A guide to crypto investing
Let’s start at the very beginning. We’ll tell you about how crypto works, its origins, and how to buy, trade, and invest in crypto. Our beginner's guide to cryptocurrency will be your place for all things crypto here at CryptoGmblr. We’ll start you way back, more than 30 years, when the idea of a cryptocurrency was formed. Then, we’ll chat about how you can get your hands on some cryptocurrency. But that’s not all. You obviously would like to use your crypto for trading, investing, or buying. We’ve got you covered.
Guide to Cryptocurrency
Have you ever wondered where cryptocurrency originated and who started this thing? Probably some pretty smart people. The origins of crypto, especially Bitcoin, are quite fascinating. It’s veiled in mystery, as you’ll find out. And it wasn’t always smooth sailing; no, there were ups and downs.
What is cryptocurrency?
Cryptocurrency is a sort of virtual currency. Using these virtual or digital currencies, you can make payments online without using an intermediary like a bank. If you look at the word, you’ll see that “crypto” is the crucial element here. Crypto refers to encryption. Cryptocurrency transactions are encrypted with cryptographic processes to make sure that no one besides the authorized people has access to it. Cryptocurrencies are trendy trading and investment tools. They are also used for standard retail purchases to some extent.
We’d like to start this cryptocurrency for dummies guide with a history lesson. We can look back to 1998 and the idea of Bitgold from the mind of Nick Szabo, a pioneer in blockchain technology. Although Bitgold was never officially launched, many have speculated that the Bitgold idea was the forefather to Bitcoin, as the protocols between Bitcoin and Bitgold share so many similarities.
In 2008, a paper called “Bitcoin - A Peer to Peer Electronic Cash System” was published by a certain Satoshi Nakamoto, now thought to be a pseudonym for a group of people. The first transaction of Bitcoin took place between “Nakamoto” and a person called Hal Finney on the 12th of January 2009. In Feb of that year, somebody bought two Papa John’s pizzas with 100000 Bitcoin. If the person only knew what they would be worth now.
Since then, the value of Bitcoin has soared, and it was joined by other cryptocurrencies, such as Litecoin, and the very popular Ethereum, which uses smart contracts on the blockchain. The crypto world has had its setbacks. We’ve seen a quick drop in the value of coins and exchanges being the target of hackers, such as the Mt.Gox saga back in 2014 when 850 000 Bitcoin went missing. However, Bitcoin and cryptocurrency have come a long way and entered the mainstream, with many investors and traders taking to it.
Cryptocurrency - an investment journey
In the next section, we’ll discuss how crypto works, how to get or purchase your first crypto, and how to invest and trade. Don’t be intimidated; it’s really not too complicated!
How cryptocurrency works for beginners
Our “How does cryptocurrency work for dummies” guide will now turn to the underlying process on which cryptocurrency is built. We think it’s best to start by explaining the principles and technology behind cryptocurrency, so we’re all on the same page; the most important of these is blockchain technology, which was developed in conjunction with Bitcoin. The blockchain is a ledger of information, in this case, transactions shared across a network of computer nodes. The blockchain stores information in a digital format, which cannot be deleted. The blockchain can be seen as a ledger with a history of transactions in chronological order. How is information stored on the blockchain, you might ask? What happens when you make a transaction in cryptocurrency, such as Bitcoin? As this is crypto for dummies guide, we’ve broken it down into a few easy steps to explain the process.
- The first thing would be to initiate a transaction in cryptocurrency. Whether you are paying for services or maybe making a deposit to do some crypto gambling, it all works the same. It will initiate the whole blockchain process.
- Next, the transaction will be sent to the network of computer nodes. The peer-to-peer network is globally and not centralized in a single area. It’s a key element that makes using crypto appealing. There is no central authority that regulates the process.
- These computers then compete with each other to solve equations using computer algorithms. It’s what is called “mining.” The crypto miners use high-end PCs to solve these equations and validate the transactions.
- When the transaction has been validated, they are lumped or clustered together in a “block.” Once a block is filled with information, the block is then chained to the previous block. It will form part of the blockchain, containing all the previous records of transactions.
- After this is done, the cryptocurrency transaction is officially completed.
The blockchain is decentralized, and this provides a critical element of protection. No single person can go and corrupt the information on the blockchain, as it is stored on numerous nodes on a network. Also, for the transaction to be validated, most nodes on the network need to agree that the transaction is valid. The method to reach this consensus is called PoW (proof of work) or proof of stake (PoS). With these methods, the blockchain can ensure that there are no bad transactions such as “double spends.”
How to buy a cryptocurrency for beginners
Before you can start investing in crypto, you will need to acquire some crypto. The easiest way is to head over to your friendly crypto broker. A crypto broker will take all the hassle out of buying crypto, and the interfaces are usually beginner friendly. If you’re a little more experienced, you can try to buy directly from a crypto exchange. A crypto exchange is a platform where buyers and sellers go to trade crypto. However, the exchange is more complex with charts and different trade types, and it could potentially be intimidating for a beginner.
Choosing the right cryptocurrency to buy would depend on several factors:
Bitcoin and Ethereum make up more than 60% of the entire crypto market, indicating that they make up a good chunk of the market. They are good options to choose from.
Our crypto for dummies team would suggest you consider the total number of coins available. If crypto has a limited number of coins available, the value will go up inevitably as demand grows.
every coin has a White Paper available to read where you can learn the developers' mission for the coin.
the more use cases a cryptocurrency has, the more acceptable it can become in the mainstream. It shows the potential to become more valuable.
each investor has a unique tolerance to risk. Here, you must take into account your emotional response to a change in the market. Some coins are more volatile than others, but crypto, on the whole, is quite volatile.
We’ve also included a short guide to cryptocurrency trading in this article. You’ve purchased some coins of your choice, and you know your risk tolerance. Trading is a bit more complex because you must focus on specific indicators. One is crypto market sentiment, which can be described as the investor’s overall feeling or attitude toward a particular crypto asset or coin. Accounting for the market sentiment, combined with other analysis tools, you can predict or speculate how the cryptocurrency market is expected to react due to certain factors, for example, a tweet from Elon Musk. You can pick your entry and exit points to be the most profitable. Now that you know a thing or two about how to make trading moves, we can look at cryptocurrency investing for dummies, which will assist the aspiring crypto investor in you.
Investing in cryptocurrency for dummies
You don’t have to be an expert in investing in crypto. However, cryptocurrency investing is certainly not for the faint of heart. Luckily, you’ve already established that you have enough risk tolerance to hold on for dear life. The first golden rule would be never to invest more than you can afford to lose, especially with the volatility of the crypto market. Never invest money you are saving up.
Furthermore, when investing, you must create a risk management strategy that best suits you. If you are simply going to buy a coin as a long-term investment, your strategy could just be never to sell. Maybe you are investing in crypto short-term. If so, your strategy could include setting rules for yourself, such as selling your crypto asset if it falls a certain percentage. A short-term plan like this can minimize your loss.
Conclusion - do proper planning
We’re glad you made it to the end of our investing in cryptocurrency for dummies guide, and we hope you can take a few tips and tricks away to start your investment journey. Remember, when you're starting out, you can always refer to this guide to crypto trading and investment. Trading and investing in crypto, or any asset, is an art. Your skills will improve with time and as you learn how to use all the various techniques and indicators at your disposal. Remember, take it slow and stick to your budget.
Crypto for dummies FAQ
Choosing the right cryptocurrency to buy and invest in depends on many factors. These include the price and long-term market sentiment. You can learn more about choosing the correct crypto for you by giving our handy guide on cryptocurrency investment and trading a read.
There are many ways to buy crypto. It would all depend on your level of knowledge and expertise, which will most likely dictate where you will make your first crypto purchase. We discuss crypto exchanges and brokers in our guide to crypto for dummies for more information on acquiring some crypto assets.
When investing in crypto, you need first to establish if your investment will be long-term or short-term. Your investment strategy would guide you when you need to sell your crypto. Our guide discusses this in more depth.