Get equipped to make your first crypto trade with this guide from our experts.
With so many terms to learn and strategies to understand, crypto investing can be daunting for beginners and intermediate traders alike. We know — we were there once, too.
That’s why we created this ultimate guide to cryptocurrency investing for beginners: to help you work your way from your first trade to executing advanced trading strategies so you can experience all of the benefits crypto has to offer.
In this article, you’ll learn cryptocurrency basics, how crypto trading works, and easy steps to make your first crypto investment.
The world of cryptocurrency may seem overwhelming right now, but by the end of this guide, you’ll be ready to take that first leap into your wealth-building journey.
What Is Cryptocurrency?
At its most basic, cryptocurrency is a form of digital money.
The concept of digital money shouldn’t be too foreign — you’ve probably paid a bill online or transferred funds from one bank account to another on your phone, tablet, or laptop.
Using money as a medium of exchange or moving it around to settle bills, transfer funds, and pay for things is one of the cornerstones of the cryptocurrency market. But, unlike the paper bills you carry around, cryptocurrency only exists online. It’s not a physically tangible asset.
That means you can’t go to an ATM and withdraw a ‘physical’ Polkadot token. You’d first have to convert the Polkadot cryptocurrency into dollars before withdrawing those dollars from your crypto exchange or bank account.
Currently, there are over 18,000 different cryptocurrencies. All of them are secured, or created, by a cryptographic technology that makes the double-spending phenomenon nearly impossible.
Simply put, the double-spending phenomenon refers to scenarios where asset holders can spend the same asset twice. The technology that prevents that is called a blockchain.
What Is A Blockchain?
A blockchain is a digital database capable of storing transaction records in a secure, irreversible, and decentralized manner.
Think of a blockchain as a piece of paper used to record transactions, such as deposits, withdrawals, and trades.
Look closely at this “piece of paper” and you’ll see that it contains blocks of information (like cells in a spreadsheet). The unique thing about this specific “paper” and the blocks it contains is that you can only write on it — you can’t go back and edit or remove the content.
When you record a transaction in an empty block, a new block appears and links itself to all of the previous blocks, creating a chain of information. This is called a blockchain.
Similarly, when you fill all of the blocks on a page, a new page appears and links itself to the previous pages, creating a permanent and unchangeable record.
This is in sharp contrast to transactions involving traditional money. In those cases, retailers, financial institutions, and other organizations keep a record of the transactions in their own ledgers and exercise centralized control over the funds.
Cryptocurrency acts as its own ledger, so no single person or group (like a national bank or government) maintains control over the coin. And because the information in the record can’t be changed, blockchain-based cryptocurrencies are incredibly secure.
Crypto Basics: Terms To Know
Now that we’ve covered the very basics of crypto, let’s take a look at some important terms to know before diving in.
Coin / Token
As we mentioned, a coin or token represents a record of digital value stored on a given blockchain. Some coins/tokens have the same name as their blockchain, while others are stored on blockchains of a different name.
Bitcoin, for example, is stored on the Bitcoin blockchain, while the Lumen token is stored on the Stellar blockchain.
Most Popular Coins
There are thousands of cryptocurrencies available today with more coming online all the time.
However, some of the most popular cryptocurrencies include:
Bitcoin was the first cryptocurrency, created back in January of 2009. Its value has climbed steadily over the years, and it is currently one of the most valuable coins on the market.
An altcoin is any cryptocurrency that isn’t Bitcoin. The term can refer to anything from the second-most popular coin, Ethereum, to any of the thousands of cryptocurrencies that have appeared on the market in recent years.
A cryptocurrency exchange is a digital marketplace where users can buy, sell, and trade crypto.
A crypto wallet allows users to store, access, and manage their crypto funds. Wallets fall into two categories: hot wallets and cold wallets.
Hot wallets are those that online cryptocurrency exchanges offer to their customers. Cold wallets are those that store cryptocurrency offline (e.g., an external hard drive).
Decentralized Finance (DeFi)
Financial activities conducted without an intermediary — such as a bank or government — are considered decentralized finance. Examples of DeFi activities include earning interest on your crypto investments, staking crypto, and securing a loan backed by crypto.
Crypto For Beginners: Mining Versus Buying
When the first cryptocurrency came online more than a decade ago, you could use your personal computer to add transactions to the blockchain and create new coins or tokens.
Though mining is the only way to bring new coins or tokens to the market, the nature of its technology means that once you create a cryptocurrency — Ethereum, for example — every subsequent token becomes harder to mine.
To mine many of the world’s most popular cryptocurrencies these days, you’d need an extremely powerful, customized computer that might cost thousands or even tens of thousands of dollars to build and operate.
Because of this, it has become prohibitively expensive for most people in the crypto market to mine cryptocurrencies themselves. Instead, the vast majority of investors buy crypto using their local currency on an exchange or trading platform.
Crypto For Beginners: How To Invest
1) Create A Crypto Exchange Account
The first step toward investing in cryptocurrency is to create an account with an exchange, like Binance.US. This will give you the ability to convert fiat currency (money backed by a local government) into cryptocurrency.
Before choosing a trading platform, be sure they have features that work for you regardless of the crypto you choose to invest in.
Consider such features as:
- Low trading fees
- Ability to set recurring buy orders
- Numerous supported cryptocurrencies and cryptocurrency pairs
- Real-time order books
- Advanced trading API
2) Fund Your Account
The second step toward investing in crypto is to transfer funds from a traditional bank account to your newly created crypto exchange account.
Most trading platforms offer a variety of ways for you to fund your account, including:
- ACH (from a bank account)
- Debit card
- Credit card
- Wire transfer
We recommend verifying that the trading platform of your choice offers a funding method that’s convenient for you.
3) Select Which Token To Invest In
The next step, selecting a token, is important because the coins in which you choose to invest play a key role in the profits you can earn.
4) Choose Your Investing Strategy
A variety of crypto investment strategies exist, including day trading, HODLing, range trading, and dollar-cost averaging, but most fall into one of two categories:
- Long-term investing
- Short-term investing
Start by identifying how long you’re willing to commit to your investments e.g., days, weeks, months, or years, and then choose the long-term or short-term strategy that fits your goals.
Once you’ve settled on a strategy that works for you, you’re ready to access the features on your trading platform and start investing.
Expert Tips For Investing In Crypto
1) Research First
Before making any investment in crypto, be sure to research the tokens or coins you’re interested in.
Gather information from multiple sources, and always keep in mind that:
- Crypto markets are very volatile
- Many cryptocurrencies are so new that nothing is set in stone yet
- Even experts in one cryptocurrency may not understand the new cryptocurrencies coming online
The more time you spend researching, the better you’ll be able to protect yourself from the ups and downs of the cryptocurrency market.
We mentioned this briefly earlier, but it’s worth repeating here: Diversify your crypto portfolio so you don’t overexpose yourself to the peaks and valleys of the market.
3) Don’t Rush
The old saying “haste makes waste” certainly applies to investing in crypto for beginners.
Resist the urge to buy unproven coins you’ve seen hyped on social media. Unscrupulous individuals often use this method to inflate a token’s value, sell what they’ve got at high prices, and then disappear when the value crashes.
Again, research is essential before investing in any cryptocurrency.
Build Wealth With Binance.US
When you invest in cryptocurrency, the risks and rewards vary based on the token you purchase and the strategy you choose.
You can minimize risks by learning all you can before diving in, taking it slow, following the tips on this list, and partnering with the right exchange.
Whether your investment strategy involves trading every day or HODLing for the future, choosing Binance.US as your crypto exchange is the best way to maximize the rewards associated with crypto investing.
Sign up with Binance.US today to start building real wealth through crypto investing.
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