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Although it can be very easy to be distracted by all of the hype surrounding cryptocurrency, it is worth taking time to learn how things work. If you jump straight into buying different cryptocurrencies without giving it much thought, then you reduce the chance of your investments paying off. There are a number of things a beginner should know about investing in crypto. From doing proper research to understanding the different ways, you can invest in cryptocurrency, below we will go through some of the most important things to know about before you begin investing your savings into crypto.
Consider Why You Are Investing in Cryptocurrency
Before you decide to invest in anything with your savings, it is important to ask yourself why you want to invest in the first place. By doing this, you will have a better understanding of your motives for choosing to invest in crypto. For example, it may the that you only want to invest in cryptocurrency because there's major news coverage and investment space, and you simply don’t want to miss out. Alternatively, if you are interested in investing in cryptocurrency after doing proper research into the space and have weighed up the risk and rewards, then you will be better at understanding cryptocurrency, which will allow you to make a calculated decision on the type of crypto you want to invest in.
Secure Your Keys
When you invest in cryptocurrency will be given a private key which essentially functions as a secure password to access your crypto investment. If someone is able to access your private key for specific addresses for your crypto investment, then will be able to access all of the cryptocurrency that you use, so it is essential that you keep it safe and secure. When you buy cryptocurrency, it is stored in your very own cryptocurrency wallet, which automatically generates a key that is specific to that wallet.
If you lose this key to your specific cryptocurrency wallet, then you will never be able to access your funds ever again. So, it is imperative that you secure all of your private keys in either a cold wallet that is offline or through utilizing a custodial service that has a good reputation for being trustworthy and effective.
Get a Feel for the Industry
Before you start investing in crypto, one of the top things to do is to get a feel for how the industry functions. There are a number of different aspects of the crypto market that you should have a good understanding of how they function. You should avoid jumping into investing in a particular cryptocurrency because you read somewhere that it has a lot of potential and instead perform your own research.
There are thousands of different cryptocurrencies available to invest in, and therefore you must understand why a certain coin has value as a good investment and make your decision after weighing up your options thoroughly. Cryptocurrency utilizes blockchain technology which can take a while to get your head around how it works. By doing this, you will have more knowledge and control over how to manage your investments, and it will set you up for a better financial future.
Consider Hot and Cold Wallets
Using a hot or cold wallet is two of the different ways that you can store the cryptocurrency that you have bought. There are several differences between the two that you should be aware of. First of all, hot wallets are useful for those that participate in trading frequently and use their cryptocurrency to make purchases. However, the downside is that hot wallets are more vulnerable to things like theft and hacking. Cold wallets, on the other hand, are a lot more secure and are better for those that want to buy crypto and hold on to it for long periods of time.
Hot wallets can be accessed a lot more easily than cold wallets and also have a connection to the internet. Some examples of hot wallets include things like software wallets, mobile wallets and online exchanges. However, if someone with malicious intent is able to gain access to your hot wallet, then your cryptocurrency is a lot more vulnerable to theft. Cold wallets do not have a connection to the internet, which means they are a lot more secure than hot wallets. This comes with a price where it is a lot harder to make transactions with your cryptocurrency, which is held in a cold wallet.
The more time you spend trading cryptocurrency, the better understanding you will have of the type of investor you are, which will enable you to decide what type of wallet is best for you to store your cryptocurrency in. It is common for investors to utilize both types of wallets and keep the majority of their investments in cold wallets and the remainder which they are using to buy and sell actively in hot wallets.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.