Investing In Cryptocurrency
Investing In Cryptocurrency, if you’re looking to invest in crypto, you need to have all your finances in order. That means having an emergency fund in place, a manageable level of debt and ideally a diversified portfolio of investments. Your crypto investments can become one more part of your portfolio, one that helps raise your total returns, hopefully.
Manage your risk
If you’re trading any asset on a short-term basis, you need to manage your risk, and that can be especially true with volatile assets such as cryptocurrency. So as a newer trader, you’ll need to understand how best to manage risk and develop a process that helps you mitigate losses. And that process can vary from individual to individual:
- Risk management for a long-term investor might simply be never selling, regardless of the price. The long-term mentality allows the investor to stick with the position.
- Risk management for a short-term trader, however, might be setting strict rules on when to sell, such as when an investment has fallen 10 percent. The trader then rotely follows the rule so that a relatively small decline doesn’t become a crushing loss later.
Newer traders should consider setting aside a certain amount of trading money and then using only a portion of it, at least at first. If a position moves against them, they’ll still have money in reserve to trade with later. The ultimate point is that you can’t trade if you don’t have any money. So keeping some money in reserve means you’ll always have a bankroll to fund your trading.
It’s important to manage risk, but that will come at an emotional cost. Selling a losing position hurts, but doing so can help you avoid worse losses later.
What is cryptocurrency?
Cryptocurrency is a type of digital currency that doesn’t rely on a central authority to verify transactions or create new units. Instead, it relies on cryptography to prevent counterfeiting.
Blockchain technology supports cryptocurrency. A blockchain consists of individual blocks of data that can contain information about anything, such as transactions made in a specific cryptocurrency. Each block of data makes a reference to the previous block, creating a chain of blocks. The reference uses cryptography to ensure the chain remains immutable so hackers are unable to change data.
There are thousands of cryptocurrencies in existence right now. That’s largely due to the ease of creating a new currency by using smart contracts. New coins can simply piggyback on an existing blockchain that already has a well-established network of computers verifying blocks.
How Crypto Work
- hey rely on blockchain technology. One of the major innovations behind cryptocurrencies is the use of blockchain ledger technology. These are public databases used to track transactions that can’t be changed once new information (a block) is added to the existing chain. This transparency and permanence helps make sure cryptocurrency isn’t duplicated, spent twice or otherwise manipulated.
- There are different blockchains. Cryptocurrencies may have their own unique blockchains. For example, there are separate Bitcoin, Binance and Ethereum blockchains.
- They are decentralized. People and companies around the world use their computers to help run the blockchains and get rewarded in return. Because the database and computing power is spread out, there isn’t a central authority—such as a company or government—that controls what’s happened.
- They are minimally regulated. While cryptocurrencies are relatively new and regulations can be murky, state and federal agencies have shown that they can and want to regulate them. But that doesn’t mean you’re protected or should trust everything you read on a crypto company website.
While the underlying technology is similar, you can invest in cryptos that are created with different purposes in mind. For example, Bitcoin was created as a digital form of currency, while other coins let you use certain crypto platforms or apps.
Choose a crypto exchange
Cryptocurrency exchanges are platforms where buyers and sellers meet to exchange crypto. These exchanges demand fees for their service. However, many tend to have complex interfaces that can make things discouraging for the first-time user.
Fortunately, there are more and more exchanges that offer beginner-friendly operation. But these beginner-friendly options usually come at a higher cost for users compared to the standard trading interface of the platform. So finding a broker suitable for beginners and advanced traders is the first step in your journey into the crypto world.
As a beginning crypto investor, you should also choose a platform that accepts “fiat currency” – a term used in the crypto space for traditional money such as euros or US dollars.
This is because some platforms only allow you to trade crypto for another crypto.
SMART VALOR ticks all the boxes as we offer:
- Enterprise level security standards
- Purchase crypto with fiat currency (CHF, EUR, GBP, USD)
- Low service fees
- An easy-to-use trading interface
- Crypto-friendly Swiss heritage