Bitcoin was launched as the first ever cryptocurrency in 2009. The crypto space has met some unprecedented growth and downfall since then. The inception of this digital asset has also expanded opportunities for other online investment platform to function properly
Due to its volatile nature, investors need to understand the risks involved when investing in cryptocurrency. Although, a good number of investors said they went into crypto without any knowledge of technical or fundamental analysis and still make it big. The real big question here is also;
Who can invest in Cryptocurrency?
According to William Procasky, CFA, assistant professor of finance at Texas A&M University-Kingsville, He noted that new investors should stay out of crypto. However, the world of crypto is not a stable market and so there are high possibilities that one’s asset can be lost entirely if risk management is not at its peak.
In this article, we will cover the following;
- What is cryptocurrency?
- Why do people invest in cryptocurrencies?
- Types of cryptocurrency to invest in
- 7 steps for investing in Cryptocurrency as a newbie
What is Cryptocurrency?
Cryptocurrency is a digital or virtual asset secured by cryptography, which does not base or rely on any bank verification to verify transactions. It is not owned or controlled by any financial institution such government or central authority. It is an alternative method of receiving payment without being traced. All transaction are store in a public ledger and void for tempering or intrusion
Cryptocurrency got its name from the word ”encryption” which means providing a secured and safe path to send, receive and trade crypto assets.
Why Do People Invest in Cryptocurrencies?
Individuals participate in cryptocurrencies with the belief that an increase in cryptocurrency prices will lead to a corresponding surge in the coin’s value, ultimately resulting in higher profits.
Cryptocurrency has become popular these days due to it enormous advantage. Meanwhile, many people are still wondering the reason behind the popularity and why would someone choose to invest in crypto over other financial institution investment.
It will no longer be a matter of speculation, as the following piece will elaborate the usefulness and the reason why many eyes are projecting toward the crypto space
Secured transaction
Cryptocurrency unlike the traditional financial institution where it quite ambiguous to carry out huge transaction, has made transactions more secured.
The Crypto industry provides a secured transaction path that is not traceable and protected by various security features. Unless one exposes his private key that is holding the crypto asset, no one can gain access or carry out transaction on their account. However, if you lose your private key you cannot gain access to your asset
Because of the cryptographic nature of cryptocurrency, any attack to invade the blockchain will require high computing algorithmic power to confirm other blocks before the ledger can verify the authenticity of the transaction paving way for a tight and secured path.
Diversification Approach
In the context of cryptocurrency, diversification refers to spreading of investment across several types of cryptocurrencies or assets in the cryptocurrency market. This is a risk management approach aimed at mitigating the effect of possible losses by limiting exposure to any particular coin.
The cryptocurrency market is notable for its volatility, with prices frequently fluctuating drastically in short periods. You might possibly lessen the risks associated with price volatility and market uncertainty by diversifying your bitcoin holdings
Cryptocurrency as a Transparent Option
It’s worthy to note that cryptocurrency provides more transparent feature such as the use of Public Ledger, Privacy-Enhancing Technologies, Auditability and Token Transparency. These features make the crypto space trusted and more reliable.
Many cryptocurrencies, including Bitcoin, use a public ledger, sometimes known as a blockchain, to record and verify transactions. This ledger is spread across a network of computers and provides a complete history of all transactions. Anyone may read transaction data such as addresses, transaction amounts, and timestamps on the blockchain. This transparency encourages accountability and enables for transaction verification
Alongside transaction openness , cryptocurrencies frequently include information on token availability and distribution. This implies that data on the overall supply of tokens, token allocations, and token creation procedures is available to the public. This type of openness can assist people in determining the fairness and authenticity of a cryptocurrency initiative.
Accessibility
The ease with which users may acquire, store, trade, and use bitcoins is becoming increasingly high. Efforts are being made throughout the years to increase the availability of this digital asset to the average person with a starting capital.
All you need is an internet access to enable you navigate through the processes. The internet access is a major fundamental prerequisite to start your crypto journey.
Moreover, cryptocurrency exchanges has made the accessibility of crypto easier. This function as intermediaries, enabling the purchase, sale, and exchange of cryptocurrency. Individuals may use these services to change traditional fiat currency, such as USD, Naira or EUR, into cryptocurrencies and vice versa. Generally, there are several exchanges that provide various trading such as KuCoin, Binance, Huobi, Bybit, Hotbit etc. The existence of these exchanges improves cryptocurrency accessibility.
Fast Transaction
Sending money to other country might take up to 24hours to 5days depending on the route of the transaction. Cryptocurrency provides a simpler and great opportunity to easily send and receive money in digital form from all across the world.
The transaction in cryptocurrency can be completed within some minutes unlike wire transfer, which take up to 24hrs to settle.
Privacy
All transaction in cryptocurrency blockchain are pseudonymous. Pseudonymous Transactions utilizes cryptographic addresses to represent any participants performing transactions rather than exposing their real identities. Due to pseudonymous nature of these transactions, they are not in any way associated to personal information
Other privacy enhancing techniques such as Zero-Knowledge Proofs, Ring Signatures, Stealth Addresses and Confidential Transactions – which is incorporated to encrypt transaction amount enabling only the user to have visibility of the transaction, are all employed in cryptocurrency to further enhance its privacy.
Types of Cryptocurrency to Invest in
Bitcoin (BTC)
The earliest and most widely recognized cryptocurrency is Bitcoin. It has a significant market capitalization of about $521B according to coinmarketcap. BTC has a strong liquidity, and widespread acceptability from all across the world.
Ethereum (ETH)
Ethereum is a decentralized platform for creating smart contracts and decentralized apps (DApps). It has the second-highest market capitalization of about $207B as of today. It provides a configurable network with its native currency, Ether. Ethereum’s innovative capabilities is positioned in powering and expanding decentralized finance (DeFi) industry.
Alternative Cryptocurrencies (Altcoins)
Altcoins are cryptocurrencies that are not Bitcoin or Ethereum. Ripple (XRP), Litecoin (LTC), Cardano (ADA), and Polkadot (DOT) are some prominent Altcoins.
Other cryptocurrency to invest in includes
Privacy-Focused Cryptocurrencies
Decentralized Financed (DeFi) Token
7 Steps for Investing in Crypto as a Newbie
Before one can invest in cryptocurrency, it is imperative to take the following to help you earn massively
1. Research and self Education:
Before investing in any crypto project, carefully research about the project and educate yourself about the underlying factors of the project. A knowledge of technical Analysis (TA) and Fundamental analysis (FA) will be an added advantage.
2. Outline investment Objective and Risk assessment:
it is important to set up investment objectives, as this will give you fundamental managerial skills while carrying out trades. Always assess the risk of any project before investing in it.
3. Choose the right Crypto Exchange:
In as much as the concern of crypto currency is security and transparency, ensure to choose the right crypto exchange that support the cryptocurrency you wish to invest in. Factors such as country support, security measure, user interface, customer support and trading pair should be carefully scrutinized. Example of crypto exchanges includes; Binance, Bybit, KuCoin, Kraken etc.
4. Account Creation and Identity Verification:
Once you have chosen the supported crypto exchange for your investment, then it’s time to download the app from play store for android users or apple store for iOS and sign up. Further identification process like submitting of KYC should also be carrying out.
5. Enable 2FA:
Two-factor authentication is paramount to your account security, as this will ensure that no third party can carry out transaction from your account even when they have access to your login details. You can use authentication apps downloadable from play store or by using SMS.
6. Fund Your account:
Once your KYC has been approved by the chosen exchange, you can fund your account using P2P feature or the use of credit card for non-Nigeria due to cryptocurrency ban by the federal government of Nigeria. In other words, you can copy your wallet address and request a funding from your friends in exchange of fiat currency.
7. Carry out a Trade and Monitor Your Investment:
It very important to carefully carry out your research before investing in any cryptocurrency. Once your account has been funded, invest on your chosen cryptocurrency by issuing a buying order. Always monitor your trade and stay vigilant for any market change or drop which might affect your setup
Bottom line
So is Cryptocurrency a good investment to make in 2023
It important to note that cryptocurrency investment involves many risks. However, as one can make a million dollar overnight, it is paramount to know the nature of risk you are involving yourself into and make proper decision. The Volatility of the cryptocurrency makes the market to change rapidly. Ensure you balance your tolerant level, conduct thorough research on the chosen project and most importantly seek for financial advice from your superiors before making any decision.
Leave a Reply