Cryptocurrency is one of the significant financial breakthroughs that have happened since the advent of the internet and has been a game-changer for investors. These forms of digital currencies are increasingly becoming popular globally. The hype around crypto grew rapidly as more businesses, financial institutions and governments adopted the new currencies.
So, is crypto a technology, a currency, or a tangible asset for trading?
Crypto is basically a digital asset that is decentralized in nature and finite in number. Unlike traditional currencies, crypto is not controlled by a central authority such as a Central Bank or Federal Reserve.
Cryptocurrencies are created through a process called mining. It entails using complex problem-solving solutions using powerful computers.
Crypto adoption on the rise
Crypto adoption escalated in the year 2021 with a total net worth market value of $ 1.7 trillion in that particular year. Currently, there exist over 10,000 listed cryptocurrencies. Shocking, right? Some of the more popular cryptocurrencies include Bitcoin, Ethereum, Tether and Polygon, just to name a few.
Bitcoin takes the largest share of market capitalization amounting to $650 billion. Last year, El Salvador shocked the world by becoming the first country in the world to accept bitcoin as a legal tender-meaning all businesses within the country would accept payments through bitcoin.
Africa stands out as one of the fastest-growing crypto markets in the world. In mid-2021, crypto transactions peaked at $20 billion per month in Africa alone.
Kenya, Nigeria and South Africa host the highest number of crypto users in the region. Other African countries such as Zimbabwe and Ghana are slowly catching up to the crypto hype.
As crypto continues to spur the global economy, it is vital that new investors should understand crypto. But the space is ever-evolving, and anyone who’s just getting the hang of things will probably feel overwhelmed.
Sure, you don’t want to be left behind as the crypto ship sails. So, we came up with these five incredible tips every crypto noob should have in mind.
1. Always DYOR
You will come across the phrase DYOR as you creep into the space. This simply means ‘Do Your Own Research’. Before delving into any projects in the crypto space, it is wise to always do some research. Without the necessary information and data backing, investing in crypto will prove counterproductive.
You will need to evaluate the team behind the crypto or the project you prefer. A team with a strong background in related fields such as blockchain, finance or business is an indicator that the project stands a chance for success. You should also consider looking into other factors such as the founder, team track records, transparency, the community behind it, reviews and any existing passed candles.
Just as with any investment, crypto trading hosts a number of risks and pitfalls. Take Caution! The crypto space is still in its initial stages, therefore, it is still prone to market volatility. It still lacks any form of regulation from most authorities. As in the case of the FTX collapse, you may lose your funds and fail to recover.
This also calls for thorough research when you are choosing a crypto exchange. This is a platform that will facilitate buying and selling of your crypto. In recent months, several crypto exchanges were hacked and investors scammed. Hence, it is vital that you choose a trusted crypto exchange. Trusted crypto exchanges are Coinbase and Gemini, to name a few.
2. Play the long game
If you want to earn from crypto trading, then invest in the long game. Most scammers rely on short-term gains to trick new investors in the crypto space. Once the new investor is hooked, the scammers disappear with the investor’s crypto funds.
For long-term investments, many customers choose to stick to the top crypto coins in the market. Most investors consider Bitcoin, Ethereum and Tether as long-term capital investments.
However, when investing for the long term, always invest considerable amounts of crypto funds. It is tempting to invest large amounts into high-risk assets. This may financially cripple you.
Consistent growth over time shows how much an asset means to the market. Since crypto is a fast-paced industry, it is worthwhile for long-term investors.
3. Diversify your investment
A key strategy you need as you join the crypto space is learning how to diversify your investments. By this I mean do not put all your eggs in one basket. Diversification is a fundamental principle of risk management. By not putting all your money on a single investment you can spread out your risk and potentially reduce the impact of one investment’s poor performance.
This is essentially important in the volatile and high-risk world of cryptocurrency as the value of digital currencies can change rapidly and unpredictably.
Additionally, the crypto market is still relatively new and not understood. By investing in a variety of different currencies and projects you can protect yourself against the risk of investing in a washout.
4. Not your keys, not your crypto
Once you find a good exchange you can trade in, it is appropriate that you then acquire a crypto wallet. Crypto wallets are simply software programs that will enable you to store your private keys. Private keys simply act as your password to your wallet.
Unlike traditional bank accounts where a central authority governs your funds, these wallets allow you to own your private keys which you will use to access and manage your funds.
When choosing a good wallet consider the security features. Look for a wallet that uses industry-standard security features such as two-factor authentication, password protection and hardware encryption.
Other factors that you should consider include the wallet’s compatibility with the cryptocurrency of your choice, the ease of use and the reputation of the wallet provider.
It is also vital to know that there are different types of wallets such as hot wallets, cold wallets, web wallets and paper wallets. Each carries with it its pros and cons.
Cold wallets are the most preferred for users who want to keep their crypto assets safe without touching them for a long time. They store the private keys offline providing assurance of safety against situations such as theft and security breaches.
Crypto is just the tip of the iceberg
There is more to crypto than what you have heard or come across. Through blockchain technology, crypto assets have penetrated different spheres of the economy. There are also many other areas of the blockchain field that are worth exploring.
As you delve deeper you will come across areas such as DeFi, metaverse, and NFTs among other hot topics.
DeFi (Decentralized Finance) engulfs the financial applications built on blockchain technology such as lending, borrowing and trading platforms. You can use these platforms to access financial services without the need for a central authority.
Metaverse is also another hot topic. The term metaverse simply describes virtual worlds built on Blockchain technology. These worlds can be used for gaming, socializing or even conducting business.
Non-fungible tokens (NFTs) on the other hand are digital assets that are unique and cannot be replicated. They are used to represent ownership of digital items such as artwork collectibles and virtual real estate.
These are just a few examples of the many innovative and exciting developments taking place in the blockchain field. The industry is ever-evolving and it is important to keep learning and stay up-to-date on the latest developments. You can easily stay ahead of the curve and take advantage of the many opportunities that the industry is yet to offer.
Keep exploring and learning more about this fascinating and dynamic space and check out other resources on our site to continue your journey in the world of crypto
