Getting Started with Cryptocurrencies
It’s very difficult these days to avoid hearing or seeing some news about cryptocurrencies. Especially in 2020, when the prices crashed during the start COVID only to rocket upwards at the end of the year. This article aims to provide some introductory information on the subject as well as inform you how you can get started investing in various cryptocurrencies.
What are cryptocurrencies?
The following has a fair amount of crypto jargon, so if you’re mainly interested in how to invest in cryptos, skip ahead to the “How to Buy” section.
First, what is a cryptocurrency? Think of them as digital assets designed to work as a medium of exchange. Ownership and transactions are maintained on a ledger, which you can think of as a decentralized database that keeps track of this information. There are literally thousands of cryptocurrencies that claim different benefits and uses. Entire articles can be written on these and won’t be covered here.
There is no shortage of enthusiastic supporters of cryptocurrencies that seem to only have great things to say about it. Of course there are those on the other side (although the number seems to decrease year after year).
It’s always good to have an idea of the arguments for and against cryptocurrencies before you decide to invest. Some of the main arguments are highlighted below.
Some of the main criticisms of Bitcoin and other cryptocurrencies:
Currently Bitcoin and many other cryptos have a finite supply which is intended to mitigate inflation. Some claim that since it isn’t physical, the code can be altered and the total supply changed.
Cryptos have limited actual utility. Meaning that their ability to buy goods and services is not particularly widespread at the moment.
Buying into cryptocurrencies does not give you actual ownership of the underlying Blockchain technology.
Others refer to cryptos as a ponzi scheme and that their value relies on new buyers.
Some of the main praise for cryptocurrencies:
Conversely to #1 above, the finite supply can make them a store of value. Some call Bitcoin digital gold.
The underlying Blockchain technologies have important and growing applications in several industries.
Many believe the long term upside of cryptocurrencies greatly outweigh the downsides. Given the volatility there are opportunities to speculate and earn very large gains.
Since your name is not necessarily associated with your wallet(s), decentralized and not controlled by a bank or government, people like anonymity and privacy.
Here is a list of 10 popular cryptos:
How to buy cryptos?
Some popular exchanges with and any worthwhile notes. These may change so check directly with each exchange for the most up to date info.
Easy to use for beginners.
Largest cryptocurrency exchange in the U.S.
Earn $10 in Bitcoin when you sign up with Coinbase.
Easy to use for beginners.
Earn interest on your cryptos.
Earn $10 in Bitcoin when you sign up with Gemini.
Good security.
More suitable for investors trading larger sums.
Interface geared towards more experienced investors.
Easy to use.
Can be used to trade stocks and options as well as cryptos.
No ability to transfer to other wallets.
Earn a free stock when you sign up.
Easy to use.
Earn interest on your crypto holdings.
Use referral code ERIE8B to earn $25 in Bitcoin when you sign up and trade $100.
Easy to use.
Connect to your Brave Browser to monetize your BAT.
See our review on Uphold.
Sign up here.
Final thoughts
I did find a “rule” that I thought made a good framework for someone looking to dip their toes in crypto investing. We also have an article on the basics of investing that provide many overlapping concepts that can apply to the speculative market of cryptocurrencies.
Rule of Three
No more than three percent of your investment portfolio.
Dollar cost average with three percent of your income.
Have a three year time horizon.
Basically, don’t invest more than you are willing to lose, don’t try to time the market and don’t expect to make money overnight.
As an investor, you should be made well aware that buying and selling cryptocurrencies is a very volatile business. There can be large swings up and large swings down. In my opinion, with a longer term investment mindset, cryptocurrencies are worth the time, but be ready to stomach large gains and losses. Now that you have a bit more knowledge, do your own research to make sure crypto investments are right for you.