The Ultimate Beginner’s Guide to Investing in Cryptocurrencies

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Cryptocurrencies are making headlines, and there’s a good reason for that. It’s looking a lot like they’re going to completely change our economy in the near future.

But they’re a dense topic for new investors to break into. That’s why we’ve put together a beginner’s guide to investing in cryptocurrencies.

What are Cryptocurrencies?

There’s a lot of jargon around cryptocurrencies (or ‘crypto’).

To keep things simple, cryptocurrencies are a subset of digital currencies. To keep transactions secure, cryptocurrency developers use cryptography, hence the name.

But what makes crypto exciting are all the ways it differs from traditional currency.

Unlike traditional currency, cryptocurrencies are decentralized. They don’t ‘belong’ to governments and corporate boards. They’re controlled entirely by a distributed community.

Government mints usually control currency and print more during a shortfall, resulting in increased inflation. In contrast, most forms of crypto are programmed to only ever issue a finite amount of ‘coins’.

This strictly controls the inflation rate of crypto relative to traditional currency. That means crypto not only holds its value, but can become more valuable than fiat currency.

Some commentators consider crypto more than a currency system. Its finite supply and ability to hold its value invite comparisons to investment materials like gold.

How to Invest

Users of cryptocurrency can buy and sell it through a variety of online marketplaces. And now it’s even possible to use existing crypto to invest in new forms of crypto through sites like topicolist.com.

So how do you purchase high-value crypto if you don’t have thousands of dollars sitting around?

Luckily, you don’t have to buy, say, a whole Bitcoin when investing in cryptocurrencies. You can invest exactly as much as you can afford. You simply receive the Bitcoin equivalent of cents – except they’re worth hundreds of dollars.

Top Cryptocurrencies

You may notice that ‘cryptocurrencies’ is a plural. That’s because there are over a thousand different cryptocurrencies out there for you to invest in.

That’s why we’ve picked out two of the big names to talk about.

Bitcoin

Bitcoin is the grandaddy of cryptocurrencies, to the point they’re almost synonymous to the uninitiated.

Bitcoin was the first decentralized cryptocurrency. Through the blockchain, its developer was also the first to solve the double-spending problem inherent to digital currency.

Since then, Bitcoin has escalated from strength to strength. In its early days, early adopters handed out bitcoins for free. In late November 2017, Bitcoin made headlines for breaking the ten thousand dollar mark on its exchange rate to USD.

Ethereum

Ethereum debuted in 2015, so it’s a lot newer than Bitcoin. But it’s perhaps the second best-known.

Technically, Ethereum is actually a platform, not the currency itself. Its crypto tokens are known as ‘ether’. But you’ll hear both used to refer to the currency.

Brand support and information campaigns have brought a lot of attention to Ethereum recently. So despite its young age and low value relative to bitcoin, it’s poised to be one of the big players.

Risk and Reward

Like any investment, investing in cryptocurrencies is a gamble. You can’t be sure it’ll pay off, so you need to know about the risks and rewards involved. Let’s take a look at some of the pros and cons:

Pro: It Could Be The Future

Worldwide currency could change dramatically as a result of crypto.

Investing in cryptocurrencies could make you an early adopter of an entirely new version of the worldwide economy.

No one living has seen such a potentially dramatic transformation of our economy. We can only look at previous bubbles to see the advantages.

Getting in on the ground floor could secure your place in a new, decentralized version of the economy we’re used to.

Con: The Second Mouse Could Get The Cheese

Crypto uptake is still low, even among the tech-savvy populace. That means there’s still scope for another currency to become more of a household name.

Throughout history, there are hundreds of examples of the difference between the first and the successful. It could be a major brand or government throwing in their lot with a new crypto. It could be better, more scalable technology.

Whatever it is, it could popularize a new crypto over one you’ve invested in.

Pro: Huge Returns

So far, the best-known cryptos show huge returns on initial investments. For a relatively small investment, you could see growth that smashes most equivalent types of investment.

The growth chart of Bitcoin must be seen to be believed. Crypto is smashing records month after month, and there’s no definite sign of a slowdown yet.

Con: It’s a Long Game

You can make a relatively quick buck on cryptocurrency. Bitcoin has gained about ten times its value in the past year.

But for serious investment, you’ll want to lock that money up for a long time. Bitcoins rise in value even over the last five years has defied description and blown away all expectations.

Serious investors aren’t just looking for high returns. They’re expressing confidence in crypto as a foundation of our future economy. It has more incoming with investing in homes with a few to capital growth over time than with flipping homes for a quick return.

Pro: Chances to Buy In

The volatility of some cryptos isn’t all bad.

Buying in at such astronomical exchange rates makes getting big returns over time harder. But it’s possible to “buy the dip” when a wobble emerges.

Successfully buying during a drop in the market means you’re set up for huge returns once the market bounces back. It Bitcoin’s case, every drop has lead to a higher value than ever before.

Just be prepared: during times of high demand, crypto sellers might struggle to meet demand.

Con: Volatility

And sometimes volatility is bad.

Bitcoin is the leading model for crypto’s potential. And Bitcoin continues to shoot up in value faster and faster.

But like a car on the highway, the faster it moves the more it wobbles. Bitcoin has had some major wobbles in its lifespan. And its extreme value means that those wobbles are on the magnitude of thousands of dollars.

Keeping with the car metaphor, some also see these wobbles as a prelude to it spinning out of control and crashing. No one knows for sure.

Investing in Cryptocurrencies Today

You can’t change the past, so there’s no better time for investing in cryptocurrencies than today. Don’t invest more than you can afford to lose, but take the time out to do some research, invest sensibly, and bide your time.

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