Cryptocurrency For Beginners: The Concept of Cryptocurrency (Beginners Guide)

Cryptocurrency for beginners

Cryptocurrency for beginners may look like an abstract form of finance trying to replicate the physical financial system or a long-running Ponzi scheme that will soon fail and catch millions of people currently invested in it. Beginners easily misconstrue cryptocurrency and what it is truly about. This happens most often when the information they learn and absorb about cryptocurrency is wrong, thus creating a negative view of cryptocurrency for beginners.

If you are a beginner and need proper guidance, you must continue to read on. Cryptocurrency is exciting, bringing revolutionary technology into finance while also onboarding millions of people who had little to no access to the traditional financial services used in business, commerce, and normal living. By the end of this article, you should have a pretty strong grasp of the fundamentals of cryptocurrency. Without any more niceties, let’s get into it.

Understanding Cryptocurrency for Beginners

The first step to understanding cryptocurrency for beginners is to know the definition of cryptocurrency and the terms closely linked to it. So what is Cryptocurrency? Google defines it as:

“a digital currency in which transactions are verified and records maintained by a decentralized system using cryptography, rather than by a centralized authority.”

While that definition captures the definition of cryptocurrency at its core, the definition has now been expanded following the evolution of blockchains, smart contracts, decentralized apps, nuts, and web3.

Cryptocurrency is now more than a digital currency, it’s an asset class. A whole new industry is being built with these digital currencies at the core of everything. Universities now offer courses that tailor to the rising demand for cryptocurrency education from students and organizations, showing the shift to digital finance and the urgency people are moving with to place themselves in positions, ready to take maximum advantage of the opportunities that will present themselves in this ever-expanding industry.

So a better definition of cryptocurrency for beginners must capture the information in the paragraph above, while still maintaining the core definition we have known for some time. Hence, you can define cryptocurrency as:

“A financial asset class made up of digital assets that can be traded in money markets like stocks and bonds, while also having the ability to be used as a medium of exchange for goods and services, much like money. Transactions carried out with these digital assets are verified, recorded, and secured in digital ledgers called blockchains. These records are encrypted using cryptographic technology, hence the name CRYPTO.”

Terms Of Definition

A longer definition, but one that more accurately describes what we now know as cryptocurrency. Knowing the meaning of cryptocurrency for beginners is just the beginning (pun intended), beginners must also understand the various terms used to create the definition we now use. Below is a list of the important terms:

  • Blockchain: A system that acts as a digital ledger, where cryptocurrency transactions are. It is a system that is maintained and secured by several computers acting as nodes in a network.
  • Cryptography: The study of communication methods that cannot be deciphered by entities who are not participants in the communication process. 
  • Digital Assets: These are computerized forms of money that were created to act as a substitute for real currencies. Their value is dependent on the evaluation and security of the blockchain they are built on. An example of this type of asset is bitcoin.

Understanding Bitcoin

Speaking about bitcoin, a brief history of it is necessary for beginners to understand cryptocurrency. 

Bitcoin is the first cryptocurrency ever. In 2009, Satoshi Nakamoto, an unknown entity, created Bitcoin, intending to create a payment network that did not require an institutional authority (or middleman) to act as an intermediary between two parties that wish to transact between themselves.

In 2008, Satoshi introduced the bitcoin whitepaper, a document that detailed his vision for a censorship-resistant digital currency that would be created on a blockchain system that uses cryptography.

While Satoshi initially created bitcoin as an alternate form of money, it has now become more than just that, becoming an asset that functions as a hedge against inflation and an investment asset.

As more people are exposed to cryptocurrencies, more value is injected into them, thus increasing the worth of owning one. Now, cryptocurrency for beginners is not just a must-have, but a necessity. New buyers are seeing the potential bitcoin and other cryptocurrencies have in raising their economic status and increasing their financial spending power. Cryptocurrency for beginners is sort of like a get-rich-quick scheme now, even though it is far from it.

If you want to make money trading cryptocurrencies, then you must know how to buy, sell and hold these cryptocurrencies. 

Trading Cryptocurrency for Beginners

For a better understanding of beginners, trading cryptocurrency involves buying cryptocurrency, selling it, or speculating against its future price. There are many online money markets called “exchanges” where cryptocurrencies are traded. They can either be centralized or decentralized.

A centralized exchange is an online platform that offers cryptocurrencies for sale and purchase. It provides a wallet for users to store their cryptocurrencies and has custody of these wallets. It is centralized because it acts as an intermediary between trading parties, takes a commission or fee for every transaction that takes place on its platform,  has control over its users’ wallets, and is under regulatory supervision. 

A decentralized exchange is also an online platform that offers cryptocurrencies for trading. It differs from centralized exchanges by offering lower transaction fees, allowing users to have full control over their wallets, and not being under all the regulatory supervision centralized exchanges find themselves under.

Trading any cryptocurrency for beginners should be done on a centralized exchange. They offer instant purchases and give new traders an easier path into the cryptocurrency market. Some of the biggest centralized exchanges you as a beginner may try are:

Beginners can buy cryptocurrencies from these exchanges with minimal fuss. 

There are different ways to trade cryptocurrencies when using these platforms. Some offer more ways than others, while some decide to only focus on a specific trading method. These methods include:

#1. Spot Trading:

This is the simplest form of trading a cryptocurrency. It involves a user buying a cryptocurrency at either its current price (known as a market execution) or a predetermined price (known as a limit execution). By trading on a spot market, you are directly buying or selling a cryptocurrency.

A list of cryptocurrencies on a centralized exchange

#2. Futures Trading:

As the name suggests, a user is trading a cryptocurrency with reference to its future price at a future predetermined time. It is also called speculative trading. In the futures market, you do not have ownership of the cryptocurrency you trade, you are merely speculating on the price of the cryptocurrency on a predetermined date in the future. 

#3. Margin Trading:

A form of spot trading that allows a user to purchase a cryptocurrency with an amount of money larger than the user’s account. If you have $500 in your trading account, you can buy cryptocurrency worth more than that by using a margin the centralized exchange gives you. It may be 2x, 5x, 10x etc. This means you could buy up to 10 times the amount in your trading account. So 10x on a $500 account would get you $5000 worth of crypto

Instant Trading:

Some people may not want to spot trade to buy their cryptocurrency as it will require them to buy a stablecoin first and trade the stable coin for their desired cryptocurrency in a spot trading pair. Exchanges offer this set of people the ability to purchase the cryptocurrency they want using their debit/credit cards or directly from their bank accounts.

The next thing for any beginner to know is how to buy cryptocurrency. I will show you how to use a popular exchange.

If you are enjoying this article, you may also want to read our other article on bitcoin as a good investment in 2022.

How to Buy Cryptocurrency for Beginners

I will use Binance, the world’s largest and most trusted cryptocurrency exchange, to show how to buy a cryptocurrency for beginners.

  1. Go to binance.us (For US residents) or binance.com (For Non-US residents).
  2. Log in if you have an account or register for an account if you are a new user.
Binance.com landing page
  1. Go to the menu bar and click on the “Buy Crypto” tab. A drop-down menu will appear. Choose any of the options there to make your purchase of the cryptocurrency of your choice. All you need to do is follow the instructions that follow.
Buying cryptocurrencu=y on Binance
  1. To buy with your credit/debit card, input the amount you want to spend (it must be within the limit specified) and the cryptocurrency you want to buy. Once you do that, your purchase may take you to a 3D secure page where you will verify the transaction and receive the cryptocurrency in your exchange wallet.
Buying cryptocurrency with a debit/credit card
  1. For bank deposits, select the currency your bank account and choose the best option for you. You will have to follow the instructions given to you. In most cases, a receiving account number may be given as the account to deposit in, once done, your crypto wallet would automatically be topped up with the cryptocurrency you purchased.
Buying cryptocurrency through your bank account on Binance
  1. For P2P, you transact with fellow users. All you need to do is the amount of money you want to spend, the currency you want to use, and your payment method. For USD transactions, you can choose Venmo, Cash App, Zelle, Paysera, Monzo, PayTM and so many more methods. Choose the trader whose rate and limit suit you, click on the traders, enter the amount you want to trade, and follow the prompts that follow.

NOTE: NEVER SEND CRYPTO TO ANYBODY IF YOU HAVE NOT RECEIVED PAYMENT. BE CAREFUL WITH YOUR FUNDS.

Buying cryptocurrency for beginners through P2P on Binance
  1. A beginner can also buy cryptocurrency on Binance through a third-party payment channel. Choose the option that you would like to use and follow all instructions. 
Buying cryptocurrency through third party channels on binance

For beginners who may want an alternate option, Coinbase is a great platform to buy your cryptocurrencies from. If you want to buy on Coinbase but don’t know how to, follow this link to their official website support.

Best Books on Cryptocurrency for Beginners

Knowledge is power, a saying that rings true in the cryptocurrency industry. If you understand what’s going on, you will be in a better position to make choices that can improve your financial standing. The best source of knowledge on cryptocurrencies is a book. Many trading figures and organizations have gotten their best minds together to create books that contain a combination of knowledge and experience these experts have accrued over the years. Some of the books I recommend for beginners are:

  1. How To Bitcoin from CoinGecko.
  2. How To DeFi – The Series from CoinGecko.
  3. How To NFT from CoinGecko.
  4. The Basics of Bitcoins and Blockchains by Antony Lewis.
  5. Crypto assets by Chris Burniske and Jack Tatar.
  6. Bitcoin from beginner to expert by Christian Newman. 
  7. Digital Gold by Nathaniel Popper.

These are just some of the top-quality books on crypto I believe every beginner should read. They are insightful, concise, and easy to understand.

I also recommend all beginners read the bitcoin white paper. Understanding the reason for bitcoin’s creation and how it seeks to overhaul traditional finance will give you the clarity you may seek on the future of digital assets. Binance Academy is also great for beginners to learn about cryptocurrencies. Their topic-by-topic explanation of different tokens, features and ideas in the crypto industry make it a good source of information.

Investing in Cryptocurrency for Beginners

For beginners who want to invest in cryptocurrency, there are some possibilities to explore. To mirror the traditional financial system, decentralized finance has incorporated investment vehicles that cater to the cryptocurrency community. While I advise you to buy exercise caution, I will still explain some ways to invest in cryptocurrency for beginners.

#1. Crypto Staking:

It involves locking your cryptocurrencies with an exchange for a period of time. An APY is attached to the staked token and increases if you increase the length of time your tokens will be locked. The APY stands for annual percentage yield and denotes the percentage of tokens you will earn for staking your tokens for a specified time.

#2. Crypto banking:

Much like staking, this involves lower yields but is more secure as it is offered by centralized platforms that act as cryptocurrency banks. Examples of such platforms are Nexo and Crypto.com.

#3. IEO/IDO/ICO:

These are initial offerings of a token that will be newly released on a centralized or decentralized exchange. These new cryptocurrencies are offered and prices below their listing price at launch, hoping to attract investor attention and liquidity. Investors make good profits on cryptocurrencies that launch this way, buying them below their listing price and selling them at their listing price or waiting for a higher price to sell at.

#4. Weighted baskets/indexes:

Some platforms offer users the opportunity to buy indexes with different cryptocurrency assets. This way, investors do not expose themselves to the risks of directly owning a cryptocurrency and they can spread their risk as the index’s performance will be a weighted average of the performance of all assets in the basket.

These four are the main ways a beginner can invest in a cryptocurrency. There are more, but they require one to be familiar with the world of finance. Start by exploring these first and gaining experience with them. You will need that experience to sharpen your investment senses and your judgment skills as they will come in handy when you encounter new opportunities.

There may be questions you have that need answers to. Don’t worry, I have curated answers to some of the most asked questions beginners have when they start their journey in the crypto space.

Questions You May Ask

How much crypto should I buy as a beginner?

I strongly advise you to buy an amount that will not put you in the wrong financial position. A reasonable purchase amount would be 10% of your monthly earnings.

How do you start crypto for beginners?

Start by learning about cryptocurrency. Do not venture into a new industry without knowledge, it will be detrimental to you and your wallet. Do not purchase nor trade any cryptocurrency till you have sufficient knowledge. 

How can a beginner make money with cryptocurrency?

The best way for a beginner to make money with cryptocurrency is to follow the “buy and hold” strategy. Simply buy the cryptocurrency you want and hold it for a price increase.

How much should I invest in crypto?

As I stated earlier, you should focus on investing only 10% of your spending power. It could act as savings for you.

Which crypto will make you rich in 2025?

Nobody knows. You shouldn’t expect any accurate predictions for token prices that far in the future. The cryptocurrency space is fast and a lot happens in it so any predictions being made about coin prices in 2025 are red flags and you must avoid them.

Can Shiba Inu reach $1?

I will say no. For Shiba Inu to reach $1, it must have a market cap of $549,063.28Billion. For context, that means Shiba Inu must have more money invested into it than there is on earth for it to reach $1. So no, it’s not going to happen.

How high will Shiba Inu go in 2025?

Nobody knows, just as I said previously. If you see any prediction about Shiba Inu’s future price, avoid it like a plague. You will fall into a liquidity dump and lose your money for no reason.

In Conclusion,

Without proper information, cryptocurrency for beginners can be a very difficult subject matter. If you rush into buying a cryptocurrency without knowing what you’re doing, you may well end up buying tokens that depreciate rather than appreciate, causing you to lose a sizeable amount of your money.

So if you are a beginner, please do well to go through this article and bookmark it, it could prove to be a money saver for you or someone else in the future. If you have any questions, comments, or concerns, please leave them in the comments section. 

Until my next long read, do take care.

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