Investing in cryptocurrencies: everything you need to know
Crypto
September 11, 2024
A decade ago, it was rare to hear about encrypted currencies. Today, hearing about Bitcoin is no longer surprising, and now with the pandemic, it has gained new momentum, increasing its market capitalization and value. In fact, its current price surpasses the GDP of countries like Switzerland, according to data from the International Monetary Fund (IMF).
Now, investing in cryptocurrencies is a common topic, and we cannot deny that they are an essential and profitable asset for any investment portfolio. But is investing in cryptocurrencies for everyone?
In today's article, we share the best way to buy cryptocurrencies through an exchange account. Additionally, we'll discuss which are the best cryptocurrencies, what the famous blockchain is, and most importantly, whether investing in cryptocurrencies is worth it.
It's important to note that this article is for informational purposes, and you should always do your research before investing your savings in any investment asset.
Let's start with the definition: Cryptocurrencies, also known as digital currencies or crypto assets, are digital exchange currencies generated using cryptographic methods. This generation is programmed based on an algorithm that also secures transactions, controls the creation of new units, and verifies the transfer of assets.
This cryptographic encryption guarantees ownership, and thanks to this property, unauthorized copies are prevented. In the end, cryptocurrencies do not exist in physical form—they are digits that can be stored in a digital wallet.
→ They are not controlled or regulated by any institution;
→ They use a decentralized database: blockchain, which uses a shared ledger to control transactions;
→ They do not have customer protection coverage, such as the well-known deposit guarantee funds or investor guarantee funds, unlike investing in the stock market.
To understand how a crypto investment works, we need to know three elements:
But who are the miners? They are people dedicated to "cryptocurrency mining," which involves adding new transaction records, i.e., expanding the blockchain. By joining this network, miners receive rewards, making it an attractive profession.
When you make a crypto transaction, such as a purchase, the data is recorded in a block. Automatically, it is replicated across the entire blockchain network. This decentralization of information prevents it from being counterfeited, modified, or manipulated.
This digitization would solve the financial problem of counterfeiting. Moreover, many experts highlight that:
→ It is a great investment opportunity for risk-tolerant investors;
→ It is becoming an accepted means of payment;
→ It is available to everyone worldwide;
→ It is a profitable instrument, although it is volatile and comes with certain risks.
→ Blockchain technology is proving to be reliable.
One of the most important and practical aspects of making a safe crypto investment is that you should invest capital that you won't need in the long term. For this, it is important to have a basic investment strategy. It is also worth reminding you to learn some basic crypto concepts, such as blockchain, exchange account, Bitcoin, circulating supply, total supply, and different types of wallets.
With this as a theoretical foundation and a first step, let's move on to the next steps to start investing in crypto assets:
This involves registering on a platform where you can convert your money into a cryptocurrency. We're talking about an online currency exchange that digitizes your money. This transformation charges a small commission and can exist as centralized and decentralized types.
Alberto Fernández, professor of the Blockchain and Digital Innovation Program at IEB (Instituto de Estudios Bursátiles), recommends using an approved exchange or one that has representation within the European Union.
When you make a transaction through an exchange, your money is stored on their platform, meaning it is not completely under your control. You have their "promise" that you can withdraw your assets whenever you want. Use the platform for buying and selling transactions, but then transfer your cryptocurrencies to a wallet, which we will explain later.
At this point: Which exchange should you choose if you're in Latin America?
→ Choose one that is built on a platform with quality and security standards;
→ Where crypto assets or other securities are available 24 hours a day;
→ And that offers you various cryptocurrency options such as Bitcoin, Ethereum, Dogecoin, among others;
But above all, it should be backed by recognized institutions like Y Combinator—the leading Silicon Valley accelerator—and operate in association with ViewTrade, a registered broker-dealer in the US. Try Hapi here and buy your favorite cryptocurrencies!
After registering on an exchange, you can now buy a share, set the amount you have to buy your cryptocurrencies, the platform provides the options, place the buy order, and you're done.
You can buy them with any amount of money, as it is not necessary to purchase a full coin—now you can buy fractions of a crypto on Hapi. So if you have $1, you can already start investing in your favorite cryptocurrency. Some exchanges may require a minimum amount.
Currently, there are thousands of cryptocurrencies. Did you know that Facebook and Telegram tried to create their own? But they didn't achieve enough fame.
Faced with so much variety (and if you're interested in seeing the charts, visit Coinmarket), today we present the 2 most recommended cryptocurrencies by web users currently available on Hapi's platform.
Bitcoin was the pioneer, and due to the time it has been around and the trust that thousands of users have placed in it, it stands as one of the best cryptocurrencies on the market.
It is one of the most popular cryptocurrencies, and despite its volatility, typical of any cryptocurrency, it is a profitable crypto asset for three reasons: its scarcity, its decentralization, and its global acceptance. This is believed by its more than 3.793 million buyers.
Ethereum is a digital currency that has strengthened over time. Ethereum is a "programmable" cryptocurrency, adding more functionality but also making it a bit more expensive.
Ethereum has differentiated itself from Bitcoin by creating this new concept: smart contracts. They are used to run programs on the blockchain itself, enabling the creation of thousands of projects like Decentralized Finance, NFT, Play2Earn games, and more.
This extra functionality influences the demand for ETH, driving its price up. That's why Ethereum (ETH) is a profitable cryptocurrency, or at least that's what its crypto-believers say.
After buying a cryptocurrency through a reliable exchange—you know which one to choose if you're in Latin America—many people opt to let the exchanges hold those funds. This is an option for more passive profiles who are just starting in investments, and it is recommended by Hapi.
Now, if you want to do trading, you can leave them in your transaction exchange. But keep in mind that if you're starting, you should research more about how this market works.
As you have seen, buying cryptocurrencies through an exchange is the safest and fastest way to enter this world. Now that you know how to acquire your cryptos, keep the following aspects in mind.
There is no doubt that digital money is the future, so venturing into a future-proof investment is a good option, but always in an intelligent and informed manner. Remember always to invest only what you are willing to lose, and always diversify your portfolio; these are the main advice from investment experts.
With this in mind, investing in cryptocurrencies means:
→ Dealing with high volatility—you must be willing to tolerate a high level of risk;
→ Payments are irreversible—if you make any mistake transferring a certain amount of cryptocurrency, it will be impossible to correct it;
→ All your transactions are confidential and anonymous.
The world of cryptos is not a market that everyone can handle. It will depend on your financial profile, how much risk you're willing to tolerate, what your financial goals are, and how long you want to hold your cryptocurrencies.
Cryptocurrencies seem to be a financial solution to inflation, globalization, and digitalization; it's a fact that they are here to stay—this is the perception of many investors. So, with this encouraging outlook, are you ready to invest?
We know it's a complex topic, and there's a lot to learn, so in the next post, we'll share the advantages and disadvantages of investing in cryptocurrencies and delve deeper into their history.
Member of FINRA and SIPC
All investments involve risk, including the loss of capital. Hapi offers self directed investment accounts for those investors who feel comfortable managing their own investments. For a full list of our disclosures, please visit our disclosures page.