• Cryptocurrency ‘s are digital currencies whose value is determined by supply and demand.
• Investing in cryptocurrency’s offers benefits as well as risks.
• With over 12,000 different cryptocurrency’s, each with its own value and vision, it’s important to navigate carefully.
• The value of crypto can rise or fall rapidly, resulting in potential gains or losses.
• In four steps, you can determine whether and which cryptocurrency’s to invest in.
Investing in Crypto for Beginners
a highly discussed topic with diverse opinions. “You can earn a lot from it,” “it involves significant risks,” or “it’s the future” are just a few statements often heard. Perhaps you know someone who invests in crypto and you’re interested in exploring it yourself, or maybe you have no idea what we’re talking about. In both cases, read on! We’ll provide you with the fundamental knowledge you need before diving into crypto investment as a beginner.
In any case, it’s crucial to handle your money wisely. Therefore, don’t start investing if you don’t have a sufficient financial buffer. Saving, paying off debt, and investing all have their advantages and disadvantages. The Nibud Money Plan “Save, Pay Off Debt, or Invest” can help you make a decision.
Crypto for beginners: What are cryptocurrencies?
When we talk about “crypto,” we’re actually referring to cryptocurrencies, also known as digital currencies or cryptocurrency. Cryptocurrency’s are digital money; you can’t physically hold them. Instead, you store them in a digital wallet, which is like a virtual purse. Although you can’t use crypto everywhere yet (e.g., for rent or groceries), many believe that cryptocurrency’s will become the future means of payment due to several advantages they offer.
Advantages of crypto
Crypto has various advantages. We’ll highlight the three most significant ones.
- Direct transactions Transactions with cryptocurrency’s occur directly between the sender and receiver, without any intermediaries. In contrast, with “regular” money, you pay through a bank, for which you might have a payment card and incur annual fees. With crypto, no third party is involved.
- Fast payments Cryptocurrency’s are always available online, and payments are processed instantly. This is especially advantageous for international transactions, eliminating the need to wait hours or even days for funds to arrive.
- Reliable payment method Cryptocurrency’s are highly reliable as a payment method. All transactions involving cryptocurrency’s are transparent yet protected by the blockchain system. To understand blockchain, we need to delve into a somewhat complex and technical explanation. It’s challenging to grasp how it works due to its elusive nature, but we’ll attempt to provide a simplified explanation.
What is blockchain?
Blockchain is a system that enables secure and smooth operations with cryptocurrency’s. It ensures that every crypto transaction is unique and secure. Once a transaction occurs, it can never be undone. Essentially, many volunteers encrypt transactions instantly. This way, personal information remains hidden and safeguarded against potential hackers.
Risks of crypto
Cryptocurrency’s also come with risks. The value of crypto can fluctuate rapidly, leading to potential financial losses. Additionally, there is currently no robust regulation overseeing cryptocurrency’s, which means there’s nowhere to turn if something goes wrong. To further explore the risks associated with crypto, we have a separate article dedicated to this topic. You can read about the top 5 risks of investing in crypto here. If you’re still uncertain about whether investing in crypto is right for you, this handy Investing Checklist may assist you.
Investing in crypto
Investing in crypto, using crypto as a payment method, and employing blockchain technology all sound fascinating. But why is crypto so popular despite not being widely accepted as a means of payment yet? The answer lies in the value of cryptocurrency’s. Their value fluctuates rapidly, presenting opportunities for substantial gains or losses. We’ll delve into this topic in more detail later. First, let’s explore the different types of cryptocurrency’s.
Navigating the crypto forest
There are numerous types of cryptocurrency’s, each with its own value in euros. Well-known cryptocurrency’s include Bitcoin, Ethereum, and Ripple. Don’t be startled: there are now over 12,000 different coins available. A coin can be exchanged for traditional currency, such as the euro. The price of a coin is determined by supply and demand and is often referred to as the exchange rate. For example, currently, one Ethereum coin is worth approximately €2,700. Since it’s not necessary to buy whole coins, you can also purchase smaller units. In other words, if you want to invest €100 in Ethereum, you can do so.
Differences between cryptocurrency’s
Apart from variations in value, cryptocurrency’s often differentiate themselves in other ways. While some cryptocurrency’s aim to become new means of payment, others focus on different areas. For instance, Ethereum doesn’t necessarily intend to function solely as a payment method; it aims to be a platform where other cryptocurrency’s can operate. Another coin may prioritize privacy and security.
But how do you determine the best cryptocurrency’s to invest in? You can find numerous articles from people discussing promising coins. However, remember to conduct your own research before investing anywhere.
Earning money with crypto
As mentioned earlier, the value of cryptocurrency’s can change rapidly. This means that the value of your investment in crypto can increase or decrease significantly. It all depends on the market’s confidence in the specific cryptocurrency. By “the market,” we refer to everyone who buys or sells these cryptocurrency’s.
Investing in Bitcoin: An example
You’ve probably heard the classic Bitcoin story: in 2015, you could purchase a new bicycle for just one Bitcoin, whereas now, that same Bitcoin is worth nearly $30,000. This increase occurred because more and more people gained trust in Bitcoin and started buying it. As with other products in our economy, the higher the demand, the higher the value. However, if something happens that diminishes trust (like a financial crisis or a pandemic), the value can also plummet. So, don’t solely focus on success stories you see or hear around you. It’s crucial to invest in crypto only with money you don’t need at the moment.
You can start experimenting with Crypto today on Bybit 👇
