I recently received a request to write about crypto. Not my zone of genius! So when BitPrime, a crypto trading platform, got in touch, it seemed like a good time to team up on this topic.
What is cryptocurrency and how does it work?
‘Cryptocurrency’ – let’s break it down. Crypto is derived from words like cryptogram, cryptography etc. and means hidden/concealed. Currency is a unit of measure for money. Cryptocurrency is “concealed money”.
The first true cryptocurrency was bitcoin; created by an anonymous entity, Satoshi Nakamoto. Satoshi described bitcoin as a “purely peer-to-peer version” of electronic money.
Many cryptocurrencies like bitcoin are “created” by mining. Mining is the collection of resources like coal, metals etc., hence, the application of the term to cryptocurrency.
Crypto miners run powerful computers solving complex mathematical puzzles called cryptographic hashes. The purpose is to verify transactions and add them to a distributed ledger – a blockchain. The incentive for solving this puzzle is newly released “cryptocurrency”; essentially, a unique piece of code that can’t be duplicated or altered.
But, how does cryptocurrency have value? This part’s simple:
Choosing which cryptocurrency to buy
There are more than 16,000 out there – know what you’re buying first. Research the crypto company/developers, read whitepapers on new coins and follow trusted industry news sources like CoinDesk and CoinTelegraph.
Familiarise yourself with key industry jargon. Altcoins refer to any coin that isn’t Bitcoin. Stablecoins are those whose value is fixed to something tangible, e.g. USDT is pegged to USD. Investing in altcoins could yield an explosive return or perhaps not. Stablecoins might appeal to those with a lower risk appetite.
Bitcoin has the highest market cap while Ethereum ranks #2.
Market Cap = Current Price x Circulating Supply
Due to its extreme volatility, cryptocurrency is considered high-risk, so ‘don’t invest more than you can afford to lose’ definitely applies here.
At the end of the day, the best choice for you comes down to your comfort within the market, and your risk management, trading goals and strategies.
Whichever you choose, learn how to track performance to know whether to sell or buy more. CoinMarketCap has a wealth of tools and information, including a free portfolio tracker. CoinStats is a paid portfolio tracker that connects to your existing crypto wallets, provides daily market updates and news.
How can I buy, sell and trade crypto safely?
Retailers and brokers offer the most suitable environment for beginner-intermediate users or professionals/institutions short of time. A fiat-crypto or crypto-fiat transaction occurs between the two parties. A broker is essentially the middle man between you and the buyer/seller, whereas you deal directly with a retailer like BitPrime, who have their own crypto supplies.
With exchanges, you’re dealing with all other buyers/sellers listing on the said exchange. Pricing follows current market spot prices with multiple options to set the price you want to enter or exit. Exchanges are for more experienced investors or those who have the time to learn how trading exchanges work!
Regardless of how you buy, you need to store your crypto in wallets. Crypto wallets come in two forms, hot or cold. Both hold the cryptographic keys that unlock your coins stored on the blockchain.
Cold wallets are primarily offline until you’re sending crypto from them and include paper or hardware wallets. Hot wallets maintain an active internet connection and include software and exchange wallets.
BitPrime’s beginner’s guide to crypto wallets covers all of this in great detail.
There are many safeguards you can put in place to ensure your crypto stays safe. The most crucial is ensuring you create a backup, write it down and store it in multiple, safe locations.
Familiarise yourself with the latest scams, learn the signs to be wary of and what to do if you’ve been an unfortunate victim in BitPrime’s detailed Scam Guide.
Remember, if something seems too good to be true, it probably is. Don’t believe someone who cold calls you or starts a random instant messaging chat promising the latest, greatest trading platform guaranteeing returns of 150% in two days – no one can guarantee returns.
Is now a good time to consider cryptocurrency?
In general, due to the volatile nature of cryptocurrency, it can be hard to know exactly when the best time to buy and sell is. A study conducted by The Motley Fool stated, “looking at data from October and November, the very best time of day to purchase these popular cryptocurrencies generally was in the morning, and the earlier, the better.” However, it is important to note that analysis of historical data doesn’t dictate future markets.
Crypto is evolving rapidly but it’s not too late to consider it as part of your portfolio diversification. Still, it’s essential to always seek professional investment advice tailored to your specific situation.Always be sure to purchase from a reputable platform, keep yourself up to date on industry news, learn how to detect and avoid scams, and most importantly protect your wallet and its backup phrases!
The above references an opinion and is for informational purposes only. Do not take this as personalised financial advice or investment advice. The views expressed by the author do not necessarily represent the opinion of BitPrime or NZMuse.