If you’re new to the world of cryptocurrencies, finding out how to invest in the crypto market might be confusing at first.
Introduction
Please keep in mind that the cryptocurrency market is very unstable, and if you’re not careful, your investments could go badly.
Remember that buying cryptocurrency is just a guess, and your money is at risk. You could lose all of your money or just a portion of it.
Let’s solve some of the queries that have been asked by investors who are new to this crypto market:
What is cryptocurrency?
Cryptocurrency is a type of digital or virtual money that is protected by cryptography and is almost immune to fraud or duplicate spending. It is decentralized and operates independently of a central authority, distinguishing it from traditional currencies managed by governments or financial institutions.
Blockchain technology allows direct transactions between buyers, eliminating the need for middlemen. This distributed ledger tracks activity across several computers, providing transparency and protection.
There are several types of cryptocurrencies, each with its own set of characteristics and goals. Bitcoin, the pioneer, is well-known as a digital alternative to existing currencies and a value store. Ethereum, a popular cryptocurrency, allows for smart contracts and decentralized programs (dApps) using its native currency, Ether.
Altcoins, or alternative cryptocurrencies to Bitcoin, have several possibilities. They include Litecoin, known for its faster transaction speeds, and Ripple, which claims to simplify international transfers. Others, like as Cardano and Polkadot, attempt to build more scalable and collaborative blockchains.
Types of cryptocurrencies
While there are many different cryptocurrencies—more than 2.4 million as of May 2024, according to CoinMarketCap – Bitcoin was one of the first cryptocurrencies invented and is still the most well-known. The term “altcoin,” or alternative to bitcoin, refers to all other coin-based coinage taken together.
Top 10 Cryptocurrencies by USD Market Cap
As of May 2024:
- Bitcoin (BTC): The original and most valuable cryptocurrency, known for its decentralized nature and limited supply.
- Ethereum (ETH): A leading blockchain platform featuring smart contracts and decentralized applications (DApps).
- Tether (USDT): A stablecoin pegged to the US dollar, used to provide liquidity and reduce volatility in the crypto market.
- BNB (Binance Coin): The native cryptocurrency of the Binance exchange, used to pay for trading fees and participate in various platform activities.
- Solana (SOL): A high-performance blockchain supporting fast, low-cost transactions and scalable decentralized applications.
- USDC (US Dollar Coin): A stablecoin backed by US dollars, providing stability and ease of transfer in the crypto ecosystem.
- XRP (Ripple): A digital currency designed for fast and cost-effective international payments and remittances.
- Dogecoin (DOGE): A meme-inspired cryptocurrency with a strong community, initially created as a joke but now widely used for tipping and charitable donations.
- Toncoin (TON): The native token of the TON (Telegram Open Network) blockchain, aimed at enhancing digital communication and transactions.
- Cardano (ADA): A blockchain platform focused on security, sustainability, and supporting the development of decentralized applications.
How much should you invest in cryptocurrency?
Some experts recommend that you invest between 1% and 5% of your net worth. The key to deciding how much of your portfolio to invest in Bitcoin is to keep your overall exposure to the currency low. Always invest only money you can afford to lose. Though a small amount of cryptocurrency exposure might improve the risk-adjusted return profile of a diversified portfolio, your risk tolerance and entire investment portfolio should dictate how much bitcoin you should invest in.
How to invest in the crypto market in 2024
Are you interested in investing in cryptocurrencies? Understanding where and how to receive and preserve it is crucial. Setting up an account is simple and uncomplicated, as there are multiple exchanges accessible, comparable to traditional investing platforms. However, before investing in any currency, it is necessary to undertake extensive research. For beginners wondering how to get started, follow these five steps:
- Choose what coin to make investments in.
- Select a trusted coin exchange platform.
- Explore saving and digital wallet choices.
- Calculate the amount of money you want to invest.
- Stay updated and handle your finances wisely.
Step 1: Choose what coin to make investments in.
You should be aware of and fully evaluate the many, unique features of every coin you are thinking about investing in, just as you would before purchasing the shares of a company. You could decide to put money into a single cryptocurrency or many.
Because cryptocurrencies have grown to be a common tool for fraud, like pump-and-dump scams, vetting them can be difficult. Those dangers might have you asking how to buy Bitcoin without becoming a victim of a scam.
Avoid smaller, younger cryptocurrencies that are being strongly pushed on social media to prevent pump-and-dump scams. Analyzing the financial risk of a certain coin is important, and social media gurus might not be thinking about your best interests.
You might be able to lower your risk of scams and hacking by investing through a big, reliable platform, but as the entire sector is uncontrolled, this risk cannot be completely removed. For instance, in 2022 we found that rogue players were running FTX, a once-reputable platform, and had taken money from users.
Its founder, Sam Bankman-Fried, was found guilty of theft and money laundering on November 2, 2023. And the court gave Bankman-Fried a 25-year jail term on March 28, 2024.
Step 2: Select a trusted coin exchange platform.
Cryptocurrency must be acquired through an exchange or investment site like Coinbase, Gemini, or Kraken. Some aspects to consider while choosing an exchange include security, fees, trading volume, minimum investment requirements, and the varieties of cryptocurrencies accessible for purchase on a given exchange.
Step 3: Explore saving and digital wallet choices.
Since cryptocurrency is entirely digital, storage of your money requires a digital place. To keep them on the same platform where you invest is one option. Many new Bitcoin investors nowadays choose this approach. Just be sure the platform you select will be responsible for the custody and security of your funds. These platforms are regulated, provide strong protection against online threats and hackers, and provide financial insurance.
You will need a crypto wallet if you decide not to store your cryptocurrency on the more well-known platforms; they include the private keys that let you access your cryptocurrency by revealing the digital identity associated with your ownership, which is documented on the blockchain.
You can select either a “hot” or “cold” digital wallet. A heated wallet is available over the internet and is typically more convenient. A cold wallet is a physical storage device, much like a USB drive, that keeps your Bitcoin keys completely offline and typically more secure. Holding your Bitcoin in a wallet provides an added degree of safety.
Step 4: Calculate the amount of money you want to invest.
As with any investment, the amount you choose to invest in crypto will depend on many factors, including your budget, risk tolerance, and investment strategy. You may want to consider minimum investment and transaction fees, which vary among crypto exchanges.
If you want to invest in cryptocurrency at a high price per coin, most exchanges allow you to invest in dollars instead of buying the whole coin. This means you don’t need a huge amount of money to invest in something like Bitcoin. Focus on the total amount you want to invest, rather than the amount you want to buy. And always keep in mind to avoid investing beyond what you can afford.
At The Wall Street, we recommend holding no more than 2% of your total portfolio in any one crypto to limit the risks associated with a particular crypto.
Step 5: Stay updated and handle your finances wisely.
Cryptocurrency is a unique type of investment since it can be used to buy products as well as held as a long-term investment; how you handle your crypto holdings will be determined by your investing philosophy and aims.
Example: Monthly Investing Guide for Bitcoin
Assuming the following happens to the price of Bitcoin within the next four months:
- Month 1: Bitcoin price = $30,000. Your $250 buys you 0.00776 BTC.
- Month 2: Bitcoin price = $35,000. Your $250 buys you 0.00641 BTC.
- Month 3: Bitcoin price = $25,000. Your $250 buys you 0.00824 BTC.
- Month 4: Bitcoin price = $40,000. Your $250 buys you 0.00540 BTC.
So, let’s perform some evaluation after 4 months:
- Total Investment: $1000
- Total Bitcoin Purchased: 0.02781 BTC
You’ve collected Bitcoin in a way that lessens your exposure to price swings and falls by not trying to time the market and by buying often regardless of price. At any of these exact pricing points, the average cost per Bitcoin may be more advantageous than a single lump sum purchase.
With this method, trying to figure out when is the best to buy becomes less stressful and difficult. In the market known for its volatility, it also helps you to slowly grow your investment while controlling risks.
Disclaimer: The Wall Street Crypto Investment Guide is purely fictional. Any resemblance to actual investment advice is purely coincidental. Invest responsibly, Kindly do your research before you invest in crypto.
Read More:
How to Invest in the US Stock Market in 2024
What Is Cryptocurrency And How Does It Work?
