because of you that this thing has value. You invest your time and money because of which the network stays busy and keeps growing.
Exchange platforms: The exchange platforms are the ones who facilitate the investment chain and make sure you get the best price. Now it depends on the platform to decide the exchange fees. This exchange fee is apart from the fees you pay for the transaction.
Cryptocurrency community: Though not directly but the cryptocurrency community do affect on the price of the cryptocurrency and the investment chain. As the community is the one who takes care of the cryptocurrency features and security.
Now that you know the key players, let us plot the whole chain and explain how exactly this works. This is important to understand why to invest and how to invest your hard earned money in cryptocurrency.
Buy cryptocurrency from the exchange for fiat currency
Depending on the cryptocurrency you want to buy, the place where you buy will vary. For the sake of this post, we will explain the process with Bitcoin as an example. Bitcoin being the prime cryptocurrency is accepted/traded by all exchanges across the globe. You pick any exchange in your country and you will be able to buy Bitcoin from there.
Narrowing down the scope of exchange platforms, let us considerCoinbaseas it’s the leading exchange platform in the U.S and is acclaimed in the rest of the world too. You need toregister on Coinbase and set up your profile first. As part of setting up your profile, you will need to add your bank details and all the necessary information. Once done, follow the following steps.
- Login to Coinbase dashboard
- Click on ‘Buy/Sell Bitcoin’ tab
- Select payment method from the drop-down menu
- Enter the right amount
- Click on ‘Buy Bitcoin Instantly’
- View credited Bitcoin in your dashboard.
Now Coinbase has only four cryptocurrencies listed but there are other exchanges that we will discuss in subsequent sections. But for now, we want you to know an catch here. The point is obviously related to the risk. Risk of losing money is one portion it and another is the attack on the exchange platform (yes it is a centralized system just the traditional financial institutions we hate these days)
Coinbase is indeed the best platform for buying Bitcoin, Bitcoin cash, Ethereum, Litecoin. But at the end of the day, it is a centralized server and is prone to attacks.Coinbase was attacked once and it was a public issue that it turned into.
So far it was about Coinbase only, there are a ton of exchanges and you can choose literally any exchange and start investing/trading. When you sign up for any exchange platform for the first time, make sure that you do the documentation right so that you don’t hang in the middle when you need to withdraw money after the trade. Initially, the verification might take days to get through as it’s done manually, but it’s just once. Once done it’s smooth as silk and you can withdraw money anytime.
That was on buying cryptocurrency from exchanges. But these are not physical currency coins, it is digital currency and can be stolen just like any data breach? That leads us to the next section of this guide.
Where can you store your cryptocurrencies?
Exchanges have built-in wallets where it stores the cryptocurrency you buy in your account. But Mt. Gox was and is still the biggest cyberattack in the history of cryptocurrency. If you are aware of the story, you won’t agree to store your digital assets in exchanges. Another reason why we personally do not recommend storing your money in exchanges is that the exchange you rely on may shut down anytime either due to attack or a fraud like freewallet is accused of.
If everything is hackable where can you store your digital assets?
Well, you can use paper wallet like myetherwallet.com or use hardware wallets like Trezoror Ledger Nano S. Once you purchase cryptocurrency, you can transfer them to these hardware wallets. The best part of the hardware wallet is that it is not at all hackable unless you yourself give up the security pins of the wallet. It is like storing the wallet in a physical wallet. So let us see the steps involved in transferring the coins to the hardware wallet. There are a lot of fake products ofLedger Nano SandTrezor, make you buy from the official website. Buy Ledger Nano S and Trezor from their official websites.
How to transfer cryptocurrency to hardware wallet from exchanges?
- Login to the exchange platform you want to transfer cryptocurrency from
- On your Coinbase dashboard, go to Accounts and then click on Send button under Bitcoin.
- You’ll see a pop up asking the address to send the Bitcoins to.
- Enter PIN and activate the Ledger Nano S
- Select Bitcoin on Ledger Nano S(you can make use of OLED screen on the wallet).
- OpenLedger Wallet Bitcoinextension from Chrome or Safari
- Plugin the hardware wallet to your computer and you’ll see the pop up on the extension.
- Select Bitcoin on the pop-up and the wallet will synchronize with the extension. Wait till your account balance syncs.
- Click on receive and you’ll see the pop up with receiving details.
- Copy the address on the pop-up and paste it in Coinbase send pop up.
- Specify the amount you want to transfer and click continue.
- Next, you’ll need to authenticate this transaction by the OTP sent by Coinbase
Once the transaction is through, all you need to do is verify the balance in the extension. Considering the hash rate, it should take at least an hour for the transaction to confirm.
That was on how to store the digital assets. Ledger Nano S is the best wallet in the best price segment. Considering the features it serves, it is worth every single penny. That being said, let us look at some FAQs
Frequently asked questions
#1 What is the difference between Bitcoin and stocks or equity?
Bitcoin is a digital money and just like stock or equity, it doesn’t exist. The major difference is you can only exchange stocks/equity for money but you can spend cryptocurrency to buy goods/services. Another difference between equity and cryptocurrency is that equity has to abide by the country-specific laws which make it a bit of a headache for beginners.
#2 How to ensure the future of a cryptocurrency?
We understand this fear and sense of insecurity. Sure, there is a big question mark on the existence of cryptocurrency as it has its own complications and limitations. But as of now, there is no way we can ensure its existence. It depends on people, how extensively they use the cryptocurrency that will make or break their future.
#3 Why shouldn’t you store cryptocurrencies in centralized 3rd party platforms?
First, a very few cryptocurrencies have their own wallet so inevitably it is the 3rd party platforms that we have to rely on. Second, there are hundreds of third-party platforms that are brilliant in keeping your digital assets safe. But at the end of the day, it is a centralized system. It has a single point of failure. Therefore, the best third party option today and for years to come is using hardware wallet. That is the safest way you can keep your digital assets safe and it’s like having them right in front of you.
We will keep updating this section as per more queries in future. Keep in touch to not miss the queries that will help you become good at investing.
Final thoughts on buying cryptocurrency
Cryptocurrency is easier than before, almost everyone on the internet knows about it and it is a massive market. The whole cryptocurrency market is very huge to be called a bubble, its billions of dollars that we are calling a bubble. However, it is always advisable to be safe than sorry. Many people have made fortune out of cryptocurrency and also many lost hundreds in this market.
It takes extensive research and courage to risk your money, but if the market goes well you’d get at least a 30% return on what you’ve invested. That is a lot of money to get by investing in something that doesn’t even exist. Another good thing that’s happening is we are slowly getting decentralized trading platform so that we get a similar experience, security, and anonymity like we have in cryptocurrency. A decentralized trading/exchange platform will ensure that your funds are safer than ever and no one can get hold of it. But that’s all in testing now, we have to wait to see it. One thing is for sure, it’s coming.
Over to you. Are you planning to invest in cryptocurrency or use these fancy terms to shop in stores or online? Let us know in the comment section below. Share this information with people who you think is looking for it. Show your appreciation by sharing, we take huge pride in seeing you share our work.
Originally published at http://bitfolio.org/buy-cryptocurrency.