A Beginner's Guide To Investing In Cryptocurrency | Motilal Oswal

How To Start Investing in Cryptocurrency

Around a decade ago, when you heard the word ‘Bitcoin’, it was nothing more than  something that piqued the interest of technocrats and millennials. In spite of this fleeting interest, there were individuals who predicted the rise of cryptocurrency and now, this is attracting millions of folks. Cryptocurrency to invest in is here to stay and although it's not your typical investment avenue, it has numerous takers. 

 

  • What is Crypto Investment? 

To fully grasp what cryptocurrency to invest in, you should know about some basics of cryptocurrency. Based on the technology of blockchain, a chain of distribution and registration of information that is not under the control of any single authority, crypto investment may seem a little dubious to traditional investors. However, cryptocurrencies are gaining recognition and many are now wondering whether they will ultimately replace sovereign existing currencies in the global marketplace. Where India is concerned, cryptocurrencies have attained a degree of legitimacy in the recent past, giving this digital token a boost. Consequently, there has been a surge in the interest of investors although some do not understand how to go about the investment process. 

  • Steps to Invest

Cryptocurrency is alien to many investors who still wish to climb the bandwagon and invest. Hence, here is a crypto investment guide to get you started off in systematic steps:

  1. Understand the Asset Class - For any investment that is about to be made, investors must comprehend the class of assets and the purpose of investment in that class. As far as cryptocurrencies are concerned, markets are dynamic and very volatile. Hence, it is wise to allocate a relatively small portion of wealth to this somewhat risky avenue of investment. Analysts have suggested that around 5%-10% of an investor’s portfolio should make up digital tokens.  
  2. Decide What Cryptocurrency to Invest In - If you are confused about what digital token to invest in, you are not alone. With names like Bitcoin, Ethereum, Dogecoin floating around, you may be surprised to know that there are a lot more, over 5,300 digital tokens offered up for investment. The crypto investment world is just over 10 years old, and since Bitcoin is the most traded of them all, you may want to explore it. However, it's worth a study of the others as some have performed well too. 
  3. Research Your Chosen Cryptocurrency - Digital tokens involve fundamentals and each is based on distinctive blockchain technology. The main aspects to stress on are the mining technique, intrinsic value, community addressed and accessibility factors. 
  4. Determine the Buying Platform - Cryptocurrency exchanges are where investors can purchase cryptocurrencies. These are dedicated places to buy and sell them, and you will need to pay a charge for any transactions made. 
    1. Storage - Stored in crypto wallets, cryptocurrency wallets may be hot or cold. Hot wallets are linked to the internet, whereas cold ones aren’t. The wallet is not a physical wallet, but a digital one, and is actually a software programme to hold currencies. The programme has private and public keys and these connect users to the blockchain that the cryptocurrencies are stored in. You can access them in this way, and they ‘unlock’ crypto that is embedded in the blockchain
  5. Safeguarding Crypto - It is important to keep your crypto investment protected in your crypto wallet. You can use a VPN (Virtual Private Network) that assures you of encrypted and safe transactions online.
  • Crypto isn’t Cryptic

Cryptocurrency investment isn’t as cryptic as you may think, and if you wish to understand more about it, Motilal Oswal can help you. The key thing to note, however, is that cryptocurrencies should be held for the long haul. Usage-wise, there may be a different story to be told, but you have to realise that crypto investment may not make you rich quickly.

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