There are several ways to start investing in cryptocurrency. Depending on whether you’re looking for help managing your investments or if you want to be aligned with the ethos of the community and “be your bank,” there are opportunities for your crypto wallet. So, where do you start?
There are thousands of cryptocurrencies. The traditional finance applications that support cryptocurrency trading offer a minimal number of choices. Buying cryptocurrency through digital wallets and crypto exchange providers will give users more choice and functionality than buying through exchanges.
It depends on where you live, but most countries have safe, mature options.
These providers are typically called “centralized exchanges” because they’re managed and operated by a single company. Some centralized cryptocurrency exchanges provide protections for investors, including insurance if a cyberattack occurs, clarity since they’re regulated businesses, and help protect assets. Centralized exchanges usually provide better user interfaces than decentralized exchanges, making them easier for investors.
Centralized exchanges rely on a central authority or middle man between you and your assets. It means that your assets can be frozen or constrained by the exchange from participating in some actions or types of transactions. Centralized exchanges must comply with Know Your Customer regulations and collect and verify personally-identifying info. This makes them less suitable for people who want to keep their details private from the cryptocurrency market.
Investors may prefer to use exchanges aligned more closely with the decentralized ethos of cryptocurrency.
Decentralized Exchanges or DEXes, are not run and managed directly by one person, organization, or company. The code they’re built on allows for peer-to-peer crypto transactions without intermediaries.
Using a DEX has both advantages and disadvantages. Decentralized exchanges don’t offer hackers a large honeypot of user funds. However, hackers can and have exploited bugs within the exchanges’ code to drain funds from their protocols.
There’s usually no strict onboarding process collecting personal information from customers, so there’s not much recourse if they lose their cryptocurrency holdings. DEXes often have more complicated user interfaces than traditional financial applications.
Non-fungible tokens (NFTs) have recently gained significant attention and high resale values. Tokens can be used for various functions, including access to digital assets and ownership, but recently the hype has focused on token-based digital art. There are several marketplaces where users can pursue NFT collections and buy art.
With the crypto market maturing, investing in crypto assets has become more accessible and more secure than ever before. It’s an exciting space that offers access to new technology, shaping innovation in many industries. Cryptocurrency investing is still a bit risky. You’ll want to have some financial security before you start putting money in cryptocurrencies. Do your research, and remember to keep track of your assets. They aren’t insured by the Federal Deposit Insurance Corporation (FDIC).