Cryptocurrency is undoubtedly still a speculative play in terms of an investment, and will likely remain so for the foreseeable future until the world becomes more accepting of the word Bitcoin as opposed to treating it like a penny stock. Despite this, the blockchain technology backing this new asset class has proven its worth in multiple areas, and seems to be here to stay.
This in mind, crypto as an asset is worth investigating, but where do you even start?
Do your research
You probably googled “what is Bitcoin?” before and skimmed over the Investopedia article about it, only to feel more confused and with some cool new terms to teach your partner. Yeah, we’ve all been there, and honestly, you don’t need to do anything more than that to be a good investor in crypto, but some basic education that makes sense sure would help.
Take a few hours or days and consistently research different cryptocurrency projects. Go through all the big names like Bitcoin and Ethereum of course, but also check the peripherals too. You don’t need to understand all the intricacies, but getting a grasp on each of the projects' use-case and purpose can help you determine if you believe in it and see it as a good investment.
Gather a rudimentary understanding of the principles of cryptocurrency and decentralization as a whole from multiple credible sources, and whether you go with a big name like Bitcoin just to dip your toes in, or become the next altcoin connoisseur, there’s something to be gained.
💡Tooltip. In addition to lessons we at Finny are building out on cryptos, this recent guide on Cryptoassets from the CFA Institute is worth digging into. Other free resources include 99 Bitcoins and 21lessons.com.
Pick an exchange you like and dip your toes
Cryptocurrency has to be bought through an exchange. Think of this just like a brokerage, only its sole purpose is to facilitate the exchange of cryptocurrency only. Because of this, fees to trade are also high. Some traditional brokerage firms also offer cryptocurrency as an asset that can be traded on their platforms, but the selection is usually limited.
Cryptocurrency is still in the early stages of its introduction to the world, and so the legislation surrounding it on a state by state and even worldwide basis is still a bit murky.
💡Tooltip. Research exchanges such as Coinbase and Kraken.
What to look for...
Exchanges are also not subject to the same rules as banks when it comes to insurance. USD held in your exchange wallet is usually held in various accounts with independent banks. This could be a money market account, classical checking, or even T-bills in some cases. This makes your money FDIC insured up to a certain amount.
Cryptocurrency though is not the dollar, and so it’s usually held by exchanges in “mostly” what’s called cold storage if you leave your coins on the exchange. In most instances where an exchange suffered any kind of breach, they maintain insurance to cover these losses. Every exchange is different though, and that’s why it’s important to take the time to investigate more than one.
Once you’ve taken the time to research, and are ready to pick an exchange and that certain coin, you’re at a great starting point and have come much farther than most. After that, it's then time to start learning about offline wallets and cold storage, which we'll surely get into another time.
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