Cryptocurrency Guide for Beginners: What You Need to Know Before Investing
Getting started with crypto may initially seem quite daunting, but it doesn’t need to be that way. With multiple online resources, it’s easier than ever to invest in crypto of all kinds. The first point is to understand how crypto works, followed by which crypto coins are worth investing in, and how to purchase coins. We’ll deal with all of the frequently asked questions to give you better insight into the world of cryptocurrency—a new and exciting era of investing awaits.
What Is Crypto?
You’ve undoubtedly heard the buzzword crypto or cryptocurrency ad infinitum since the advent of Bitcoin and altcoins. But what exactly is crypto? The simple answer is that crypto is a digital currency used as a payment for goods and services available on online platforms.
Think of crypto as an arcade token or a casino chip that you exchange with fiat currency. From here, you’ll be able to use the coin or token for specific purposes.
Several companies have also jumped on the bandwagon and now offer their very own coins or tokens serving as an exchangeable currency for the company’s goods or services.
But why has crypto enjoyed such fanfare? The answer lies in the technology that enables the use of these coins or tokens. The tech is called blockchain, and it is a decentralized database that serves as public electronic ledgers. Blockchains store data in the form of, you guessed it, blocks linked together, forming a chain. Any data within the blockchain is permanent; this means that crypto transactions are incredibly secure as there is no way of changing or forging the data. Furthermore, the crypto transactions are viewable by anyone, which adds an extra layer of transparency.
How Do I Choose A Cryptocurrency?
You may be asking yourself, how do I choose crypto? There are several types of cryptocurrency that have enjoyed widespread popularity and boast an enormous market cap. The top cryptos in 2021 based on several selection criteria that include the following:
- Adoption rate – how many people are investing? A high level of adoption translates to better liquidity. The liquidity of the crypto makes it easier to trade, sell or spend the particular crypto.
- Technology – how does the crypto’s tech fare in comparison with others? Is it usable and safe? Transaction speeds are vital as they verify a stable network and indicate that there could be dramatic uptake as speed is a definite boon.
- Longevity – how long has the crypto existed? Crypto that can display historical data helps to gauge its performance.
- Track record – how has the crypto performed since its release? Price growth and stability are good indicators that the crypto is doing well and is gaining traction in the market. Although it’s imperative to accept that past indicators aren’t guarantees of future indicators.
Which crypto to buy for beginners? It may very well depend on your level of risk-aversion and your budget. Although you can purchase portions of crypto, think of it as cryptocurrency stocks.
How Many Types of Cryptocurrency are there?
There are thousands of cryptocurrencies, with the number continually growing as more and more cryptos are listed daily. Some of the thousands of cryptos make it, while others don’t. Their success rate largely depends on the initial coin offering (ICO), whether investors will use the crypto to pump and dump and whether the crypto addresses a particular need with no clear and present solution.
What is the best cryptocurrency to invest in 2021? Following the criteria mentioned in the section above, we’ve drawn up a list of 10 cryptos:
- Bitcoin (BTC) – Bitcoin is a staple of the cryptocurrency market and represents 40% of the crypto market cap. Its price, market cap, and volume make it the leading crypto. Add to that widespread acceptance, deals with VISA and Tesla and slow yet steady acceptance by banks, and you’ve got a winner.
- Ethereum (ETH) – Ethereum is open-source blockchain-based software that also offers its own crypto called Ether. Only Bitcoin is more prominent than Ethereum, with its network enabling developers to create more crypto. The network
- Binance Coin (BNB) – This particular coin is the third-largest crypto by market cap. The coin, developed by giant crypto exchange, Binance is intended for use as a payment method for fees on its platform. Take note that BNB can only be exchanged into other cryptocurrencies and not fiat currency.
- Ripple/XRP – The Ripple platform is an open-source protocol that allows cheap and fast transactions. XRP is the Ripple platform’s coin that’s used on its network to process global payments. Transaction costs are low, as XRP acts as a mediator between currencies. Numerous banks and financial institutions already make use of Ripple. XRP has the potential to increase in value following widespread adoption.
- Tether (USDT) – This stablecoin pegs its market value to the US dollar as linking a coin to a currency to reduce volatility. Tether describes itself as “a blockchain-enabled platform designed to facilitate the use of fiat currencies in a digital manner.” The crypto enables individuals to transact in traditional currencies using a blockchain network while minimizing volatility and complexity.
- Cardano (ADA) – Charles Hoskinson, a co-founder of Ethereum, helped create the proof-of-stake crypto. The project differentiates itself by using peer-reviewed scientific research to update the platform and coin. It’s similar to Ethereum, and Cardano considers itself the third-generation platform over Ethereum’s second-generation offering.
- Polkadot/DOT – Polkadot is a network that aims to connect various other networks so that they can all work together, i.e., joining the dots. Co-founder of Ethereum, Gavin Wood, created the multi-chain network that allows interoperability between different blockchains. DOT is the network’s coin that will enable holders to vote on potential code changes.
- Litecoin (LTC) – Launched by former Google engineer Charlie Lee, Litecoin is very similar to Bitcoin as Lee created it as a lighter version of Bitcoin. Litecoin’s network offers near-zero cost, instant payments.
- Stellar (XLM) – The Stellar blockchain’s cryptocurrency is called the lumen (XLM). The purpose of the coin is to facilitate payments across the Stellar network between banks, payment systems, and people. The network allows digital currency transfer to fiat currency.
- Dogecoin (DOGE) – Created a joke based on the viral dog meme, the Dogecoin can process payments free from traditional banking fees. Dogecoin’s recent popularity is thanks to Elon Musk and Bitcoin’s rise in value.
Are Cryptocurrencies A Good Investment?
Now that you’ve gone through the list of the top cryptocurrency to invest in, you’ll be asking the very pertinent question – are cryptocurrencies a good investment?
The short answer is yes; the financial yield of many cryptos is staggering if you’ve timed it correctly. It all depends on your appetite for risk, as crypto markets are incredibly volatile at best.
Purchasing crypto is an investment, and all investments are inherently high-risk, and there are no guarantees. But if you watch the crypto market, you’re able to make money off your crypto investment.
Which Is the Fastest Growing Cryptocurrency?
Crypto volatility makes it difficult to pinpoint the fastest growing crypto, but according to the gainers’ list, Dogecoin is growing exceptionally fast. Remember that cryptos fluctuate wildly and that you should do your due diligence before investing in any crypto.
What Can I Do with Crypto?
Besides “holding” crypto as an investment, you can use several cryptos as a payment method for online goods and services.
Several online casinos and sportsbooks accept crypto as a depositing method – placing a bet on your favorite sport is now streamlined and offers fantastic convenience. People also use crypto to transfer funds at a low cost and earn interest in their crypto using yield farming.
Where to Buy Cryptos
Many crypto exchanges also feature hot wallets, which means that the crypto is accessible via the web or an app. But which crypto wallet is best?
The crypto exchanges that allow you to purchase crypto with fiat currency are the following top players:
- Binance: Low fees, a strong focus on altcoin trading, and a large variety of up to 500 cryptos make it one of the top exchanges today. Binance is very reputable indeed, and they’re the largest cryptocurrency exchange based on trading volume.
- Coinbase: This popular US-based exchange offers free hot wallets, plus they also boast insurance against unforeseen losses due to hacks and security breaches. Coinbase provides a large variety of altcoins, a simple user interface, and high liquidity.
If these two options don’t suit your needs, don’t despair, as there are many other respectable exchanges.
Wrapping it all up
Many people are hesitant to invest in crypto due to crypto news portraying crypto as high-risk scams and an imminent crypto crash. Naturally, there are scam coins, but they certainly don’t last long. The vast majority of coins with high adoption rates, a large market cap are legit.
It’s important to remember that investing in crypto is a risk, as are all forms of investment. Crypto volatility may deliver large profits or devastating losses depending on market fluctuations and extreme volatility.
However, more and more people accept crypto as a legitimate means of payment, investment, and more. As technology advances, there’s potential to turn a profit with crypto – a new and exciting era of investing awaits. Will you be a part of it?