Cryptocurrencies and blockchain technology have hit the mainstream. Celebrities are scrambling to hop onto the trend and are buying up NFT avatars to use online, while investors everywhere are buying the recent “dip” in bitcoin and altcoins. But not everyone is already “in” when it comes to crypto.
For those who haven’t taken the leap of faith into the next generation of money but want to learn about holding for the long haul, we’ve put together this beginner’s guide to buying your first cryptocurrency.
Understanding The Risks
Bitcoin and other cryptocurrencies are positioned as the future of finance. The general consensus is that it is still relatively early to invest in these technologies, which presents a high reward setup that doesn’t come without plenty of risk.
Cryptocurrencies are highly volatile, which is why many investors are advised to simply HODL (hold on [for] dear life). Other common and careful advice includes never investing more than you can comfortably afford to lose.
The final risk most often associated with cryptocurrencies is related to where you actually store the assets. The private keys protecting digital assets live online only, making them easily accessible by hackers and easy to lose access to. Users must store these private keys either themselves in an online hot wallet or cold storage wallet, or trust a third-party cryptocurrency exchange to custody the keys instead. Such exchanges could be vulnerable to a hack; however, new solutions are appearing as Bitcoin matures, such as Bitcoin ETFs that offer investors exposure to bitcoin price without needing to own the underlying asset.
Choosing A Coin
Not all cryptocurrencies are created equal. Each cryptocurrency has unique attributes, communities, or use cases. Bitcoin, for example, is primarily a store of value or payment currency, with a supply of only 21 million. Ethereum, on the other hand, has a supply of over 119 million and can run smart contracts. Other altcoins offer a variety of comparable or unique attributes.
No cryptocurrencies are immune to risk; however, the risk may increase further down the list of cryptocurrencies ranked by market cap you go. When approaching cryptocurrencies, investors should consider starting at the top with Bitcoin and Ethereum. The two primary crypto assets command the most market capitalization and provide the most liquidity and regulatory acceptance.
For those reasons, Bitcoin has primarily begun to gain greater traction with institutional investors, hedge funds, corporations, and more. Further research should be done into each individual cryptocurrency by individual investors before making a final decision on which to approach.
Where To Buy Bitcoin?
Where you ultimately purchase bitcoin is up to you. But be certain to put as much effort into researching and exploring your options as you would considering which coins to pick and choose. The platform you purchase from is often where many investors choose to store their assets – so security and reputation are everything.
The best advice is to seek a company or platform with a history or track record of servicing customers or any platform that offers the convenience of managing other types of financial accounts in the same place.
Avoid Bitcoin ATMs that charge massive fees and then leave it up to you to protect your coins. Also, never exchange bitcoins with someone you don’t know and avoid peer-to-peer platforms like LocalBitcoins.
With all of this in mind, you are ready to buy your first cryptocurrency.
