Two Essential Tools to Start Investing in Cryptocurrency
Cryptocurrency has become a global phenomenon in the past decade. One of the reasons that it has become so incredibly popular is that it is accessible for almost everyone.
As long as you have an internet connection and a little bit of money that you are willing to part with, you can start investing in cryptocurrency. You don’t need to pass a credit check or get permission from a bank to begin investing.
When you first start learning about cryptocurrency, it can be a little overwhelming, especially when articles get into the technical side of things. But the good news is that you don’t necessarily need to understand the technical aspects in order to invest. It really is one of the most straightforward ways to become an investor.
There are two essential tools that you need to manage a cryptocurrency portfolio: an exchange and a cryptocurrency wallet. You might have to do some research to figure out which option is best for you, but once you figure out your exchange and wallet, you will be ready to go.
I want to give you an introduction to both of these essential tools so that you know what to look for and what options are available. You also need to understand why they are so important.
A cryptocurrency exchange is simply the program that facilitates cryptocurrency transactions. You could have all the cryptocurrency in the world, but it would not matter if you didn’t have a way to sell or trade it. That is why you need a crypto exchange.
It’s easy to sign up for a cryptocurrency exchange, but you should be aware that you will have to prove your identity in a variety of ways. For example, you will most likely need to submit a photo of your driver’s license.
The reason that cryptocurrency exchanges have such stringent identity verification procedures is that they have to make sure that you’re not a scammer or a hacker. They don’t want robotic scammers inflating the market without making actual purchases.
This step is also vital because they will use some of the same identity checks to authenticate your transactions. It’s a lot easier to verify your identity if that information is already associated with your account.
Factors to Consider
There are dozens of cryptocurrency exchange websites available. Here are a few factors you should consider before you choose one in particular.
First of all, you have to choose one that is available within your country. If you travel between two different countries regularly, select an exchange that works for both.
Next, you need to consider how you will deposit money into the exchange and the fees that they charge for each transaction. If you don’t already own cryptocurrency, you should be able to use a bank transfer or a debit/credit card to deposit money into your exchange account.
Always compare the fees for the various exchanges that you are considering so that you can choose the one that is most reasonable.
Finally, you need to consider the kinds of trading and investing options that you will use. For example, some people like to margin trade, which is like taking a loan against your portfolio to fund further investments. That is a risky move, and only a few exchanges offer that kind of program.
If margin trading is important to you, choose a crypto exchange that has a built-in margin trading feature.
Examples of Exchanges
Here are three examples of cryptocurrency exchanges that you might want to consider.
I chose these three, in particular, because they showcase the variety of features that you might want to look for. Use these three recommendations as a way to get familiar with some of those features that might be important to you.
Coinbase is one of the most popular cryptocurrency exchanges because it has a reputation for being beginner-friendly. It also has a simple interface that makes it easy to use.
Compared to other crypto exchanges, the transaction fees are minimal, especially if you use a bank transfer. You will only pay 1.49% for bank-funded transactions, but you will pay 3.99% if you want to pay with a debit or credit card.
One feature that I really appreciate about Coinbase is that it gives you a variety of resources to learn about several different cryptocurrency options. In some cases, they will even give you a few cryptocurrency tokens after you watch some videos and take a quiz on different cryptocurrency brands.
One of the best cryptocurrency exchanges for investors is Kraken, especially if you want to invest large amounts and trade in a variety of currencies. Kraken uses a sliding scale to calculate their transactional fees, and it gets based on the volume of your trades each month. Their user interface has a lot of options that give you the ability to make massive investments.
Kraken is one example of a cryptocurrency exchange that offers a margin trading program. Depending on the eligibility requirements, some people can get loans for up to $500,000 to use for further investments.
Gemini is an exchange that focuses on security. Their security features include compliance checks, multi-factor authentication, and a cold storage system that stores your private keys and other information offline. They also have minimal fees and different options that depend on the types of investments you want to make.
If you are interested in mining cryptocurrency instead of just investing in it, Gemini is a good option for you. The drawbacks of the Gemini platform are that they only serve customers in the United States and the only two cryptocurrencies that they work with are Bitcoin and Ethereum.
Once you have chosen a specific cryptocurrency exchange, you need to choose a cryptocurrency wallet. Your crypto wallet is one of the most important pieces of the puzzle because it is the only way that you can keep your investments safe.
I don’t want to get into too much of the technical side of things, so if you want more details about how cryptography works, check here.
The important thing that you need to understand is that every cryptocurrency token has an associated encryption key, and every exchange user has a cryptographic address. Both the address and the key are a random combination of at least thirty characters.
Those codes have to match up if you want to sell or trade cryptocurrency because that is how the peer-to-peer network makes sure that the transaction is legitimate.
You have to protect your encryption keys because they are the only way to access your funds. If you lose your encryption key, or someone else steals it, you will have lost all of the money that you invested in the first place.
Why Hardware Wallets Are the Best Option
There are several different products that will help you protect your encryption keys, including paper-based wallets and cloud storage options. But I want to focus on hardware wallets because I think they are the best way to secure your information.
A hardware wallet is similar to a USB flash drive, but it has additional security features built into it through microchips. It stores your encryption keys on the device itself, so the only way to access those funds is to connect the wallet to your computer. You also have to authenticate each transaction by entering a PIN, a signature, or some other security mechanism.
Some people think that paper wallets are the way to go, but I believe that hardware wallets have some advantages over those. If you use a paper wallet, and you happen to lose or damage your encryption key in some way, there is no way to retrieve that information. Hardware wallets have built-in restoration features.
Think of restoration features the same way you would think about the process you go through when you forget your password to a particular account. You might have to answer some security questions that only you know the answer to, and then they will send a new password to your email.
The only way to reset your password is by answering those questions correctly and verifying that you are the owner of that email address. Restoration features work the same way. That is why I think hardware wallets have an advantage over paper wallets.
Examples of Hardware Wallets
Just like I did with the cryptocurrency exchanges, I am going to give you a couple of examples of hardware wallets.
- Ledger Nano S
These are not the only options that are available on the market, and they might not even be the best for everyone. You have to decide which wallet is the right one for you, but this should give you a place to start.
Ledger is a company that has a variety of hardware wallet options. I prefer the Nano S because it has some features that I like, but it is moderately priced compared to their other products. When it comes to security, the Nano S has a multi-signature security format that protects my information if someone else happens to get their hands on it.
The thing that makes the Ledger Nano S so great is that it works with a variety of cryptocurrencies. It is never smart to keep all your eggs in one basket, so I prefer to invest in multiple currencies, and the Nano S helps me protect all of them.
Another excellent example of a hardware wallet is the KeepKey wallet that works on the ShapeShift platform. It is moderately priced but has some attractive features.
For example, you can access the ShapeShift Integration exchange from the wallet itself, so you can easily and quickly sell or trade your cryptocurrency. Many hardware wallets are frustrating because it takes so long to move your crypto back to the exchange so that you can use it. So, this feature addresses that frustration.
I also like KeepKey because it has a straightforward back-up system. When you set up the device for the first time, it will automatically generate a twelve-word recovery sentence. If you lose or break your KeepKey, you can contact the company and use that sentence to regain access to your funds.
Once you have chosen your cryptocurrency exchange and your hardware wallet, there are only two other things that you need to get started as a cryptocurrency investor. You need a little bit of money and a connection to the internet. It really is one of the simplest ways to become an investor.
I hope that this blog has given you the tools you need to get started. Once you have invested in cryptocurrency, you can use it for online gambling. Check out these recommended cryptocurrency gambling sites if that interests you.