If you have been reading LLM – Luxury Lifestyle Magazine for a while now, you’ll know that we are very interested in the emerging world of cryptocurrencies. Once a fringe experiment for technological anarchists, digital currencies continue to edge into the mainstream.
Although more and more traditional investors, like those on Wall Street, are beginning to diversify into cryptocurrency as an asset, it has never been easier for casual investors to get into the crypto game, thanks to smart trading software like BTC Revolution review.
If trading software is not for you, here is our guide to dipping your toe in the waters of digital currency.
Disclaimer: Before we begin, we should make it clear that LLM are not financial experts, and the below article should not be taken as professional investment advice.
Step one: Do your research
Before you begin your cryptocurrency investment journey, you need to decide which coins you are going to target, and, ideally, understand the technology, known as blockchain, that powers them.
The blockchain is the decentralised, infallible ledger that registers all transactions of cryptocurrency – eliminating the need for regulation by region, or involvement from agents or nation states. This is an essential USP of cryptocurrencies as a whole, and what sets them apart from their traditional rivals, known as fiat currencies – like the dollar.
There is a common misconception that investing in crypto, particularly Bitcoin, is a get-rich-quick scheme. Of course, this has proven to be true in the past – and that perception largely exists because of the 2017 Bitcoin (BTC) boom, which saw the price of a single BTC rise from $750 to over $10,000 inside a year.
While Bitcoin is the best-known cryptocurrency, there are actually over 5000 coins traded on the market – and identifying which ones to invest in is the key to your trading success.
Step two: Buy your coin
So, you have identified which coin you would like to acquire to begin building your crypto empire – but where do you go to get it?
The answer is that there are a number of places to get started with cryptocurrency acquisitions, although Coinbase, headquartered in Silicon Valley, seems to be the platform of choice for the Western world’s crypto enthusiasts.
The process for purchasing cryptocurrency through platforms like Coinbase is as simple as making an order on Amazon. You simply create an account (known henceforth as a wallet) and link it to your credit card or bank account. Once you have done this, you can purchase a number of different cryptocurrencies, with Coinbase taking a small brokerage fee (which is higher if using a credit card), for exchanging your fiat currency for shiny new cryptocurrency.
Step three: Join the exchange
Although there is a section of the cryptocurrency community that simply indefinitely stashes their cryptocurrency in the hope that the market will do their work for them, (known in the industry as ‘hodl’-ers), small-holding investors tend to try and generate additional value by trading their cryptocurrency with others in the market.
In order to join this community, you’ll need to send your coins from your Coinbase (or other platform) wallet to an account on a cryptocurrency exchange – such as Binance.
To send your coin from your wallet to the exchange, Binance will generate a unique transaction code associated with your account, which you can enter into your wallet to establish the exchange. Be careful, though, if you enter the wrong code, there is no recall function.
Step four: You’re an investor
So, you have bought into the crypto community, and you’re itching to make your first trade. Where do you start? How does one separate the wheat from the chaff in terms of shrewd crypto investing?
That’s the billion-dollar question. Companies launch cryptocurrencies for a number of reasons, and you have to remember that, with the majority of alt-coins (short for alternative coins – i.e., not Bitcoin, Ethereum, etc.), you are effectively providing investment in small businesses and sole traders.
Fortunately, the majority of cryptocurrency initial coin offerings (ICOs – the crypto equivalent of crowdfunding), have a significant digital footprint. From the company’s website, through to Discord channels, sub-reddits, and price histories, you will be able to generate a good understanding of the coin’s direction of travel, and make a decision on whether to part with some of your valuable coin in search of returns.
Of course, there are also a decent number of scam or low-quality ICOs (known crudely as ‘shitcoin’ in the community), so be sure to check that the currency has legs before you commit to trading it into your portfolio.
Step five: Follow the data
Although the industry continues to become more stable over time, there remains a significant amount of volatility in the cryptocurrency community – particularly with the fledgling altcoins favoured by junior investors, so keeping on top of news surrounding your portfolio is essential to protect your investment.
There are a number of expert data sources that help you keep an eye on crypto trading as it happens, and it is this data that should ultimately drive your strategy.
Investing in cryptocurrencies carries risk, do so at your own risk and we advise people to never invest more money than they can afford to lose and to seek professional advice before doing so.