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Blockchain and Cryptocurrency, a Beginner’s Guide on how to Invest in Crypto

Bitcoin is a digital currency built on a peer-to-peer network and blockchain, a public ledger recording transactions. The entire system is founded on open-source software created by a computer scientist known as Satoshi Nakamoto, whose identity remains unknown.

Posted: 15th January 2024 by Andrew Palmer
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It is not subject to third parties or central authorities and protected by cryptography, it remains free from inflation. Without political forces or corporations able to alter this order, there is no possibility of inflation in the system. Various cryptocurrencies exist, with Bitcoin having the largest market cap and global liquidity. It possesses several attractive properties for its users. Asma Salman and Muthanna G Abdul Razzaq outline cryptocurrency regulations through blockchain technology in the present-day digital era.

The Bitcoin network is advantageous due to its complete decentralization. There is no central bank authority for money supply, and transactions occur 24/7 without regard to country borders, making it highly international. The coins cannot be forged, copied, or spent twice, ensuring the integrity of the field system. Payments made are impossible to cancel, and transactions are both anonymous and secure through cryptography and digital signatures. Bitcoin stores transaction history in a sequential block of blocks, providing transparency and anonymity. Companies can use unique Bitcoin addresses for individual transactions, ensuring full anonymity. The digging code applies the same algorithms as online banking, with transaction speed within minutes.

The transfer of funds between two parties is easier in Bitcoin transactions. Fund transfers incur minimal processing costs, allowing users to avoid large fees charged by most banks for online transactions. Public and private keys are used for security purposes. Each wallet holder can make payments to anyone, anywhere, and any amount, with no transaction being preventable or controllable.

There are three main vehicles for investing in crypto: stocks and ETFs, which offer ease of access and management but lower potential returns; crypto exchanges, with added risks and variable fees, providing a more reasonable selection of Altcoins; and on-chain investments, which require market knowledge and experience, offering real profits but with higher risks as security is the investor's responsibility.

Investing in cryptocurrencies involves various approaches, each catering to different preferences and risk appetites. One option is to invest indirectly through stocks and ETFs, allowing investors to gain exposure to the cryptocurrency market without directly holding digital assets. This method provides ease of access and management but may yield lower potential returns compared to direct holdings. Alternatively, investors can utilize cryptocurrency exchanges, online platforms facilitating the buying, selling, and trading of digital assets. Choosing a suitable exchange requires consideration of factors such as fees, security measures, liquidity, and the variety of available altcoins.
For a more hands-on approach, on-chain investments entail directly holding and managing cryptocurrencies using private wallets. This method demands a deep understanding of the market, as investors navigate emerging projects and altcoins. While offering potential for higher profits, on-chain investments also come with increased risks, especially concerning security, as investors are responsible for safeguarding their private keys and managing self-custody wallets.

Successful cryptocurrency investing requires diligent research and due diligence. Before making any investment, it's crucial to thoroughly understand the projects and tokens under consideration, evaluating aspects such as technology, team expertise, use case, and community support. Diversification is another key strategy, spreading investments across different cryptocurrencies to mitigate risk and protect against poor performance in a single asset impacting the entire portfolio.

Crypto wallets are relatively new, requiring time to understand, and investing without proper knowledge may pose a high risk, including susceptibility to cyberattacks. Payments cannot be cancelled, and refunds depend on the recipient's discretion. For those less familiar with the intricacies of the cryptocurrency market, seeking professional advice from financial advisors or experts can provide valuable insights. Prudent risk management is essential in the volatile cryptocurrency market. Investors should set clear goals, timeframes, and risk tolerance levels, only investing what they can afford to lose. Tools like stop-loss orders can be employed to limit potential losses in the face of adverse market movements. Staying informed about market trends, technological developments, and regulatory changes is crucial, as the cryptocurrency landscape is dynamic and subject to rapid evolution. Investing in cryptocurrencies demands a combination of research, adaptability, and a cautious approach to navigate the dynamic nature of this emerging financial landscape.

Article by: Joy Serena Evenden

This is information – not financial advice or recommendation

The content and materials featured or linked to Finance Monthly are for your information and education only and are not attended to address your particular personal requirements.

The information does not constitute financial advice or recommendation and should not be considered as such. Finance Monthly Magazine is not regulated by the Financial Conduct Authority (FCA), it’s authors are not financial advisors and it is therefore not authorised to offer financial advice.

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