Crypto Investing 101
If the thought of adding crypto to your investment portfolio in 2022 has been dancing in your head — don’t worry — you’re not alone. In fact, it’s hard to remember a time when cryptocurrency wasn’t mainstream.
With a market valuation of over $1 trillion, crypto is worth more than the world’s largest banks combined.
So, how do you get started? Let’s jump into some terminology so you feel more confident about diversifying your portfolio with crypto this year.
What is crypto?
Cryptocurrencies are a new form of currency that is digital and uses encryption techniques for security purposes. The transactions are recorded in a public ledger called a blockchain which is decentralized and not managed by any central authority like a bank or government.
Most people use crypto investing as an alternative to traditional currencies, such as the US dollar or Euro, because they believe that crypto investments are more secure than traditional currencies.
The first step to invest in cryptocurrencies is to set up an account with an exchange platform like Coinbase or Binance where you can buy and sell cryptocurrencies.
There are many different types of exchanges including Coinbase, Cashapp, Binance.us and more. Want to learn more about exchanges? Check out Investopedia’s 2022 list of their top picks.
In a nutshell = crypto is internet money.
What is blockchain technology?
No one really knows who is behind the pseudonym Satoshi Nakamoto, the creator of Bitcoin and blockchain technology.
But we do know that blockchain is a game changer. Blockchain is the building block that all cryptocurrency is built from — it’s a digital public ledger that records every transaction.
Each “block” of information is digitally verified and given a unique hash (or identity) and added to the public ledger.
Adding this new block creates a new unit (or coin) of currency.
However, blockchain can be used for more than just creating new currencies. Many organizations are using it as a way to improve their operations, specifically for complex and decentralized systems.
Non-fungible tokens or NFTs are relatively new to the crypto landscape. Purchasing an NFT gives you the rights to a piece of digital art — and the use cases for “digital art” are vast. NFTs can be bought in the form of virtual real estate all the way to a picture of a green monkey. Here’s a list of the weirdest NFTs sold in 2021, including the first tweet that Jack Dorsey, the CEO of Twitter, ever tweeted.
Is it too late to start investing in crypto or NFTs?
We have never lived in a world where crypto or NFTs existed.
The landscape of digital currency is being compared to the Wild Wild West…and that’s not far off.
You don’t want to be someone scrambling at the end chasing coins that
The best thing you can do today is to start investing in crypto. I’m not an expert, but we’re the same
When’s the last time you used cash? Kudos to you if you’re a cash person. I know I don’t carry cash. We’re becoming a completely cashless society.
In a nutshell = start today, you don’t want to look back and regret not starting sooner.
Benefits of investing in crypto
Investing in cryptocurrency has people buzzing for a number of reasons.
- Diversification: The wonderful thing that cryptocurrency provides is an alternative way to invest your money. If you’re already investing in stocks, bonds, real estate, collectibles — crypto gives you another way to put your money to work. And if 2022 is going to be anything like 2021 — the returns you stand to make with crypto dwarf returns from any other asset class.
- Form of payment: Unlike stocks, it’s becoming more and more commonplace for you to actually be able to pay for common goods and services with cryptocurrencies like Bitcoin or Ethereum.
Drawbacks of crypto investing
- Volatility: Depending on your time horizon — when you need the money from an investment — crypto may not be a good idea. The shorter your timeline, the safer your asset should be, so that the value of the asset doesn’t fluctuate too much. For example, if you’re near retirement and need your money in a couple years, crypto might not be the safest play.
How big was cryptocurrency in 2021?
2021 was a blockbuster year for cryptocurrency and exchanges.
- Bitcoin saw its price top out at $69,000 in November 2021.
- Ethereum skyrocketed to a record high of $4,404 in October 2021.
- Shiba gave investors a 49,000,000% return on their investment.
According to CoinMarketCap.com, investors had the opportunity to pick up Shiba crypto for $0.000000000073 per token at midnight on Jan. 1, 2021. Over the course of the next year, Shiba ate up six zeroes and was going for closer to $0.000036, as of Dec. 29.
What does that even mean?
It means that if someone bought $2.05 worth of SHIB at midnight on Jan. 1, 2021, and we assume there were no transaction fees, they’d be a millionaire at its current per-token price.
This kind of phenomenal growth is getting investors around the globe excited to try their hand with lady luck.
If you’re still sitting on the crypto sidelines and wondering if now is the time to finally jump in and join the fun, take this as your sign to start. Start investing in crypto. Start investing in NFTs. Start investing in your financial education — here’s a link to my favorite Udemy course on crypto investing.