Nervous About Crypto? Here’s What You Need to Know

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Nervous About Crypto? Here’s What You Need to Know

Investors, both experienced and novice, are flocking to crypto to get big gains. A once high-risk and easily avoidable investment, crypto is becoming more popular as investors learn that it’s not a fad but can instead serve as a profitable way to diversify investment portfolios while earning more money. 

Unfortunately, investments of all kinds come with risks, but savvy investors can invest their money wisely in crypto and trade at the right moments to earn more money. As a new (or even an experienced) investor, investing in crypto can be complex. On the one hand, you want to know what the fuss is about, and you’re worried about losing your investments. On the other hand, it’s normal to be anxious about new investments, but you shouldn’t let that stop you from investing. Here’s what you need to know about investing in cryptocurrency

What is Crypto, and How Does it Work?

What is Crypto, and How Does it Work?
What is Crypto, and How Does it Work?

Crypto is a digital currency that doesn’t have a central authority like a government or bank, and Crypto is instead bought, sold, or traded securely through the blockchain. In addition, blockchain maintains a record of crypto transactions, which prevents people from making copies of their assets and using them twice. 

Cryptocurrencies are typically referred to as coins or tokens, but they depend on their use. For example, some crypto is used for payments just like any other form of payments of goods and services, while others store value. 

Crypto is created through mining, which requires computers to solve puzzles to verify the authenticity of transactions. The easiest way to obtain cryptocurrency and start investing in it is by purchasing it through an exchange, but you can also buy it through a user. 

How Do You Buy Crypto?

Buying crypto is easy and only takes a few minutes of your time. Typically, it’s best to buy crypto through an exchange. Many exchanges have their crypto exchange apps, so you can buy crypto no matter where you are. Here’s how you can become an investor: 

Choose Where to Buy

While you can buy crypto in various ways, it’s typically best to purchase through an exchange that will act as a third party to oversee transactions. Exchanges typically sell crypto at market rates, and they make money from the fees they charge for their services. 

You can also buy crypto through an online brokerage account, where you can also purchase some stocks if you’re trying to diversify your portfolio t protect you from cryptocurrency volatility. Brokers include Robinhood, Webull, and TradeStation, but you can find more exchanges if you do research. Just do your homework and read about what people are saying about those exchanges to ensure they’re safe. 

Your final option is for pure-play crypto exchanges such as Coinbase and Kraken, which don’t give you access to stocks and other investments, but they have various cryptocurrencies to choose from. 

Exchanges are easy to use, but they can also be hacked, so it’s important never to invest more than you’re willing to lose. In addition, a government organization does not back crypto, so they’re gone for good if you lose your assets. 

Figure Out Payment

To buy crypto, you have to pay for it. Most people purchase crypto with fiat currencies, including the U.S. dollar. If you’re new to crypto, you’ll probably need to use U.S. money to make a purchase. However, more experienced investors can trade existing crypto for another type of currency. 

Fund Your Account

Depending on your payment method, you might have to put money into your account before you can start investing in crypto. Most exchanges accept bank transfers, but some may allow you to use your credit card. If you’re already an investor, you can transfer crypto from your digital wallet or even another platform and use it to trade for another type of crypto. However, not all cryptocurrencies can be traded for another, and some platforms might now allow trading between assets. 

Buy Crypto

Selecting which type of crypto you want to purchase is key since some are more valuable than others. Before you buy, consider your goals for investing in crypto. Most investors will hope their assets will increase in value, while others will want to use crypto as payment. A few of the most circulated types of crypto include:

  • Bitcoin
  • Ethereum 
  • Dogecoin

Of course, you don’t have to choose just one type of crypto to invest in, but it’s typically best to use one exchange, so you don’t have to switch between accounts to monitor your investments. 

Investing Safely in Cryptocurrency

Keeping your crypto investment safe is critical. Because no bank or government is backing up your investment, losing access to your crypto or being hacked means you’ll lose it for good. Once you purchase crypto, you should figure out how you want to store it. You will need a private key, a series of letters and numbers, that will prove ownership of your crypto and allow you to transact. If you lose your private key, you will lose access to all of your cryptos with no means of getting it back. Additionally, if someone else gains access to your private key, they can do whatever they want with your crypto with very little risk of getting caught. 

All crypto investors use digital wallets to store their assets. Some investors will keep their crypto on the exchange where they purchased it, while others will reduce their risk of a hacker by storing their crypto in non-custodial wallets. 

Risks of Crypto Investing

Crypto is a high-risk investment that can yield high returns, but you should never invest more than you’re willing to lose, and it’s best practice to diversify your portfolio. In addition, Crypto should only make up a small percentage of your overall portfolio because crypto values can rise and fall several times in a single day. 

Additionally, you shouldn’t panic and sell your crypto just because you see a drop in value. These drops are normal, and you can expect them to increase again, and you could potentially lose most of your investment by panicking and selling or getting cold feet. 

Final Thoughts

Even though crypto is a risky investment, many investors enjoy taking on high risks to help diversify their portfolios. However, if you’re only investing in crypto, you could get yourself into trouble. So instead, ensure crypto is only a small portion of your portfolio and continue to invest in stocks, bonds, and even your retirement fund to protect your money.

Matt Casadona
Matt Casadona

Matt Casadona

Matt Casadona has a Bachelor of Science in Business Administration, with a concentration in Marketing and a minor in Psychology. Matt is passionate about marketing and business strategy and enjoys San Diego life, traveling, and music. 

Nervous About Crypto? Here’s What You Need to Know