After a short hiatus, it is time for me to start blogging again; so at the request of my wife, I will be examining the basics of crypto currency investing.
So say you’re like my mother in law and want to start into investing in crypto, I can tell you for a non techy its intimidating. The first thing you need to understand is what is a cryptocurrency and how does it work? Read on and enjoy!
A crypto currency is in its essence a giant spreadsheet or ledger, this spreadsheet is stored in multiple computers called nodes. This spreadsheet is structured as a single list that lists every transaction that has been made. When you make a transaction you add another link to the list by submitting your proposed addition to a node. This addition is called a block. Now you might be thinking how is that secure people can just add random entries wherever. That is where the crypto comes from. Crypto or cryptography has a technique called hashing. This hash is a mathematical formula that turns a string of text (or a block) into a very long string of text and numbers that act like a fingerprint. When you add a block to the blockchain it includes the hash of the block before it. This process enables the chain to ensure that all entries are in their correct order and have not been tampered with. There are many blockchains, each one has its own pluses and minuses, we analyze those technical aspects as part of our investment decision. So now that we have an understanding of the basics of blockchains and what crypto currency is and how it works lets get into the practical how to invest in crypto currency.
Step 1, DO YOUR RESEARCH
You should do atleast some research into the coins you want to buy, what exchanges they’re on, and why you think you should buy them. For this you will want to consult a trusted friend or a financial advisor. (PS I am not a financial advisor in any way remember that when you read my posts)
Step 2, Turn Money Into Crypto
This step is where the rubber meets the road, to start the easiest and most accessible way is to use a service called Coinbase. (Click that link coinbase.com/join/sponab_3. to help me out its my affiliate link).
Step 3, Hold Your Crypto Securely
Each crypto currency has a piece of software called a wallet you use to store it. The exact steps will again vary but at some point in their setup you will be asked to record some words. IT IS ESSENTIAL you write them down and secure them where you wont loose them. If you fail to do so you will loose access to your cryptocurrency FOREVER. Once you are done you will send your coins from Coinbase to your wallet.
Step 4, Going Beyond
There are various strategies involved in this and it is an entirely different discussion. It is my belief that most of the real gains are going to be seen in coins not listed on Coinbase. To access them you will need to use exchanges, these exchanges will only accept deposits in the form of crypto. So you need to buy a crypto on Coinbase and send it to these exchanges.
Step 5, Taking Profit and Cutting Losses
Ok so you hit a moonshot (crypto who skyrocketed in value), you don’t want to be thinking, ”what do I do now?” when they come. This is because highs don’t last long. You should research and plan what amount you will take out when AND where you’re going to put it. Talk to your crypto mentor and a financial advisor to find guidance in how to plan.
Ok so how do I make money, some people simply sit and hold their crypto, this is called hodling (yes the spelling is correct). This is the tactic I recommend to new investors. Some make money day trading, which is buying and selling crypto currency in the short term to make money off of the ebb and flow of the current price. Daytrading is much more advanced and should not be attempted by beginners until they are comfortable with the use and management of ALL of the systems and concepts described above.
Good luck, there is serious money to be made in crypto land, its a fun and rewarding community to be involved with. But remember, do not invest money that you cant afford to loose and be responsible