Starting investing in cryptocurrency comes with high opportunity but also with high risk. This cryptocurrency market isn’t for the faint-hearted and you should have a strong stomach before starting to invest in it. Maybe you already made your first steps into this new wonderland but got a little lost into terms like – tokens, altcoins, secure wallets, crypto exchanges and so on. If all these terms made your head spin, don’t worry this is quite normal! All these new terminologies did spin my head a few times when I started in this exciting market a few years ago.
So how does a beginner(or noob) get a good start in this new exciting digital world? In this post, I will break down and simplify(as much as possible) how this crypto market works in the perspective of a starting cryptocurrency investor. Hopefully, I can offer some guidance or clarity.
Investing in cryptocurrency: how to start
Investing in something new it doesn’t matter what kind of asset you choose comes with a certain level of risk. What I aim to do in this post is providing enough simple and clear information to make that risk as low as possible. Hopefully, I will give you the best chance of getting some great returns and will save you from deadly losses in this rapidly moving space. Also, if you are more interested in trading rather than investing, I’ll recommend this article. With this being said, this article contains research, opinion, and advice, from someone who has skin in the game – no guarantees.
Cryptocurrency terms and acronyms
First of all I want to start with an explanation of some terms and acronyms which are commonly used in this cryptocurrency space. This could save you some time when doing your own research. Some of the most commonly used ones are;
- Altcoin – this simply means alternative coin. The term applies to any coins which were launched after the success of Bitcoin – usually trying to target any perceived limitations that Bitcoin may have. Since Bitcoin was the first, any coins that came after are known as Altcoins.
- Hard fork – this is a protocol update in a certain blockchain network of computers. When computers are using this new update, previous versions of the blockchain won’t be valid anymore and a new chain is born. The computers which don’t update follow the old chain and the computers running with the update are following a new blockchain network. You can say a split up has occurred from one chain into two new blockchain versions.
- Token – crypto tokens, like tokens in the real world, are generally used to represent something else. In the real world the usually represent or replace real money or cash. In the crypto world they can represent a variety of assets or utilities.
- Cryptocurrency Exchange – a crypto currency exchange, or sometimes known as a digital currency exchange (DCE), is a business and/or platform that allows users to trade crypto currency for other assets. Such as conventional money or other crypto coins.
- HODL – A slack used by the crypto community which means to hold you coins rather than selling it to make a quick profit.
- STO – stands for security token offering and represents the ownership information of the investment product, recorded on a blockchain. When you invest in traditional stocks, for example, ownership information is written on a document and issued as a digital certificate (e.g. a PDF). For STOs, it’s the same process, but recorded on a blockchain and issued as a token.
So now that you know all these new terms where do you have to go and start as an investor? If you want to buy cryptocurrency the most common way to do so is going to a cryptocurrency exchange. There are a lot of crypto exchanges out there and the numbers are growing. When starting with investing in cryptocurrency, I advise you to use Binance which is one of the biggest exchanges out there. One of the main reasons is that I’m using it also and I’ll explain later in this article why.
Current state of the crypto market
Since the very beginning Bitcoin ranks at number one with Ethereum second place according to Coinmarketcap website. Ethereum has been on the second place forever and is traditionally the biggest competitor of Bitcoin.
Despite these two being the big names in the market and the ones that you are most likely to be familiar with, there are a huge number of altcoins in the market. According to the data of Coinmarketcap, there are currently 2132 coins in the market.
Out of these, 868 act as currencies. That’s actually more than the number of paper currencies in use in the world today! The overall market capitalization of Crypto is $185 billion – no small change!
I know 868 different currencies is a big number to get your head around, so as a beginning investor it’s better to focus on the top 10 cryptocurrencies ranked on Coinmarketcap.
Why is it a good idea to invest in the crypto market?
The crypto market is relatively a very young market with some risk but also still with a lot of upside possibilities! Down below I will give some reasons why it is still a good idea to invest into this crypto market.
- It’s an alternative to traditional banking(who’s been ripping us off for years – or at least been taking advantage of us).
- It’s an interesting store of value and a new digital form of gold. It can become a safe haven when there’s another crisis in traditional currency.
- Cryptocurrencies are known of their scarce resources
- Return of investment can be huge!
Return on investment in 2019
The last year wasn’t very good in the perspective of a cryptocurrency investor. The total market has been in a decline for the entire 2018 and is currently recovering from the lows. Q1 of 2019 has just ended and a lot of analysts are thinking of reinvesting into this market again. In this part of the article, I will give you some examples of a possible return of investments when you did this at the start of 2019.
Bitcoin started the year at 3737 US dollar and is currently priced at 5597 US dollar. That means that the price of Bitcoin has already increased by 49% since the beginning of 2019! Can you imagine if you made a 1000 US dollar investment in Bitcoin at the start of 2019, it would be worth 1500 US dollar nowadays.
This BNB Coin is a new coin introduced by Binance exchange in July in 2017. Currently, it ranks number 7 at Coinmarketcap and is currently one of the hidden gems in the market. BNB coin started 2019 at the price of 6.07 US Dollar and is currently priced at 23.81 US Dollar. This means that the price of BNB has already increased by 392% since the start in January 2019. Just picture: If you invested 1000 US dollar in BNB coin back then, it would be worth 3920 US dollar today!
As you can see the possible ROI can be very high in this market but to find the best opportunities one has to do some research and watch the markets closely. Also, as an investor, it is important to hold onto your investments rather than selling it for a quick profit. If you aren’t into this holding game; of course there are also opportunities in this market to be profitable as a trader.
Why use Binance as an exchange
So when you’re new to this or do not have much experience with trading cryptocurrency all possible online trading platforms out there could be a little bit overwhelming. Don’t worry too much about that. Currently, the biggest and most reliable exchange out there, in my opinion, is Binance. This online trading platform has its headquarters in Tokio, Japan. With more than 1.4 million transactions pro second and low transaction fees, it’s a very good option to start. All you have to do now is setting up an account there and you’re good to go. If you’re not ready yet and want some more info about the exchange I’ll explain this in the next lines.
The benefits of Binance
One of the main benefits of trading at Binance is their referral program. With this program, you can invite others(friends) to join you to come trading at the Binance platform. When this happens you will get rewarded with 50% commission on every trade your referral makes. Also, when you own the Binance BNB token you will get a discount on the trading fees of 25%. Another interesting benefit the trading platform has is the very high withdrawal limits for anonymous or free accounts. Anonymous accounts mean that you can sign up by only submitting an email address, while no further registration info(driving license or passport) is required. After this sign up you can generate your BTC wallet and send your BTC to the exchange. If you don’t own any BTC yet you also have to option to buy Bitcoin with a credit card. Anonymous accounts have a limit of 2 Bitcoin of withdrawals on a daily basis. This means that you can only send a max of 2 Bitcoin or the equivalent in US dollar to your own account on a daily basis.
Investing in cryptocurrency comes with high risk, but also with the right setup and investment strategy, the rewards could be amazing. I hope I have given you enough information with investing in cryptocurrency and how to start. Currently, at the start of Q2 in 2019, there is enough opportunity in the markets to start buying some Bitcoin or any other crypto. Keep in mind that investment always brings some risk and do some thorough research before you start to make any big investment in this highly volatile market.