A beginners guide to cryptocurrency
Since Bitcoin was first launched in 2009 it has outperformed many other of the best performing asset classes consistently over the years. There’s more to Bitcoin than just currency - Bitcoin forms a part of the web3 space, which is intercepting almost every industry in some way, shape or form.
As with any assets, as usage grows, so does its value and we have witnessed the astronomical growth of Bitcoin since its inception due to the growing number of users. Cryptocurrencies present an opportunity to invest in the projects of tomorrow and become a part of what is a digital and currency revolution revolution.
Investing in cryptocurrencies can be a hedge against the traditional fiat system that we are used to. Many people have reportedly made their millions from cryptocurrency, be it due to getting in early, striking it lucky with a meme coin, or just managing to spot a good project and take a risk. But for every crypto fairytale ending you hear, there are thousands more who lost money due to taking risks that didn’t pay off of cryptocurrency.
There is a lot of opportunity within the web3 and crypto space, but your first step before being able to capitalise from this, is actually understanding what it is.
Guide to cryptocurrency
Imagine a world where you didn’t have to carry around physical money, and transactions were speedy, secure, and global - and didn't require a bank to facilitate them. Well this is what Bitcoin set out to do. Cryptocurrency, in simple terms, is a type of digital or virtual money. It operates independently of a central bank, which makes it free from government control. Before we go any further, let's just make it clear; Bitcoin is a cryptocurrency. There are many other cryptocurrencies but Bitcoin was the first. Any other cryptocurrency that's not Bitcoin, is called an 'altcoin'.
Cryptocurrency represents a digital revolution in the financial world. Unlike traditional fiat currencies like dollars or euros, which are physical and governed by central banks, cryptocurrencies are digital and operate on a technology called blockchain. Blockchains tend to be 'decentralised' which means that they require many individuals with computers to help maintain the network and approve transactions - as opposed to one central system like a bank. This decentralised nature means that they are not under the control of governments or financial institutions.
What is cryptocurrency?
Cryptocurrency is a digital or virtual form of currency that uses cryptography for security. It operates independently of a central bank and is based on blockchain technology, a decentralised system that records transactions across many computers. The first and most well-known cryptocurrency is Bitcoin, introduced in 2009. Since then, thousands of alternative cryptocurrencies, or “altcoins,” have been created, each with unique functionalities and infrastructure. Cryptocurrencies can be used for a wide range of applications, from buying goods and services to investing and fundraising for projects.
What are the benefits of cryptocurrency?
Cryptocurrencies offer several benefits. They provide a level of anonymity as transactions are secured and cannot be easily traced back to users. They also offer peer-to-peer focus, eliminating the need for intermediaries like banks. This decentralisation can lead to faster and cheaper transactions, especially for international transfers. Cryptocurrencies can also provide access to financial services for people who are unbanked or underbanked. Lastly, cryptocurrencies can potentially offer high returns on investment, although this comes with significant risk.
The risks with cryptocurrency
Cryptocurrency investments come with their share of risks. Their value can be extremely volatile, leading to potential financial loss. Cryptocurrencies are also a target for hackers, and if your crypto assets are stolen, they cannot be recovered. Regulatory risks exist as well, as governments around the world have different attitudes towards cryptocurrencies. Some have embraced them, while others have banned or restricted their use. Lastly, the lack of consumer protection and the complexity of the technology can make it difficult for beginners to navigate the crypto space.
How to research an investment
Researching a cryptocurrency investment involves understanding the technology behind it, the team that supports it, and its market potential. Start by reading the project’s whitepaper, which should provide a detailed explanation of its purpose and how it works. Look at the project’s roadmap and progress to assess its future potential. Investigate the team’s background and expertise. Check the coin’s market capitalisation and trading volume on reputable crypto exchanges. Lastly, stay updated with news about the project and the overall crypto market, as external factors can significantly impact a cryptocurrency’s value.
How to buy cryptocurrency
Buying cryptocurrency involves a few steps. First, set up an account on a reputable cryptocurrency exchange. Complete the KYC process and secure your account using two-factor authentication. Next, deposit funds into your account. This can usually be done via bank transfer, credit card, or even other cryptocurrencies. Once your account is funded, navigate to the trading section of the exchange, select the cryptocurrency you want to buy, specify the amount, and confirm the transaction. Always do your research before buying and only invest what you can afford to lose.
There are many different crypto exchanges you can by your cryptocurrency from. When choosing one, make sure you can withdraw your crypto your bank in your country, do your research to make sure it is reputable and keep your passwords safe!
Some exchanges you may want to explore are:
Always do your own research first!
How to store your crypto
Storing your cryptocurrency securely is crucial to prevent loss or theft. Hot wallets, which are connected to the internet, provide convenience but are vulnerable to hacking. These include exchange wallets, desktop wallets, and mobile wallets. Cold wallets, which are offline, offer more security and are better for storing large amounts of crypto. These include hardware wallets like USB drives, and paper wallets. Remember to back up your wallets and keep your private keys secret.
When you first start investing, you can keep it on the exchange you bought it, but make sure you have 2FA set up! This is a security feature which means before withdrawals are made, you will need to type in a code which refreshes every 30 seconds or so. This helps to protect you from hackers. When you start to grow your portfolio, you may want to invest in a cold wallet to keep it in your full control and away from hackers. Ledger is one of the most popular and trusted cold wallets.
We hope you've found this beginners guide to cryptocurrency useful! The best way to understand the cryptocurrency space is to keep on educating yourself!