Cryptocurrency is a digital currency. It’s decentralized and inherently volatile. While it can be lucrative to trade in cryptocurrency, your balance may bounce up and down with surprising volatility. Depending on your investment comfort zone, you may want to start only with a small amount of money and play for a bit as you learn more.
Gathering More Information
It’s your money and crypto exchanges are all buyer beware situations. That being said, there are a lot of folks who know a great deal about the world of crypto. For example, you may find that you can find a great blog associated with your favorite top crypto exchange.
Do be aware that it’s possible to go down a rabbit hole of information. For example, CryptoPotato offers a lot of information and puts out up to 6 blog posts per day. If you don’t have the time or the interest to do that much reading, you may want to follow just one expert and one blog that is tied to your exchange.
Crypto was developed starting with Bitcoin in 2009. Of all the constants in cryptocurrency since that first exchange, the biggest constant factor has been volatility. If you look at the history of cryptocurrency and are excited to put money in an exchange, great! Go for it.
If you look at the volatility of crypto and want to padlock your wallet, this is also a good decision. You have at least started your research process. Find an exchange with a decent track record and low fees. Put a few dollars into recommended funds to see what runs up and what collapses. You may find it helpful to think of your crypto money as Monopoly money.
Follow the Experts
One of the interesting things about crypto is that, because it has no supporting currency, the rules of traditional finance don’t really apply. If you follow the expertise of long-term financial gurus such as Warren Buffet, you probably won’t be surprised to find out that he doesn’t do crypto. He knows the financial markets. Crypto is not tied to the financial markets, though it is tradeable.
Be ready to expand your concept of an investment expert. Most of the experts on crypto are younger. They use jargon or terms that may be brand new to you. For example, what is a Satoshi? Satoshi Nakamoto invented Bitcoin. If you have 100 million satoshis, you own one Bitcoin.
Your crypto investing process will require that you have a bank account and a secure internet connection. Once you choose your cryptocurrency exchange and make your first purchase, you will need a cryptocurrency wallet.
Your exchange is like a brokerage house. Many cryptocurrency exchanges offer an app. You can move coins around on your phone and act quickly if the experts you follow recommend a particular coin.
Do be aware that, like a stock brokerage, your crypto exchange will charge a fee every time you make a transaction. You may want to limit yourself to just a few trades per week to avoid paying too many fees over time.
The whole crypto blockchain is based around security. Every time an exchange is made, the process is encrypted. If you are not good a password protecting your phone, computer or tablets, you may be at risk of hacking.
Of course, having your banking information on a machine that isn’t properly secured isn’t healthy either. Before you start your crypto investment journey, consider setting up a cold wallet. Your cold wallet doesn’t connect to the internet until you plug it in; think of a flash drive as a cold wallet. You plug it in, enter your password, make your trades, update your data, save and unplug.
You may also want to maintain a hot wallet, or a separate wallet that you use for new exchanges. There are no limits to the number of wallets that you can set up. While your trades will be extremely secure, your personal connecting gear will only be as secure as you make it. Before you start your crypto account, take the time to update your computer and phone passwords.
A Final Word About Volatility
If you’ve been watching your stock investment balances bounce around, you probably have a decent idea of your volatility tolerance. If you invest with your partner or spouse, both of you need to be comfortable with some bounce on your crypto balance. While the maxim on stock purchases is to buy and hold, you may need to stay more flexible on when you trade crypto.
You’ll see a lot of data bouncing around online if you search for the best coin to trade. Find an expert who knows the market and has a decent track record. For an investment tool that’s only been around since 2009, there are quite a few folks out there who have made a great deal of money with crypto. If they can also point out where they lost money, you will have a better understanding of the risk of these investments.
As with anything, invest what you can afford to lose. Don’t plan to buy and hold. Study up and find an investing exchange that will let you set up multiple wallets. Increase your personal machine security before you start.