The cryptocurrency industry can be a daunting place for beginners. Given the breakneck pace of development, sheer number of cryptocurrencies, and staggering wealth of information available, it’s not easy to keep up.
But given that the bull market is in full swing, there has never been to dive in; albeit with adequate caution. Here, we cover the basics of what you need to know to start off on the right foot.
Storing Cryptocurrencies
As a cryptocurrency beginner, the first thing you’re going to need is a way to securely store and manage your cryptocurrencies.
Unlike in the traditional financial industry, where you would typically entrust the custody of your funds to a bank, you will generally be looking to take full custody of your own digital assets. This ensures you have access to them at all times, are not reliant on third-party service providers, and have full control over when and how you can use your assets.
This is why you’re going to need a cryptocurrency wallet — which is essentially a digital wallet used for securely storing and using your cryptocurrencies.
For the most part, you’ll want to use a multi-asset, multi-platform wallet, since this will allow you to manage multiple cryptocurrencies from the same wallet, using whichever device you prefer. Take Coin Wallet as an example, it allows you to manage the most popular cryptocurrencies all in one place; such as Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Stellar (XLM), Dogecoin (DOGE), and Tether (USDT). As a multi-platform wallet, you can use your Coin Wallet on your phone or computer without any difficulties.
Since you will be taking custody of your own funds, it’s important to use a wallet with suitable security capabilities. Hardware wallets like the Ledger Nano X and Trezor Model T are generally considered to be the gold standard in crypto security, but similar security can be found at a lower cost by combining Coin Wallet with a compatible two-factor authentication key, such as the YubiKey 5.
Trading Them
Over the last year, cryptocurrencies have been making headlines because of their strong market performance, with many cryptocurrencies reaching their highest ever values in 2021, sometimes generating incredible returns for investors.
Understandably, this has drawn the attention of both experienced and inexperienced investors, who look to cryptocurrencies as a way to build out their portfolio and gain exposure to one of the highest potential reward asset classes there is.
For beginners, cryptocurrency trading is usually restricted to using simple swap tools, which allow you to exchange one cryptocurrency for another without too many technicalities involved. Many cryptocurrency wallets, including the aforementioned Coin Wallet and Ledger Nano X, feature a built-in swap tool — typically powered by providers like Shapeshift, Changelly, or Coin Switch.
But for those that are looking for more control over their trades or are wanting to gain exposure to newer, less supported assets, the alternative option is to use one of the myriad dedicated exchange platforms, including Coinbase, Binance, Kraken, and the like.
Through these platforms, you’ll be able to access more advanced trading options, and will have access to charting tools and order functions that can help you more reliably capture profits. But beware, cryptocurrency trading is still a risky endeavor even during a bull market — don’t dive in without proper risk management.
Using Them
As a beginner, you may be aware that many cryptocurrencies are generally considered to be speculative instruments and can be held or traded as speculative instruments through a variety of exchange platforms — but this generally isn’t their primary purpose.
Instead, the vast majority of cryptocurrencies are built around a specific use-case. Some, like Bitcoin (BTC) and Litecoin (LTC) are used as pure digital currencies — meaning they can be used to pay for goods and services. Others, like ETH, ETP, and BNB are considered gas tokens, and are used for paying for transactions and executing smart contracts on their respective blockchains (Ethereum, Metaverse, and Binance Smart Chain).
Beyond this, another common use case is governance. Some tokens can be staked to help contribute to the security of the network, and also confer voting rights to users — meaning users can vote on proposals that help shape the network. Some examples of governance tokens include Uniswap (UNI), Aave (AAVE), and Maker (MKR).
Most cryptocurrencies have a function within their own respective ecosystem, but may also be adapted for uses outside of it. For example, Binance Coin (BNB) can be used for reducing transaction fees on the Binance exchange, whereas it can also be used as collateral for loans on supporting DeFi lending platforms.
With that said, not all cryptocurrencies have utility, and many have no value. In light of this, it’s always important to do your due diligence before purchasing a cryptocurrency for its utility value — particularly when this utility is far-fetched or not yet available.
Image source: Coin Wallet Media