If you have some extra money in your wallet with an itch to get started in the crypto market, but don't know where to start, you've come to the right place! Cryptocurrency can look and sound like gibberish to anyone who has never had experience with stocks, trading, or technology. Do not fear! This blog will outline basic cryptocurrency knowledge that will, in return (hopefully), steer you in the right direction. This blog intends to help guide people through the terminology of crypto and certain things to look at when making your first purchase!
This is not financial advice.
This is just a guy who is interested in crypto trying to help others be a little more educated.
Let's start with the basics. What is cryptocurrency? Cryptocurrency (or crypto) is a digital currency that can be used to buy goods and services across the globe. Rather than currency being controlled by a bank, crypto is decentralized, meaning there is no one entity in control or regulating transactions. Power to the people, right?
So how does this work? Blockchain is the technology that allows crypto to even exist. Blockchains store data, including all transactions, into blocks and they are chained together on a singular network. This provides complete transparency for any members within a network. All data entered into decentralized blockchains is irreversible, meaning that each and every transaction meets finality once completed. Individuals, called miners, utilize massive amounts of computing power to mine new blocks on the chain. This allows blockchains to continue to grow block-by-block until the maximum amount of coins/tokens are met. These numbers are set by the foundation, and the crypto is traded within their respective communities. Transactions are signed, verified, and forever tied to the block they operated on. We won't really dive into mining in this blog though... that will be covered at a later date.
Thankfully, you don't need to be a miner in order to participate in crypto trading. It has the potential to be significantly profitable but, unless you have thousands of dollars laying around and wattage to burn, it's probably not going to be your first option. Trading in crypto can be just as profitable! Before you take that leap, just know that trading crypto is just like anything else. Only invest in what you think will be profitable in the long-term and only invest money you are absolutely willing to lose at any given second. I'll take you through what I look for prior to making that leap myself and why.
Personally, I look at four different things. Market Capitalization (Market Cap), Trading Volume, Foundation Information, and Storage.
-Market Capitalization-
Market cap is the total value of all the crypto that has already been mined. If you are trying to do some quick math to find out the values on your own, there is a simple equation to help you do so!
Market Cap = Number of Coins in Circulation x Current Market Price of a Single Coin
If you are utilizing a trading chart, such as CoinMarketCap, they display the market cap on each crypto for you. Market cap can indicate potential growth and the safety of your investment, but it doesn't always do that. The crypto market is volatile, meaning it rapidly changes either for better or worse. Market cap can also assist you in gaining an overall idea of the size of that specific crypto community, where it's headed by using historical data, and if your investment is, generally, safe.
-Trading Volume-
Trading volume is the total amount of crypto that has been traded that day with both buying and selling off. Since crypto transactions are fully transparent, you can find the volume yourself by calculating all transactions posted over a 24-hour period. Literally no one has time for that though, as there are typically thousands of transactions posted during that time for most of the market.
Thankfully, trading charts will allow you to see the trade volume without doing all the calculations. This is important because it gives you an general idea of how the crypto will be moving forward. Keep in mind though, as I mentioned earlier, the market is volatile and can change at any given moment for any reason. Remember supply and demand from your high school economics class? This applies here. Logically, the more people invested into a crypto, the higher demand for it. Less people invested? Well, the demand won't be as high. If there is a high volume of trades for a crypto, this will catch the eye of the investors and make them more interested in what is happening on the chart. Don't just check the charts for short-term data, check the one month, three month, and even year to see exactly how your crypto is trading. If you check the trading volume on a crypto for a 24-hour period only, this information could be skewed by a number of factors. The crypto could have been in the media, on the news, who knows! Checking the performance over longer periods of time will allow you to make a better-informed decision in the long run.
-Foundation Information-
Holy smokes, I cannot stress this enough. DO YOUR RESEARCH! Just like you are already researching the market cap and trading volume, heavily research what you are about to throw your money at. Numbers alone will do you absolute zero justice when finding a good investment... you need to see the backbone of the entire operation. It's pretty straightforward. Would you give some random guy on the street $100 because they told you that he sold a lot of "stuff" today and your investment would double tomorrow because he did a good job? I doubt it. If that is you, hopefully this article makes you stop and think!
Researching your foundation should be clear-cut and easy. A crypto foundation is comparable to a corporation in layman's terms. But it's not, so don't freak out. They usually have a protocol they follow, which is always available to the public, outlining their goals united with their stakeholders. They should always include a "Whitepaper", which is a document that is laid out by the developers of the foundation, outlining factual information, diagrams, statistics, etc. It is a tool to help sell the crypto to the market, but they do so by not relying on emotional factors. The foundation is typically open-sourced, meaning that anyone can view the source coding used in the blockchain technology. Transparency is key amongst the crypto world, so anything less than completely transparent is always a red flag to be considered. This is typically achieved through GitHub. Lastly, you want to ask yourself if this is something YOU believe in. Do you support this project? Do you want to be apart of it? Always ask yourself why this investment is important to you. Profiting is always a key factor, of course, but digging deep into why you would invest in something is always something to be considered. Read articles, forums, blogs, everything you can find on what you are about to invest in.
-Storage-
You did it! You did your due diligence and researched your crypto until your eyes hurt. You have a little extra money laying around, and you are about to take your leap. Congratulations! Welcome to the club! So now what?
You more-than-likely want to get your crypto off of the exchange when you buy it and into a crypto wallet. But why? When you hold your crypto on an exchange such as Coinbase or Binance.US, you don't actually own your crypto. "WTF? I spent my own hard-earned money on this... why don't I own it?" Because your exchange still does. Plain and simple - they own the keys associated to your crypto coins or tokens. If you want full ownership over your keys, you would want to get them off the exchange. So how do you decide which crypto wallet works best for you? I'll say it again... DO YOUR RESEARCH! There are a few good crypto wallets available directly on your smartphone.
Personally, I like the Exodus Wallet. It's simple to use, straightforward, minimal fees, and you can even earn APY on some crypto, meaning you earn crypto just by holding crypto! My favorite feature is that I can swap my crypto within the app. There are other good wallets also. If you look around, you will be able to find one that best suits your needs. Always check to see if your crypto that you are interested in can be stored in your wallet. This isn't always a deciding factor, but it's always beneficial to keep your cryptos stored off the exchanges. You don't want to wake up one day and have your cryptos be locked for no apparent reason. You want full control over your financial endeavors... at least I would hope!
I really hope that this article can help the newcomer to the crypto world. I am no expert, nor am I a financial adviser authorized to give financial advice. Good thing, because this is not financial advice. I am here to write about anything crypto and do my best in assisting people with getting the knowledge they need and deserve. Cryptocurrency is a fun, exciting way to potentially earn passive income. The different foundations and blockchains make the market seem daunting but, with the right steps in your research, this should become more seamless and easier to understand. Hang in there, do your research, and find out what crypto works best for you at this time!
I am not sponsored by CoinMarketCap, CoinBase, Binance.US, or Exodus in any way, shape, or form. These opinions are mine and are solely used for educational purposes only.
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