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A new investor’s guide to crypto

We take a look at all you need to know as a new investor to make your first crypto trade.

By LLM Reporters  |  December 15, 2021
Glossy coins with microchip pattern and most popular cryptocurrency

Cryptocurrencies have been taking the investment world by storm in recent years, and in 2021, we’ve seen the likes of Bitcoin and Ether surging to all-time highs that have garnered them more attention than ever. As these innovative digital assets move increasingly into the mainstream, big-name brands and businesses are racing to offer new ways for investors to spend their fortunes, and from luxury cards to high-end holidays, we can now buy and do a whole plethora of things with them that were previously just part of a pipe dream.

As a result, cryptocurrencies are quickly becoming a more attractive prospect, with just about everyone eager to claim a slice of the pie. And, with the string of online crypto trading platforms like now making it easier than ever for amateur investors to get started, we could be about to see the largest ever number of new crypto traders in 2022.

Here, we take a look at all you need to know as a new investor to make your first crypto trade.

What exactly is cryptocurrency?

If you haven’t heard of Bitcoin yet, then you’ve likely been living under a rock – but while the name might sound familiar, what exactly is it?

Bitcoin is currently the largest cryptocurrency in the world – that is to say, the largest of a number of digital currencies that are not linked to any country or government. Records of the whereabouts of these decentralised assets are held on computerised databases secured by robust cryptology, which relies on innovative blockchain technology to function.

Bitcoin is currently the largest cryptocurrency in the world

Most commonly traded as digital assets in a bid to make a profit, the art of buying and selling on cryptocurrency exchanges has already seen Bitcoin and its peers create numerous overnight millionaires over the years – but with high market volatility, you’ll need to have a high tolerance for risk and be able to hold your nerve when the going gets tough to come out on top.

What causes crypto price fluctuations?

So, we know that the cryptocurrency is volatile – but why is this so? Well, like the stock market, there are several factors that can dramatically influence prices, but in the crypto world, things move even more quickly.

Celebrities like Elon Musk are known to regularly influence cryptocurrency value, with the Tesla boss’ regular tweets about Dogecoin quickly sending the value soaring – but just a week or so later, the price will have typically plummeted once more.

Nevertheless, there are other factors that can have a longer-lasting effect, including political events and press coverage – positive or negative, and integration. In terms of the latter, digital assets like Ether have seen some promising growth this year due to the increased uptake of the Ethereum blockchain for other purposes, like security – and with many cryptocurrencies also becoming widely accepted as a means of payment for goods, they are now more valuable than ever.

The key crypto trading strategies

There are various different strategies used by professional crypto traders in a bid to make a profit and grow their fortunes. Day trading is one of the most popular, and is a fast-paced strategy where traders rapidly buy and sell currencies within a day to capitalise on short-term price fluctuations. If you’re a complete beginner, however, then you will likely want to opt for a less risky approach, as this can result in some substantial losses should you time the market wrong.

Hedging is another approach commonly employed by investors, and works on the premise of investments cancelling out some, or all of the risk of losses with another. If you want to hold coins whilst protecting yourself from market volatility, then it’s a good place to start, and allows you to hedge Bitcoin, Ether and the like by using financial tools to bet on the future price.

The global crypto market is showing signs of recovery and is currently valued at a staggering $2.18 trillion.

Another option is to ‘hodl’ – a term coined based on a typo and that refers to the holding onto of cryptocurrencies for a long period of time, no matter what is going on in the market. Quite why the spelling hasn’t been corrected remains a mystery, and it is still referred to as ‘hodling’ today. An easy strategy for new investors looking to learn the ropes, you simply buy at a good price, and play the long game – so, if you’re unsure exactly where to start as a newcomer, then try this.

Choosing the right cryptocurrency to invest in

Bitcoin is the obvious choice, and is tipped for huge growth once again in 2022 – but with prices already high, taking a chance on a newer and lesser known cryptocurrency could stand you in good stead if you’re prepared to play the long game.

Several ‘alt-coins’ – the term used to describe alternative coins to the original – have made some impressive gains this year, not least Ether. But according to some experts, the likes of Dogecoin and Shiba Inu – both of which began life based as parody coins – could also hold some promise in the long-term.

Currently, there is a lot of interest in the upcoming ‘metaverse’ – an immersive online world being built and created by Facebook, and which is likely to take a decade or more to bring to fruition. There are already many associated cryptocurrencies piquing the interest of investors, and they could be a clever bet for investors who aren’t in a hurry to rake in what could eventually be a substantial profit.

Of course, choosing the right investment once again depends on your tolerance of risk, and it’s worth noting that not every crypto exchange or broker is able to offer the full line-up of options, either –  so if you have a specific asset in mind before you start then be sure to ensure that you are choosing the right platform to get started on.

Disclaimer: Investing money 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.