Cryptocurrencies have become a global phenomenon these days and are one of the hottest investment products available today. Therefore, it is understandable that a lot of people are interested in knowing exactly what they are and how to invest in them. Most people are not aware that cryptocurrencies actually emerged as a side product of another invention altogether; a peer-to-peer electronic cash system. This was developed in 2009 by Satoshi Nakamoto, who had been trying to create a decentralized digital cash system and hadn’t intended to create a currency. Yet, that’s exactly what he did as he developed Bitcoin, the first and the most important cryptocurrency of all time.
In simple terms, cryptocurrencies can be defined as digital currencies that are created and managed via the use of encryption techniques that are called cryptography. Bitcoin’s success has given a rise to other cryptocurrencies and they have become lucrative investments in today’s market.
Where To Buy Crypticurrencies Safely
Since it is still a relatively new form of investment, it can be very confusing people about how to go about buying cryptocurrencies. It is not your typical form of investment like stock and most people have not seen or experienced anything like it. Your investment doesn’t bring you shares; you get digital tokens or coins. There are exchanges that can be used for buying cryptocurrencies safely.
You can download an app on your smartphone or use the desktop version as per your convenience. You sign up the same way you would on any website, which includes providing your name, email address and setting a password. Next, you can add a payment method and there are several options available. Verify your account and you are good to go. If you don’t want to deal with the exchanges, there are also cryptocurrency brokers you can consult with for buying them safely.
Bitcoin is stored in specific digital wallets until people are ready to use them. The features and platforms of the wallet can vary and you should choose one that offers security, but also makes transfers easy. Once you have the wallet, you can look for an exchange to buy Bitcoin. There are plenty of options, but some are really untrustworthy so you should select carefully. Check reviews and compare their fee. If you don’t want to deal with a middleman, you can also use a peer-to-peer service to buy Bitcoin directly from a seller, but do it face to face.
Regarded as a potential Bitcoin successor, Ethereum is also a popular cryptocurrency, especially because of its token Ether that has some interesting features, which make it less vulnerable to censorship and fraud. The simplest way to buy this cryptocurrency is through an exchange because they do the difficult job of checking the prices and conduct the actual transaction on your behalf. However, you should ensure you choose an established and insured exchange that supports Ether trading. When you have picked an exchange, you can sign up, give identity verification and a payment method and then make your purchase.
The term Altcoins is a combination of two words ‘alt’ and ‘coins’, which means they are an alternative to Bitcoin. Thus, they are alternative cryptocurrencies that have been introduced after the success of Bitcoin and these substitutes have advertised themselves as better options. A number of them are based on the same basic framework of Bitcoin, but they are trying to target any perceived limitations that it has. This is one of the top reasons why buying Altcoins is a good idea. They are able to offer better security and anonymity than Bitcoin, have a different and improved hashing algorithm and also boast faster block times.
The Difference Between Trading, Investing, Day Trading and Holding (HODLING)
A lot of people use terms such as trading, investing and holding interchangeably, but they all have a different meaning in all markets. This also applies to cryptocurrencies. How does it all start? It begins when you decide to buy a cryptocurrency. You find the right wallet, a good exchange, make a payment and now you have cryptocoins. But, what is the purpose?
Trading is simply a short-term endeavor in which you enter the market, stay in it for a few months and then move on once you believe the price has managed to reach its peak. In a nutshell, traders of cryptocurrencies are price sensitive and abandon the market when it becomes unprofitable. On the other hand, investment is a more long-term activity, which involves a portfolio of several cryptocurrencies, business objectives and fiat risk hedging. Investors remain indifferent to volatility in price and don’t give up easily on their investment.
Buy-and-hold or Hodling, as it is known in the cryptocurrency world, is an investment strategy. It is exactly what it sounds like, which means you purchase an investment and just hold onto it regardless of the market fluctuations. You don’t react to the market whims and keep the cryptocurrecy for the long term. The strategy is known to offer huge financial rewards. As far as day trading is concerned, it is quite self-explanatory. You make money by exploiting the changes in price on the same day for making quick profits. It involves the use of automated tools to predict changes in price.
Buying / Trading on an Exchange
Purchasing cryptocurrency from an exchange is the most popular method when you wish to trade or invest in this market. Exchanges with a good reputation and legal status are user-friendly and have a very simple registration process. Plus, they also offer you wallets for storing your cryptocoins, give you full control over your account balance and enable you to make transfers with ease. They can offer better coin variety as opposed to other buying options.
Buying / Trading With a Broker
While exchanges may have brokers beat when it comes to variety, a number of people prefer dealing with brokers for a number of reasons. The primary distinction between the two is that exchanges allow you to actually possess the cryptos whereas with brokers you get to use them as underlying assets. The downside with exchanges is that they are prone to scams and fraud so brokers can offer greater safety and security. The leverage and costs are also more flexible with a broker.
Before making an investment in the cryptocurrency market, it is essential for you to go over the reviews. These include reviews of the cryptocurrencies themselves such as Bitcoin, Ethereum, Litecoin and other altcoins out there. You also need to read the reviews pertaining to the investment methods, trading systems, ICOs (initial coin offerings) and more to ensure you are making an investment in accordance with your objectives and goals.
Top 3 Recommended Cryptocurrency Exchanges
As mentioned before, there are plenty of cryptocurrency exchanges to choose from, but the top 3 recommended ones are:
- Coinbase: It is used globally by millions and backed by trusted investors. It has an excellent reputation due to its reasonable fees and security features. It is also a great choice for beginners.
- Kraken: Another feature rich exchange, it has minimal deposit fee, low transaction fee, is supported worldwide, has decent exchange rates, great reputation and user support. Kraken supports various cryptocurrencies.
- io: This exchange is also rising in popularity as it is a good mobile product, offers good exchange rates, is user friendly and supports credit cards.
Top 3 Recommended Cryptocurrency Brokers
Like exchanges, you have lots of options in terms of brokers and should compare their customer service, currency pairs, account types and platform types before making a choice. The top 3 recommended are:
- AvaTrade: Fully regulated, offering short selling, it is the best retail trading platform and also offers options to auto trade with excellent customer service.
- Plus500: You can enjoy tight spreads and negative balance protection all through a simple trading platform.
- Etoro: This offers web and mobile trading platforms both, has the lowest minimum deposit requirement, gives good leverage and offers a good promotion.
In order to ensure you are trading cryptocurrencies safely, you should go over the reviews and choose the right exchange/broker. Use a VPN when trading and enable two-factor authentication for secure log-in. Keep your cryptocurrency in cold storage when you are not trading actively and always stay on top of the markets to identify any red flags and do your research before entering a trade.