How to Invest in Cryptocoins, Make sure you understand how cryptocoins work before investing in them
Investing in Bitcoin and other cryptocurrencies is becoming more common as the technology’s popularity grows and the media promotes those lucky enough to have made it big by investing early.
How does investing in crypto work though and where can you even buy Bitcoin and store it? Here’s everything you need to know about investing in Bitcoin and other cryptocoins before making any major decisions.
Where to Buy Cryptocurrency
The easiest and most reliable way to buy Bitcoin and other cryptocurrencies is through an established online service such as Coinbase and CoinJar. Both of these companies allow users to purchase different cryptocoins via a variety of payments methods, including credit card, and they can also buy your crypto back off of you whenever you want to sell it in the future.
Where to Store Cryptocurrency
For relatively small amounts of cryptocoins (worth under $1,000), keeping them on Coinbase and CoinJar after the initial purchase is usually fine. For larger amounts however, it’s highly recommended to invest in a hardware wallet made by Ledger or Trezor.
Hardware wallets protect the access codes to your cryptocoins on their respective blockchains and require the pressing of their physical buttons to make a transaction. This added layer of security makes them essentially malware and hack proof.
Most banks, if any, don’t offer cryptocurrency storage so securing your investment is entirely up to you.
Understanding Crypto Lingo
When investing in cryptocurrency, you’re bound to encounter a variety of new words and phrases that will leave you scratching your head. Here’s some of the more-common crypto slang you’ll hear.
- Crypto: Crypto is simply short for cryptocurrency or cryptocoins.
- Blockchain: Blbockchain is the technology that most cryptocurrencies are built upon. Blockchain can be used for more than just making cryptocoins however and businesses have already begun implementing the technology to help secure data and improve efficiency in numerous fields.
- Wallet: A wallet is something that grants access to funds on a crypto blockchain. A software wallet is a program or app while a hardware wallet is an actual device. Hardware wallets are much more secure than software wallets.
- HODL: HODL is internet slang for hold. It refers to holding onto your Bitcoin or other crypto even when its price is falling or rising. Don’t sell your Bitcoin when it jumps 10% in value. HODL!
- Scam/Fake Coin: Cryptocoins that are created with the aim of misleading consumers are often referred to as scam coins or fake coins. They may be fully-functional cryptocurrencies but the general consensus is that they, and the people behind them, shouldn’t be trusted. One example would be Bitcoin Cash because many of the people behind it tell new investors that it’s the real Bitcoin when it isn’t. Bitcoin is Bitcoin, Bitcoin Cash is Bitcoin Cash. Always be weary of scam coins and make sure to research a coin properly before investing in it.
- Market Cap: Market cap refers to the total value of all of a cryptocurrency’s coins that are in circulation at one time.
Cryptocurrency and Taxes
Due to how relatively new cryptocurrency is, governments often change their stance on the technology several times a year. Because of this, it’s highly recommended to request the assistance of a tax specialist or financial advisor when filing your tax return if you own any cryptocoins.
Many people think that they can hide their cryptocurrency investments from the government but the reality is that many cryptocoin transactions can be traced and more and more companies are reporting crypto purchases made by individuals. Coinbase has even started giving information on users and their investments to the IRS.
Always keep a record of your cryptocurrencies and transactions. A free app such as Crypo Chart can be very useful for this.
Know the Crypto Risks
Everyone’s heard of the people who became millionaires by buying some Bitcoin for a few bucks over a decade ago. Bitcoin and other cryptocurrencies can increase in value very quickly but it’s important to remember that they can also decrease. And they often do.
As with all investments, never spend more than you can afford to lose. Crypto could make you millions or it could go to zero at any time. It always pays to be responsible and realistic with your financial decisions.
The aim of the information on this page is to educate the reader on the basics of cryptocurrency investing but it is not intended as financial advice or an endorsement for any specific cryptocurrency. Everyone is solely responsible for their own financial decision and a professional financial advisor should be consulted before making any major money decisions.