Cryptocurrency continues to be a hot topic in the fintech world and it divides people into two categories – the ones who say that it’s just a trend and those who understand its potential. If you’re leaning toward the latter position, you can start investing in these digital assets now and open yourself to a new avenue of accumulating wealth.
The entire concept of cryptocurrency is overwhelming, even more so with the thought of buying and selling these electronic coins. However, you can combat the doubts with research so that you can understand the different aspects and processes involved in purchasing crypto.
Here are some expert tips on how to buy cryptocurrency:
Table of Contents
1. Know All Types Of Cryptocurrency
Bitcoin (BTC) is undoubtedly the top cryptocurrency today. This form of electronic cash was the first to be established and remains the most stable. It also has the highest value in the market nowadays.
Whether you’re planning to buy crypto instead of placing your savings in a bank or as an investment, it’s advisable to consider another cryptocurrency rather than BTC so that you can get more value for your fiat or real-world money. There are alternative coins, also known as altcoins, each with their own set of advantages.
One example is Monero (XMR), which offers more privacy. This altcoin’s blockchain doesn’t allow for the tracking of the coin’s history, which makes it ideal for users who don’t want others to know or see their purchases. Both past and future transactions are private in XMR ledgers. Learn how to buy Monero here.
These are the other altcoins that you can consider as investments aside from Bitcoin:
- Ethereum – Ethereum (ETH) is the second most popular cryptocurrency and the leading altcoin in today’s market. It was launched as a modified version of BTC creator Satoshi Nakamoto’s system. Its distinguishing feature is the smart contracts, which are programs that execute tasks or processes precisely according to the specifications of their creators.
- Ripple – The primary advantage that Ripple (XRP) provides is that the platform allows you to send and receive international payments with minimal transaction fees. With this, banks can settle cross-border payments instantaneously with end-to-end transparency. Another distinction that this digital asset has over other altcoins is that XRP tokens have been pre-mined with an already determined number of supplies.
- Litecoin – The Litecoin (LTC) system is also an open-source global payment network, which utilizes proof-of-work known as “scrypt”. It’s often compared to BTC, although its blockchain generates blocks quicker, which leads to instantaneous confirmation of transactions. There is also an ever-growing number of merchants that accept LTC as a payment method.
- Dash – Dash is a direct fork of BTC, which means that it stemmed from differences in the developers’ ideas on how to code and run the system. It’s still a decentralized autonomous platform, where decisions are made using masternodes, and allows untraceable transactions.
- Cardano – Cardano (ADA) is the next contender to Ethereum’s smart contract platform. It also takes advantage of a proof-of-stake system to lessen its power requirements and boost its scalability. Here’s a guide showing you how to buy Cardano.
2. Read The Whitepaper
As mentioned above, research is your best tool for succeeding in your cryptocurrency investment. While it may take a lot of willpower to sit down and read through a cryptocurrency’s whitepaper, which is a comprehensive report of the coin’s philosophy and processes, the knowledge is necessary for you to understand the complex concepts behind the crypto.
Knowing the operations and trends behind a cryptocurrency can help you make informed decisions for your investments and minimize the risks. It’s particularly valuable for these digital assets because it combines finance and technology, so you have to be careful about what and where you’re investing.
3. Determine Your Strategy
After doing your research on the different altcoins and choosing one or two that you want to invest in, you have to devise your strategy for investing in cryptocurrencies. You can opt to be an active or passive trader. It all depends on your goals and needs.
The four major trading strategies are:
- Day Trading – While cryptocurrency trading platforms operate 24/7, day trading entails riding the rapid fluctuations of altcoin prices. You have to study the digital asset’s history. Most day traders usually buy early and wait for the highest possible price later in the day.
- Swing Trading – Swing trading requires a bit more patience because you have to study the trends and determine the best time to sell, which doesn’t have to be on the same day.
- Scalping – This type requires the most attention because it entails watching for slight price movements and placing frequent trades within the day, often during the same hour. If you want small, continuous profits, this strategy may work best for you.
- Automated Trading – If your cryptocurrency investment is more of a passive income source for you, you can also take advantage of automated trading. Some platforms enable you to set a price when you want to buy or sell. Then, a trading robot will execute the task when the threshold is reached.
4. Diversify Your Portfolio
Similar to traditional investing, you have to be careful not to put all your eggs in one basket.
Invest in different digital assets as much as you can. For beginners, it’s reasonable to start with one cryptocurrency. However, don’t put all your money in that altcoin. Instead, set aside some amount or save for another crypto.
5. Invest In A Secure Wallet
Make sure that you have a secure and specialized cryptocurrency wallet as well. This type of hardware keeps your private and public keys.
It’s best to have an offline one to lessen the risk of cybercriminals getting their hands on your investments.
More and more people are looking at cryptocurrency for their investments. If you want to put money in these digital assets, you should do your research and know the different types of coins, read their corresponding whitepaper, and plan your investing strategy.
Remember to diversify your portfolio to minimize the risks in case that particular coin’s value plummets and doesn’t recover. You should also invest in a secure and specialized cryptocurrency wallet to store your digital assets.