Wondering how to get started in crypto? Beware of the predators, they’re after you. I’m putting myself out there by writing the most honest guide to getting started in crypto.
I’ve been involved in the crypto space since 2017. Considering that the first cryptocurrency, Bitcoin, was created in 2009, that was already late to become a millionaire. But luckily, Bitcoin was only the first crypto, and many followed. The thousands of cryptos that are now flooding the news and crypto exchanges are copies of the most popular projects.
Trying to explain everything about crypto will be impossible in only one article, but in this beginner’s guide to getting started in crypto, I’ll help you clearly understand what’s a cryptocurrency, what’s its worth, why you should or shouldn’t use it, how to trade it and everything else you need to know to get you started in crypto.
This will probably be the most honest crypto introduction you’ll find online today, and whoever else is going to tell you otherwise will be lying. This is an unsponsored guide on one of the hottest topics in the financial world – how to get started in crypto.
Table of Contents
- What is cryptocurrency?
- Is cryptocurrency worth anything?
- Can cryptocurrency be used to buy stuff?
- What about crypto trading?
- What’s the best use for cryptocurrency?
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What is cryptocurrency?
Cryptocurrency is a term made out of two words – crypto (from cryptography) and currency.
After the 2008 financial crash, an anonymous programmer (under the pseudonym Satoshi Nakamoto) created Bitcoin – the cryptocurrency and the blockchain network that sustains it.
Bitcoin was created as a digital and verifiable alternative to traditional money (also called fiat money). But crypto isn’t and shouldn’t necessarily be a substitute for currency. It’s basically a digital asset that can be used to keep balances, not just for money, but for everything that needs to be tracked. Of course, all we care about is money, so that’s the niche that gets the most attention, but remember that’s not the only one.
You see, the way in which the blockchain works relies upon a network of computers that use cryptography to encrypt data into an immutable string of data blocks – hence the name “blockchain.” The blockchain topic is a matter that deserves more explanation than this simple paragraph, but this will have to do for now.
The “cryptocurrency” term comes from the nature of the cryptographic methods used to record information on the blockchain. When talking about cryptocurrencies, or cryptos, we refer to an online decentralized database that anyone with an internet connection can check, but nobody can alter. The cryptos wouldn’t exist without the blockchain. That’s how the two concepts are connected.
Note the word decentralized – you will hear it a lot in the context of cryptos. It means that the computers supporting the blockchain are scattered around the world and belong to individuals, just like you and me. And most importantly, it means that non of them has the power to create the blockchain or the cryptos without the rest. That’s the key to the blockchain’s security. More on that later.
Note that nowadays, there are many blockchains, probably hundreds (but I still haven’t found a way to count them) and more than 20,000 cryptos (according to CoinMarketCap).
As you’ll start researching more about cryptocurrency, you’ll notice that people use different terms to describe them:
- Digital assets
- Virtual assets (these may refer to other assets that exist on the blockchain, such as NFTs)
- Digital currencies
- Tokens (it has started to become a rule to describe non-native cryptocurrencies to a specific blockchain as “tokens”)
- And others. Some new terms may appear over time. Please note that some people have no idea what they’re talking about and use buzzwords just to appear smart or knowledgeable. Stay away from them.
Is cryptocurrency worth anything?
Does USD worth anything? Just kidding. That’s how a cryptocurrency fanatic, or perhaps a Bitcoin maximalist, would reply to your question.
But like all things that can be traded, cryptocurrency obeys the simple supply and demand rule. When the demand increases, the prices go up. The truth is that cryptos are worth something, and that’s the utility it has. And most are worth the price that traders and investors speculate upon. There’s no real answer to what’s the right price of specific crypto.
Remember how blockchains are decentralized computer networks? If that’s really the case (although with some, it’s obviously not the case), then the rule of supply and demand is the only rule. No government can intervene in case something terrible happens. For instance, a group of developers dumping all their supply on the market and thus bringing the price down. Or if, let’s say, you have an algorithmic stablecoin (*wink wink* Terra LUNA fiasco), and someone would exploit the algorithm. If it plummets, there’s nobody bailing you out. So your crypto could go from $1,000 to $0.01 in hours, literally.
You’ll see people asking all the time, “How much is Bitcoin ACTUALLY worth?”. Some financial experts will give their trustworthy (that nobody should actually trust) opinion about how much a digital asset should be worth or, even worse, how much it WILL worth in a month or year. Don’t fall for that, they don’t know. Actually, nobody can know. And those who predicted some prices correctly were actually extremely lucky. In a sea of experts, some will eventually be right.
The question nobody is asking is, “What’s the purpose of this cryptocurrency?”. And if you would try to find an answer to that before investing in this new and great market crypto, you would be able to better grasp the absolute uselessness that characterizes most of them. Again, no crypto review will ever tell you this because why would they – they are incentivized to get your money.
However, you’ll see most project projecting their disclaimer everywhere “DYOR,” aka Do Your Own Research. To get informed, we have to spend hours reading and researching, but probably most people will never do that. Or worst-case scenario, they will watch a paid YouTube review of the project before deciding that it deserves an investment.
And this brings me to the real answer to the question, “how much is a project worth?”. Most are probably worth at least as much as their marketing budget.
Can cryptocurrency be used to buy stuff?
Yes. The world revolves around whatever people think to have value. In this case, people used to think Bitcoin was a scam used by the dark web. It turns out they were partially right, but the utility was there, and people were able to use it to transfer monetary value. You’re probably getting started in crypto because you heard it might be used as a legal tender.
Crypto is not a legal tender. But now, as more people buy these digital assets, more businesses start to accept them as payment. Remember how we all used to trade sheep to land some hundreds of years ago? This is the same idea. But it’s all electronic, and since we have so many cryptocurrency exchanges (all different kinds, too, since the Wall Street greed couldn’t keep its hands of crypto), there’s no excuse not to accept crypto.
Here’re just a few examples of businesses accepting crypto as payment for their goods and services:
- Tesla (for some of its merch)
- AMC Theaters (US movie theater chain)
- Twitch (game streaming platform)
- Namecheap (web domain name registrants)
And many more. And while some don’t accept crypto directly, there are services, such as Coinbase or BitPay, to help businesses get paid in crypto.
But that’s not the best part of crypto. The awesome part about using crypto is that you can indeed use it for purchasing everyday items and services through crypto debit cards offered by many centralized crypto exchanges.
Binance, Crypto.com, Nexo, and others are now offering clients Visa or Mastercard cards that are linked to their accounts and can be used anywhere they accept card payments. Most reviews will try to guide you to use one or the other, but the truth is that I really don’t know which crypto card is the best. However, some of these platforms have ridiculously high fees, so always research deposit, withdrawal, minimum amounts, and other conditions before using any of these services. For instance, Crypto.com has one of the largest marking budgets on the planet, and you should always beware of services with such a huge budget. But if you look closely, you’ll see they also have huge fees. I’m not touching it.
What about crypto trading?
One word – Speculation.
As with anything else in this world, especially in the financial world, if there is demand for something, a trading market will emerge. And since the crypto market is so successful, the abundance of cryptocurrency exchanges leaves those who are just getting started in crypto in complete confusion. Well, that’s their goal – leave your mind numb, and make you stop researching.
As for crypto trading, people like to speculate and try to see trading patterns (which are borrowed from traditional financial trading) to explain the price movements of cryptos.
Remember that some get it right, mostly by sheer luck, but as long as the market is moving, you can make a profit by following the market’s trend. I consider crypto trading a highly risky activity, and most traders actually lose money. But that’s something that nobody tells you because they don’t have to. Crypto trading is mostly unregulated by any financial authority, and exchanges aren’t supposed to help you in any way. Actually, most exchanges make money from trading fees. The more you trade, the more they earn.
Remember that crypto was created as an alternative to traditional money.
While some cryptos are created to simply keep track of stuff, to be used in games or different blockchain apps, most of these apps and assets revolve around the financial market. And that’s because it attracts the most people.
While the gaming industry has a pretty large market, that’s nothing compared to the huge crowd that wants to invest $100 and get $100,000 in less than a month. This 99,000% price increase is mostly absurd, but then again, we also have the Dogecoin story (up by more than 100,000% in 7 years). The story is that if you hold long enough, the price will go up as you attract others to join and buy in. If you’re going to say that it’s a Ponzi scheme, you may be right. But that doesn’t mean it doesn’t have any value or that you shouldn’t trade crypto. Crypto trading is a thing because there are so many people interested in the market. So remember, as long as there is liquidity and a huge crowd willing to speculate on it, you can make money off its volatility.
What’s the best use for cryptocurrency?
We’re not there yet.
Crypto can complement currencies issued by central banks (EUR, USD, etc.). The most obvious use for cryptos is to have them keep the official balance of the currency on the blockchain, where everyone can check the transactions, the prices, and all operations. This would mark the end of financial corruption. Many governments are already in the process of researching and developing their CBDC (central bank digital currency). The closest we’ve come is the digital yuan in China. I still haven’t been to China, and I’ll like to visit it, so I won’t make any comments on that. But you know what to do with this info.
Other countries have adopted Bitcoin as legal tender – El Salvator and the Central African Republic. While these are not the best examples of a flourishing economy, they might, one day, represent an interesting case study.
So far, the best use cases for crypto are digital economies, metaverse coins, and speculative trading. However, I still believe this is merely the first phase of the crypto mass adoption we’ve been waiting for years. What I’ve learnt so far, is that the best use for something is the one that the majority adopts. In the case of cryptos, we’ll wait to see what the world wants – once most of was will have a non-custodial crypto wallet installed on our smartphone. Is this enough to get you started in crypto? No, but at least you know what you’re getting yourself into.