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Cryptocurrencies are no longer niche assets used only by cryptographers, dark web users, and cypherpunks.
It was estimated that over 560 million individuals worldwide will own cryptocurrencies in 2024. Many invest in cryptocurrencies expecting future profits, while others hold Bitcoin (BTC) and stablecoins to protect their wealth against inflation and fiat depreciation.
If you want to learn how to get into crypto, we have written this guide to help you understand cryptocurrencies and start your investment journey in digital assets.
Key Takeaways
- Estimates suggest that over 560 million individuals worldwide will own cryptocurrencies in 2024.
- People invest in cryptocurrencies for speculation, diversification, decentralization, and store of value.
- Centralized exchanges are the easiest places to begin your crypto investment journey.
- Binance, Coinbase, and Kraken are the most popular CEXs in the world.
- Self-custodianship is a big part of owning cryptocurrencies.
- Show Full Guide
What is Cryptocurrency?
Cryptocurrency is a digital asset that is secured by cryptography technology. Unlike fiat currencies that are under the control of governments, cryptocurrencies like Bitcoin are decentralized.
Decentralized cryptocurrencies do not need a centralized operator (central banks and commercial banks in the case of fiat currencies) to issue money and facilitate transactions.
Instead, cryptocurrencies depend on a community of independent miners or validators to facilitate peer-to-peer (P2P) transactions.
How Cryptocurrencies Work
Cryptocurrencies exist on top of blockchain ledgers or databases that store transactions and manage user accounts.
Each time you make a payment on a cryptocurrency network, a community of independent miners or validators process and validate your transaction.
Then it gets grouped with other pending transactions into “blocks.” Each valid block is linked to one another chronologically to create a chain of blocks, hence the name “blockchain.”
To incentivize decentralized participation and honest activity, miners and validators are rewarded with newly minted cryptocurrencies when a new block is added to the ledger.
The community of independent miners or validators keeps each other in check by verifying every block. A proposed block is added to the blockchain ledger only when its content is agreed upon by the network of miners or validators.
The process by which the network participants reach a general agreement on the validity of a newly proposed block is known as the consensus mechanism.
Why Do People Invest in Crypto?
There are various reasons to invest in cryptocurrencies.
They include:
Five Tips on How to Get Into Cryptocurrency
If you are thinking about getting into cryptocurrency investing, these five tips will guide you:
DYOR is a common phrase among investors. The crypto market is infamous for scams and rug pulls. Therefore, it is important to always conduct your due diligence before investing in any crypto token. Do not fall for market hype or get influenced into buying a scam token.
Before you invest in a token, make sure you understand how the underlying crypto network works. Deciphering how a cryptocurrency is different from a competitor will enable you to invest your hard-earned money in the right places.
Investing in cryptocurrencies is not for the faint of heart. The crypto market is highly volatile, and token prices react to different market forces compared to traditional stock markets. If you plan to start crypto trading, be prepared for the possibility of steep price drops.
Having a clear investment goal will help you in your crypto investment journey. Ask yourself whether you want to invest in cryptocurrencies to diversify your portfolio, make outsized market returns, or support the future of decentralized money. Plan your path accordingly.
Cryptocurrencies are all about self-custody, meaning that you alone are responsible for safeguarding your digital assets. Read about incidents on how crypto users have lost access to their tokens and learn how to use self-custodial crypto wallets.
How to Find High-Potential Crypto Projects
Finding high-potential crypto projects is no easy feat. However, with research and effort, you can learn how to invest in crypto sensibly.
Check market cap
Market capitalization of a cryptocurrency refers to the total market value of a crypto token. It is computed by multiplying the total number of circulating tokens by its market price. Crypto projects with high potential are sought after by investors therefore they tend to have high market cap.
For example, Bitcoin is the largest crypto by market cap in the world. Bitcoin holds a premium above other cryptocurrencies due to the popular narrative that Bitcoin has the power to replace the traditional fiat monetary system.
Check Tokenomics
Tokenomics refers to the study of the design and distribution of a crypto token. Tokenomics takes into consideration supply, inflation rate, burn mechanisms, utility, and other factors that can drive market demand for the crypto token.
For example, Ethereum (ETH) attracts high market demand due to its utility for gas fee payments. Additionally, Ethereum’s token-burning mechanism removes a certain amount of ETH tokens from circulation every day, keeping ETH inflation in check.
Use data aggregators
You can use data aggregator websites like CoinGecko and CoinMarketCap to find and research crypto tokens. These websites compile important market data, including price movements, trading volume, largest price percentage gaining token, and largest price percentage losing token, which allows investors to determine whether crypto has potential or not.
Evaluate social media
Social media websites and applications such as Twitter, Discord, and Telegram allow investors to evaluate crypto project communities, their founders, and their teams. These platforms also enable investors to evaluate the unfiltered public sentiment around crypto projects in real time.
Keep in mind that cryptocurrencies are a social movement. Without a growing number of users, a cryptocurrency will never take off and will die a slow and certain death.
How to Get Into Buying Cryptocurrency
If you are getting started in cryptocurrency, a centralized exchange (CEX) is the easiest place for you.
You also have the option of decentralized exchanges (DEX). However, we don’t recommend using DEXes to beginners investing in crypto due to the technical difficulties involved.
CEXs are crypto exchanges that are operated by a centralized company. They are popular for their user-friendly interface and easy fiat-to-crypto conversion methods (and vice versa).
Binance, Coinbase, and Kraken are the most popular CEXs in the world.
To start investing in crypto on a CEX, you will need to:
- Choose your exchange.
- Download the mobile application.
- Create an account using your email address and mobile number.
- Complete know your customer (KYC) processes.
- Deposit fiat funds using a credit card, debit card, net banking, Apple Pay, or Google Pay.
- Select crypto to buy.
- Buy cryptocurrency.
You can also gain exposure to cryptocurrencies via crypto stocks and exchange-traded funds (ETFs).
Stocks of Bitcoin mining companies will give you indirect exposure to Bitcoin.
Meanwhile, the approval of spot BTC ETF and spot ETH ETF in the US has enabled investors to gain exposure to the two biggest cryptocurrencies in the world directly from their stock market brokerage account.
If you are wondering how old you have to be to get into cryptocurrency, note that most brokerage firms and crypto exchanges require registrants to be at least 18 years old.
How to Store Cryptocurrency Safely
Self-custodianship is a big part of owning cryptocurrencies. If you choose to withdraw your tokens out of your CEX account, make sure that you know how to secure your self-custodial crypto wallet.
There are two types of crypto wallets: hot wallets and cold wallets.
Hot wallets are software wallets that come in the form of mobile applications and browser extensions. They are known as hot wallets because they are always connected to the Internet.
Cold wallets are hardware devices that are not connected to the Internet. They are considered the most secure type of crypto wallet.
To store your crypto safely, you have to protect the secret recovery phrases (SRP) of your crypto wallet. SRP is a set of randomized 12 or 24 words that give access to a crypto wallet.
Remember, anyone with the knowledge of SRPs in your wallet will gain access to your crypto tokens.
Make sure you don’t lose your SRPs as they are the only way to regain access to your wallet if you lose your mobile device, forget your password, or delete the wallet application.
Risks of Investing in Crypto
Let’s talk about the risks of investing in cryptocurrencies:
- Cryptocurrencies are highly volatile and risky investments.
- Cryptocurrencies are known to be scams and rug pulls.
- Crypto wallets can get hacked, resulting in the loss of crypto funds.
- Owning cryptocurrencies may be illegal in certain countries.
- Laws around cryptocurrencies are vague therefore, investor protection is not guaranteed.
- You will lose your cryptocurrencies if you lose your wallet’s private keys and SRPs.
- Crypto investment may be unprofitable following the emergence of new and better technology.
The Bottom Line
Getting into cryptocurrencies can be an exciting venture. You get the chance to discover new technology while profiting from smart crypto investment.
We would like to remind readers that crypto investment does not guarantee profits. Always conduct your research before investing.
This article should not be considered financial advice, it is for educational purposes only.
FAQs
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References
- Cryptocurrency Ownership Data – Triple-A (Triple-a)
- Bitcoin (BTC) Price, Real-time Quote & News – Google Finance (Google)
- Ether (ETH) Price, Real-time Quote & News – Google Finance (Google)
- Cryptocurrency Prices, Charts, and Crypto Market Cap | CoinGecko (Coingecko)
- Cryptocurrency Prices, Charts And Market Capitalizations | CoinMarketCap (Coinmarketcap)
