Money is playing a role other than just surviving and meeting daily requirements in today’s highly materialistic world. The world is turning to be more comfortable for people who have a lot to spend. The comfort of being rich is driving people to earn more through everything possible.
Crypto was looked upon with speculation in the initial phase as it was non-tangible but later as its value increased people started to see it as an asset or investment. A great amount of money is being invested in crypto from small to large investors viewing its long-term rise in value. Before getting into investing, understanding crypto is crucial. The article is a beginner’s guide to getting started in investing in crypto.
What is Crypto?
Cryptocurrency is a virtual or digital currency that does not require a central authority to regulate and works on a computer network called a blockchain. Blockchain is a type of Distributed Ledger Technology (DLT) that has its database spread across a computer network.
The data entered cannot be altered without the consensus of the network, it is immutable and the transactions, payments, and activities in the ledger are transparent. Crypto is also immune to inflation as there is a set amount of currencies to be mined, for example, the first cryptocurrency Bitcoin has a set number of 21 million Bitcoins expected to be mined by 2140.
The value of these currencies is rising over time due to scarcity. Crypto is created by a process called mining which requires great computational knowledge and infrastructure.
Advantages of crypto
The benefits attributed to crypto are what makes it so popular in recent years. It has a few advantages over the traditional financial system.
- Decentralization: No authority or organization controls the finances in crypto and hence it is decentralized. The transactions are peer-to-peer and the data will be stored in the blockchain.
- Inflation Control: To reduce inflation, cryptocurrencies have a hard cap or a set number of coins to be implemented in the market creating a scarcity that increases the value.
- Transparency: Users can see the transactions and all kinds of data related to their crypto wallet in the Blockchain Explorer. This transparency makes the users also involved in the financial market.
- Security: The blockchain technology and cryptography make crypto secure. There are private keys to get the exclusive access to their own wallets. To secure the assets from malicious networks, and hackers, they can be stored in cold wallets, and hardware offline.
- Faster transactions: Unlike traditional finances, transactions are faster without many complications. It only requires a high-speed internet connection and a system that supports the platform.
- Accessibility: Crypto can be accessed from anywhere around the world with a system like a PC or a smartphone that supports the crypto platform and high-speed internet. There are no international boundaries for payments in crypto.
- Anonymity: As crypto is decentralized, many platforms don’t even ask for KYC registration or personal details. Trading and investments can be done anonymously with a pseudonym.
Disadvantages of Crypto
Even though there are lots of advantages to crypto, there are some disadvantages that should be considered. Some of them can be negotiated with proper knowledge and preventive measures.
- Expensive and power-consuming mining: Crypto mining requires high-end computers that work for hours producing a lot of heat and consuming power. The cooling system consists of huge numbers of fans stacked together creating noise pollution and environmental and societal concerns. Mining also requires computational experts.
- Hard recovery and lack of refund policies: If the asset is lost, there are only a few theoretical methods of recovery that don’t have any guarantee. There are also not many refund or cancellation policies.
- Hacks and scams: As crypto is digital, it is also prone to online hacks and scams. Be cautious and use cold wallets, secure private keys, and seed phrases offline.
- Volatile: The value of crypto is volatile and alters based on different market trends.
Best Strategies to Invest in Crypto
- Investing what you can afford: The first and foremost strategy is to invest only what you can afford. Investing should come after securing all the living expenses and payments. It is advised to stick below 5% of your total earnings.
- Dollar-cost averaging: Make small and frequent purchases that are scheduled to be weekly or monthly. These can be automated through an exchange as well.
- Researching: Research thoroughly about current market trends, news and regulations, and the technology behind crypto and how it works.
- Using Safe Storage: It is safe to keep the digital assets offline rather than leaving them on an exchange for the long term.
- Sticking to popular cryptocurrencies and platforms: New and emerging crypto platforms might face some kind of regulatory actions or technical malware, hence stick to the popular and established ones.
Crypto Investing for Beginners
The best way not to exploit yourself with any investments is to invest what you can afford after securing the living costs. Invest only 1-2% in the beginning. It is also crucial to have more than basic knowledge about the current crypto trends. Stick to investing below 5% of your total earnings.
Conclusion: How Much to Invest in Crypto Per Month?
Investors who are new to investing in crypto are advised to start with 1% to 2% as the beginning. The amount to be invested in crypto per month is based on each individual’s monthly earnings. If the monthly salary is hypothetically $100, then crypto investment should be below $5. The best is to understand the market trend while you are beginning to invest.
If the asset value is low and is reported to be increased shortly because of some reasons, that would be a better time to buy assets. When the price of the asset rises, it is time to sell or trade. Always make sure not to drain yourself by investing everything you own in any kind of investment. Understanding transaction fees, regulations, the current trend, and market value at the time of infesting is crucial to avoid losses and benefit the funds in the long term.