You have probably been aware of the existence of cryptocurrency – or crypto as the cool kids call it – for a while. So far it’s a fintech that has existed on the sidelines of your mind, as you see it as a fad or a bubble. However, Bitcoin has been around for more than twenty years, proving it less a passing moment and more a force that is here to stay. Bitcoin is far from its heady heights and those crazy times when Bitcoin millionaires were being created every day. Yet, with the emergence of new exchanges and new coins each year (Hey, did even have a coin called Sweat Coin that you can mine just by exercising more!), there are still opportunities for investment for those savvy enough to make the right moves.
Here we offer a guide to how to get started with crypto investment. We will start at some of the basics and then move on to consider a sensible investment strategy.
What is cryptocurrency?
The everyday dollar, pound and euro is known as fiat currency. Essentially, though not entirely, this is the opposite of cryptocurrency. Fiat is a currency that is controlled by a centralised government. Access to the currency is dictated by political policy and ability to transfer it from one part of the world to another is veiled in complexity.
Crypto aims to be more democratic and ease the transfer of value from one part of the world to another. The value is represented in a unique digital code that is called a coin. The value of this coin is dictated by the trading between buyer and seller. If someone is willing to buy a coin for £10k, then this is the worth of this coin. The system is managed by everybody. So, around the world there are people administering this, avoiding the need for a central organisation.
Sounds mind-blowing in technological terms but in reality it is just market forces controlling the price and people trading based on confidence. It is a way to pay for things that means no matter where you are in the world, you can participate.
How to get started
To get started you will need to find an exchange that accepts fiat currency. A lot of exchanges only allow trading between different crypto coins. Well-established exchanges such as Coinbase will allow you to use your bank account to make your initial purchase of your coin, which will likely be Bitcoin or Ethereum. You can then take these major coins and trade them on newer and less established crypto and begin trading to increase your investment.
As well as choosing an appropriate exchange, you also need to set up a wallet. It is possible to store your crypto coin codes on a piece of paper. Some believe these paper wallets are the ultimate protection against hacks or other cyber crimes. However, realistically, a private digital wallet is going to promise many levels of security that will protect your investment. Most of these digital wallets store the majority of the codes offline and only offer a percentage liquidity.
Deciding on your strategy
When crypto first emerged it was a little like the wild west. If you were bold, you could make moves that could deliver a fortune in a single trade. You could equally destroy yourself in 24 hours too, as some news about regulation or a country banning a coin wiped out the price.
As it has been around for a while, the wild west has been tamed to a degree. The chances of making huge profit or loss on long established coins like Ethereum and Bitcoin, maybe even the likes of LiteCoin, are remote. Although there is still talk of regulation every year, this now has limited impact on the value, as there is an etiquette that has emerged with longevity. The coins are much less anti-authoritarian as they once were. Therefore, as investors, these are safe bets and should offer a decent long term position.
However, as with equities, a good portfolio is one with balanced risk. You will have a quarter of your money invested in a long-term position but then mix the rest of your investment in medium and short term positions. New coins are released all the time. Through solid research, you will hop on board at the right time and then sell at the exact point to maximise your gains. Sound familiar? It might be the trading of a code of letters and numbers generated by a computer, but essentially the principles remain similar to what investors have worked with for years.
Crypto emerged as a means of transferring money without fear of regulation or over-inflated costs from one part of the world to another. The value of these crypto coins can go up and down in value and there lives the opportunity for investment and profit. Step on board with a currency at the right time and then sell at an opportune moment and you increase your wealth.
Getting started is easy enough. Research the best and safest exchanges. Choose your digital wallet provider. Buy some coins and begin your trades. Before you invest a dime, do your due diligence, research and form a plan.