Cryptocurrencies are an industry that, due to high rates of return and dynamic price movements, has become extremely popular among investors – including beginners. As you know, the cryptocurrency market is related to advanced technologies such as blockchain, and we are aware that cryptocurrencies can pose a bit of a puzzle for beginners.
information for beginners
Digital currencies (cryptocurrencies) have gained a significant share in the portfolios of many investors – both retail and institutional. At the same time, analysts continue to warn investors about the volatility and unpredictability of this group of assets. Before you decide to buy Bitcoin and start investing in cryptocurrencies, be sure to read our guide.
As with any other investment, it is important to get to know the market and its instruments well before making your first trade. Below we present the issues that you should be familiar with in advance. As a beginner investor, take your time to explore our range of cryptocurrencies such as Bitcoin, Chainlink,Ethereum,Cardanoor Uniswap. It can also be helpful to understand blockchain technology, the basics of which are not that difficult at all. Investment awareness is one of the most important qualities of a good investor, and when investing your own funds, you should know the answers to the questions about why you are doing it and what value do you see in Bitcoin and other projects?
Perhaps the most fundamental question you should ask yourself before investing in cryptocurrencies is why you are doing it. Today, there are countless investment tools available to make it easier to invest in cryptocurrencies.
Timing
After doing some insight, you probably already have some idea of the cryptocurrency industry and you may have chosen one or more projects to invest in. The next step is to determine the right time to enter the market – the so-called timing.
The world of digital currencies moves fast and is known for its high volatility. If you see an opportunity somewhere – don’t be afraid to take it, but remember the basic principles of risk management.
Cryptocurrencies tend to follow certain patterns, the market often behaves in a cyclical manner and is sometimes predictable.
Bitcoin remains the undisputed leader and the most well-known asset among digital currencies, and the rest of the cryptocurrencies tend to follow its valuation. At times when there is a lot of volatility on the Bitcoin chart, we talk about the so-called Bitcoin dominance. This is when it usually records the biggest gains, and many investors switch from investing in altcoins to the Bitcoin market to take part in the “rally”.
Altcoins, on the other hand, record the highest rates of return when Bitcoin is at its local price highs and moves in consolidation (its chart “moves sideways”), waiting for the next large upward impulse. At times like these, Bitcoin’s low price volatility pushes investors to invest in riskier, smaller projects.
When the price of Bitcoin falls, altcoins typically also see declines, typically deeper than Bitcoin. However, there are examples of speculative projects whose valuations increase (sometimes spectacularly) when Bitcoin falls, thus encouraging investors to move funds from the cheaper Bitcoin to those assets that will allow them to “make up for the losses”.
Reports of another exchange being hacked, scammed, or price manipulation can, of course, cause the crypto market to shake up, so it’s important to keep an eye on market news and react to the changing situation. Currently, another SEC (U.S. Securities and Exchange Commission) investigation is underway into the world’s most popular stablecoin, Tether, which is a reflection of the U.S. dollar on cryptocurrency exchanges. The eyes of all investors in the cryptocurrency market are turned in this direction.
Investing in cryptocurrencies involves a lot of risk, and in the worst case, you have to take into account the possibility of total failure. However, by using risk management methods and working on your psychology, you can avoid significant losses and learn more from the market. Investing in knowledge brings the greatest profits.
What are cryptocurrencies?
Cryptocurrencies are digital assets that can be used for online shopping, but due to high price volatility, they are more often treated as investment goods. Cryptocurrencies are secured with cryptography, so they cannot be counterfeited or double-spent.
Cryptocurrencies do not have a physical form, which of course means that you cannot take Bitcoin in your hand and hold it in your hand. Each cryptocurrency has its own distinctive program or code. It cannot be copied, but it can be tracked (except for anonymity-based cryptocurrencies such as Monero or ZCash).
How do cryptocurrencies work?
Cryptocurrencies function on their own blockchains, and these in turn are based on a chain of computers that form a peer-to-peer network. It is a network in which every user is equal in the hierarchy with the same rights. This means that individual blockchain networks do not need a central administrator or transaction intermediary.
Cryptocurrencies are decentralized – meaning that no government or bank manages how they are created, their value (the price is created by demand), or how they are exchanged. All cryptocurrency transactions are secured using the often very advanced principles of cryptography.
Blockchain and cryptocurrencies – are they the same?
Blockchain is the technology that makes cryptocurrencies possible. Blockchain is a digital ledger of transactions distributed in a computer network. It is a ledger in which the history of a given cryptocurrency is recorded in real time.
Blockchain is a system of record of information that prevents hacking. Each block in the blockchain contains a record of several transactions, and each time a new transaction occurs on the network, a record of that transaction is added to the ledger maintained by each user. A blockchain database can store a large amount of information that can be used by and accessed by multiple users at once.
How to store cryptocurrencies?
Cryptocurrency can be stored in something called a “wallet,” which can be accessed using a “private key” — the equivalent of a super-secure password — without which the owner of the cryptocurrency can’t access their wallet. If the code is forgotten or lost, it is not possible to re-enter the wallet and use the funds in it.
A cryptocurrency wallet stores private keys that give users access to their cryptocurrencies – they allow them to send and receive cryptocurrencies such as Bitcoin or Ethereum. It is important to note that the user’s cryptocurrencies themselves are stored on the blockchain, and the private key is required to authorize transfers to another person’s wallet.
Storing cryptocurrencies on a physical crypto wallet carries the risk of theft or loss of such a wallet. On the other hand, storing cryptocurrencies on a cryptocurrency exchange increases the risk of hacking and theft of funds.
Holding open positions with a regulated broker does not have a high probability of any of the above risks. The instruments we offer at XTB are derivatives based on the price of cryptocurrencies, not cryptocurrencies, which is why hackers cannot steal them. Withdrawal of funds from the account is possible only to a bank account verified by us belonging to the Client.