Cryptocurrency is the currency of future trading. Once upon a time, people used paper money for transactions. Presently, However, the advent of electronic currency has made the transaction process much more efficient. Now, Cryptocurrency is making waves in the financial world. What exactly are cryptocurrencies? How do you invest in them? Read on to find out!
Here’s your beginner’s guide to cryptocurrency: what it is and how it works. Basically, cryptocurrencies are coins that can be sent electronically from peer to peer without using an intermediary like a bank or credit card company! However, unlike traditional currency which is controlled by federal governments via centralized banks, cryptocurrencies are decentralized, they are their own currency with their own value. Each individual coin represents the value and ownership of that value.
Cryptocurrency is not completely without risk, while investors have made huge gains in the crypto world, it can also be a place where people lose all their money if they don’t know what they’re doing. But fear not: you can invest in cryptocurrency and be incredibly successful and wealthy by following these simple rules!
Ten Things You Need to Know Before Trading Cryptocurrency
Before we start this article I just want to get one thing out of the way, this isn’t meant to be investment advice. I’m simply sharing my experience with trading altcoins because cryptocurrency trading has become a hobby for me over the past year and a half. If you’re looking for investment advice I suggest you head on over to your local library or do some research online.
Cryptocurrency is the Currency of Future Trading
Simply put, it’s the act of exchanging one crypto coin for another, usually, that means exchanging fiat currency (dollars, pounds, etc.) into cryptocurrency then back into fiat currency at some point after that. Cryptocurrency trading can be extremely profitable but there are plenty of pitfalls along the way, too. There are two major ways to go about trading—you can buy coins on an online exchange that offers services in the United States and Canada or you can swap with someone via peer-to-peer exchanges.
- You’ll need to have some money that’s yours to invest in cryptocurrency. No credit cards, pre-paid cards, or “buying on margin” allowed. Treat it as a business where you’re investing your own money and not something you can just blow on a whim. If you want to use a credit card or some other source of funds, go buy yourself an item at the store first and then come back to this article when you’re done spending all of your money on whatever it is!
- Set up a wallet for whatever coins you’re going to be trading with. I recommend either getting one from Blockchain or you can buy XRP in USA. For those new to crypto, these are online wallets that allow users their coins from their computers, smartphones, etc. without storing them on an exchange.
- Know how to buy coins. If you’re using an online exchange or another fiat-accepting exchange, this will be easy for you because they make the process very simple. If you are swapping peer-to-peer this can be a bit more challenging depending on which site you’re using.
- Once your coins are in your wallet, go ahead and move them off whatever service you used to keep them there onto the website where you want to trade with them. You don’t have to always have your coins in an online wallet but it’s highly recommended so that if anything happens to the place where your coins are kept (blockchain dies, say) at least you’ll still have access to them instead of finding out the hard way.
- Never keep your coins on an exchange longer than you need to. I can’t stress that enough, keep your coins in an online wallet or swap peer-to-peer after every trade until they’re in your own wallet, safely put away where only you can access them. There are reports all the time about exchanges being hacked and people losing their money. If you don’t want to risk it with an exchange, there’s plenty of ways to buy and sell without one—you just have to be more aware of the security risks involved.
- Be careful who you deal with on peer-to-peer exchanges. Just because someone is offering a good rate doesn’t mean they aren’t trying to scam you. Scammers will try to send fake coins or pretend the money order didn’t go through—be wary of anyone who has a bad reputation on these sites and be sure to check what other people are saying about them.
- Don’t invest more than you can afford to lose. And whatever you do, don’t invest without knowing how the system works first. If it’s brand new and no one knows for sure how it’ll work in the long run, chances are good that those “investing” blindly might just get burned. you’ll likely end up losing all your money with no one to blame but yourself.
- Don’t go too heavy on trading. Cryptocurrency is highly volatile so if you can help it try not to trade more than 30% of your holdings per time unless you’ve done extensive research into whether or not this is a good idea. I average about 20% gains per trade but even then only do three per day max, anyone who tells you different is trying to sell you something. The best way to build wealth in crypto is through buying and holding, just like every other type of investment out there–-more than 90% of trading volume comes from trading, not investing. If you want to make money with crypto stick with the basics.
- When trading peer-to-peer use an escrow system for your protection. You can either pay a small fee for using one of these services or do it yourself by giving the other person part of your holdings upfront and then releasing the rest once they confirm that you’ve received what you’re owed. This is important–don’t leave anything up to trust! There are great services out there where experienced users will act as middlemen so you don’t have to worry about being scammed but if you choose to do it on your own just keep in mind that “If something goes wrong I’m screwed” isn’t exactly reassuring.
- Don’t sell your coins just because the price is down. This could be considered “panic selling” and it’s one of the biggest mistakes that people make when trading cryptocurrency (or any type of investment, actually). If you bought something at $5 and now it’s at $2 but you still believe in its long-term potential then there’s no reason to panic sell, just hold on to it until you can get back what you paid or better. There will always be dips like this throughout the course of a coin’s life but if you don’t panic then they won’t hurt nearly as bad. Stay strong out there!
In this article, we have given you some guidelines to follow when it comes to investing in cryptocurrency. If none of them seem particularly interesting or different from what you’ve been doing already then good for you, at least you haven’t made any potentially costly mistakes so far. Learn all kinds of different strategies and techniques that people use with these new types of currencies, if they’re smart moves or just scams, well, that’s what we’ll be here for. Happy trading!