Last year we saw the cryptocurrency known as Bitcoin raise to almost $20,000 per coin in value, 20 times more than its original value of $1,000 at the beginning of 2017. Not only did this increase awareness in the mass media, but it also made a lot of online investors incredibly wealthy, especially those who invested when the cryptocurrency was only $22 per coin in 2013.
This type of money making might seem out of the average person’s league, but, in actuality, anyone can invest — from a college student with a hefty tax return to anyone with a spare hundred dollars. Here are a few tips, facts and cautions to know before plunging into the cryptocurrency world.
Bitcoin is Not Evil
Let’s go ahead and get a couple silly rumors out of the way. Many people may have heard about the “Dark Web,” a macabre part of the internet where usually criminals thrive and utilize cryptocurrency, more often Bitcoin. The “Dark Web” may or may not still exist, no one can be sure without finding out for themselves, but that also involves illegal activity which the average person usually doesn’t have time for. Because of Bitcoin’s reputation with this dark side of the internet, many people are cautious or completely turned off by the idea of investing in cryptocurrency, believing it to be illegal or used in illegal activities.
Although the perception of Bitcoin is twisted by this relation, there is no wrongdoing occuring as long as you’re not on the “Dark Web” itself.
“While it can be used on the ‘Dark Web,’ it is not a direct link,” University of North Alabama’s Student Web Developer Quint Glover said. “It would be similar to using physical currency to buy illegal paraphernalia. Bitcoin is not inherently evil.”
You Do Not Have to Be Tech-Savvy to Invest in Cryptocurrency
Another misconception with the online trade is being barred from getting involved because of lack of technological prowess. The process for “mining” or acquiring Bitcoins or other cryptocurrencies involve coding, utilizing spare computer parts and complicated mathematics, all things either too complicated or tedious to do for the average person. This route in investing may be far from parsimonious but the outcome does produce free cryptocurrency.
“You’re basically trading computer power for cash,” Glover said.
Mining is not the only way for people to become involved with cryptocurrency. The average person can invest physical money by converting it online, using a proof of stake model which a standard computer can handle. This model allows for investors to put forth tangible monetary value into whatever cryptocurrency they desire, just like buying stocks in the stock market. The following are a few popular exchange sites for beginners: coinbase.com, bitstamp.net, kraken.com, gdax.com, gemini.com.
Bitcoin is Not Your Only Option
Bitcoin may be the most popular in the news right now, but it is not the only cryptocurrency to choose from. Other cryptocurrencies include Litecoin, Ethereum, Zcash, Dash, Ripple and Monero.
Not only are people able to invest in these other cryptocurrencies, but investors can also convert cryptocurrencies they already have to other cryptocurrencies (e.g., bitcoin to litecoin). Utilizing sites such as coinshift.in, shapeshift.io or poloniex.com, investors can convert “coins,” just as someone would convert dollars to yen. Depending on the market, knowing this option could possibly save future investors from losing a significant amount of their money.
Understand and Pay Attention to the Market
Dealing with cryptocurrency is similar to the stock market. Paying attention to the rise and fall of values is important in the venture and the key to not losing ALL of the invested money. The same risks of investing in a business that is failing in the stock market is indistinguishable to investing in cryptocurrency that falls in value.
“It’s much faster paced, depending on the money you can put in you gain or lose a couple thousand dollars in a couple of hours,” said Mitchel Moon, Associate Director for Digital Communications in UNA’s University Communications and Marketing.
Unlike the stock market, cryptocurrency has no government involvement, meaning the people participating are the ones gaining and losing. There is no central authority over the currency while at the same time there is no insurance for the money invested. Cryptocurrency is run by the people for the people, so no matter what cryptocurrency a person invests in, the risk of losing money will always be a possibility.
“There is no guarantee you’ll make any money and no guarantee the government might take over,” Moon said.
Whether it be poor managing or government intervention, the risk is there, thus knowing the market and consistently checking the value of investments and keeping up with the news is important to protecting your assets.
Where to Get Started?
There are a few sites a person can utilize, such as Bitfinex, Poloinex and Bittrex, but since this is directed for beginners, let’s suggest Coinbase. Some sites only deal in a couple of cryptocurrencies, while sites such as Coinbase and Poloinex allow for multiple currencies which gives the investor more options for buying and trading.
The first action is setting up a digital wallet. This will be where funds will be sent and converted for cryptocurrency. Specific wallets are used for specific currency, meaning a wallet cannot hold more than one cryptocurrency. If a person decides to dabble in more than one cryptocurrency, they will need more wallets (one for each type) or they will not be able to trade properly and possibly lose money invested.
After creating your wallet(s) and setting up your investments, the next action should be to manage your portfolio. Fortunately, the average person does not need to become a master in Excel spreadsheets. There are multiple applications that can be downloaded on your phone such as Blockfolio and Delta. Creating a portfolio will help organize and keep track of every investment.
Once the person is all set up and organized, an important precaution would be setting up security. Do not use a simple password — this is money after all and no one needs someone hacking and taking all of their money. Setting up two- to three-way verifications is also recommended. It is better to have to use other accounts, emails, phone numbers, etc., and take time rather than having a flimsy password to guard your finances.
RESEARCH, RESEARCH, RESEARCH!
Now that we’ve gotten to the end, there is just one more important piece of advice. Research everything! Yes, this article may have directed you to the proper path, but it is still not a bad idea to research which site is more accommodating to your needs or which currency is more affordable for you at the moment.
Even after you find those answers, it is important to keep up with news and trends and be aware of what you have invested in. The market is always changing and being attentive to those changes could be either your greatest payday or worst mistake.