So, you want to get into cryptocurrency, but you don’t know where to start? This beginner’s guide will assist you in your journey.
Crypto is on the rise and despite having many troubles in the last few months, particularly due to the Chinese banning of crypto and it’s transactions, it’s still popular and recovering from the momentary loss.
What is Cryptocurrency?
Cryptocurrency is a virtual and digital universal currency, backed by the real-life value that people use to buy it.
A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.
A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.
Despite the hype, most cryptocurrencies are largely useless, as sadly the only one which has real-world high value is Bitcoin. Some of them have value in a charity-like state where the money invested goes towards developing a third-world country.
One of the best things about cryptocurrency is undeniably that it can make you more money when you invest before it gains popularity. For example: a currency in popular demand can double in a few months like Ethereum did, which could double your overall profits.
However, there are undoubtedly disadvantages, and risks to using cryptocurrency.
What are the Risks?
One of the biggest risks is that it’s a gambling game. There can be little to no indications that a coin is going to fluctuate in popularity and cause a huge profit to those early investors. People NEED to understand the signs to know when this is going to happen, in order to minimise loss.
Another risk is that some currencies don’t really have a use apart from being “quick” profit-turners. This ultimately means that if interest is lost then it will most likely be dead in the water and never used again.
This risk ultimately means that if you don’t keep up-to-date with the progress of the coin you could end up losing all your invested money. Some coins even switch to a V2 variant which essentially erases the other coin. This can delete all value of the coin if you don’t upgrade in time.
Scammers and rugpullers are also a huge issue in the crypto community, and they can be hard to figure out. Subreddits on Reddit for cryptocurrencies can help significantly to see if other people suspect the coin you are looking at.
Make sure you know what you are getting into, and if you aren’t planning to pay full attention to the coin, then only invest what you can afford to lose.
Which Coin do I Choose?
There are way more than 16,000 cryptocurrencies out there to choose from, but which is the best? It can be hard to find a suitable coin to invest in, especially with the plentiful choices available.
Have a read of this article that lists 5 Important Cryptocurrencies to be on the Lookout For. Choose a coin you see potential in; not as high-value as Bitcoin but not too small. Something in between will do – something that looks potentially viable for profits.
What Sites Will Help Me?
There are many sites out there to help you along your journey – particularly:
All these sites give you an in-depth look into trending and upcoming coins. They can also show a statistical view of the rise and downfall of different currencies’ value. This paints a picture which you can use to predict what will happen next.
There are other sites, but these are the top dogs for cryptocurrency investment and are genuinely relied upon by countless investors, both amateur and expert.
How Do I Buy and Trade?
When to buy is one of the most difficult choices to make when navigating crypto. However, the process of buying is simple enough.
To buy a cryptocurrency, you usually need to buy some Binance Coin first and then swap it on an exchange called PancakeSwap or any other exchange app. It’s highly recommended to get a virtual wallet for your cryptocurrency, either TrustWallet, MetaMask and CoinbaseWallet as this keeps them safe and only allows YOU to access them.
Think of it as a bank vault of your crypto storage.
Some wallets allow you to buy currency from within the app using MoonPay, however, it usually has a minimum required spend of £50. It’s also recently become compulsory that you provide some sort of identification to prevent fraud.
Some people don’t agree with this identification process known as KYC (Know your Customer) as it feels like a breach of personal information. There are less and less ways now of overcoming KYC verification so the chances are you will need to provide this when buying currency.
KYC is, however, very useful as cryptocurrency is untraceable, meaning it would be easy for someone to buy crypto using stolen funds and then transfer it back to their actual bank account. The downside is that not everyone has a driver’s license, so if you are in dire need of buying a currency without an ID then you are out of luck.
How Do I Prevent Legal Issues?
Legality is a big issue when it comes to cryptocurrency, especially if you make a large sum of money. You must announce such a sum for your taxes, as it could be from an illegal source. If not, it can be legally classed as tax evasion if HMRC find out about it, as most income gets taxed.
Technically your profits from crypto counts as income – profits from stock investments do too. The easiest way to find out how to declare profits is to check the GOV website to see what you need to announce and how.
Hopefully you now feel more equipped to navigate cryptocurrency as a whole. Make sure you weigh the risks and advantages when looking at a coin and investing.
If you need any further help with anything financially related then please contact us here at Count today.