We’re reading a lot about cryptocurrency being here to stay, but for many of us, it’s still not a regular part of our everyday financial lives. Why is that? Could be lack of education among investors, and the general lack of current, regular commercial use of cryptocurrency. However, if acquiring the right financial knowledge is a roadblock, let’s move that out of the way right now and do some schooling on cryptocurrency trading for beginners.
The Basics of Cryptocurrency
Cryptocurrency is digital currency (used exclusively online) that acts as a direct financial exchange between users without the involvement of a bank or other third parties. Think of it as an alternative currency to traditional forms of payment, like cash, checks, and credit cards.
The information used within the system is kept safe through the use of encryption techniques . These methods scramble the info to make the activity secret and difficult for outsiders to access.
When you and others use a cryptocurrency system, everyone and everything remain anonymous. Each exchange that takes place is woven into a group called “blocks” (hence the term blockchain), which again is coded (encrypted) in order to keep it private and secure.
The basic unit of value of cryptocurrency is expressed as a “token,” which is used exclusively by members of the group involved in the blockchain. Every time a transaction happens, a “miner” updates the blockchain (more about this later).
Cryptocurrency is not created by any bank system or government agency, which means it’s in a universe of its own. Also, it isn’t regulated to the same degree as other financial products, like banking and investments. At least not yet.
Many people find this freedom to be a very cool vehicle to ride. Its popularity is growing in an organic way too; this makes it hard to predict where it’s going and where it will end up.
Cryptocurrency can be bought and sold on special exchanges ; the most commonly known cryptocurrency is bitcoin. SoFi also allows users to buy and sell cryptocurrency.
Recommended: A Beginner’s Guide to Cryptocurrency
The Future of Cryptocurrency
Of course, not everybody is on board with cryptocurrency being a given for the future. Although there are have been more than 2,000 cryptocurrencies on the market, more than 800 of them are now no longer operational.
Another fact to note: the U.S. Securities and Exchange Commission (SEC) has denied more than a dozen applications for permission to list bitcoin exchange-traded funds (EFFs). The reason, though, could be to your benefit as an investor: the need to minimize risks of fraud and manipulation, and to increase investor protection.
“We’ve seen some thefts around digital assets that make you scratch your head,” SEC Chairman Jay Clayton said at CoinDesk’s Consensus Invest conference. “We care that the assets underlying that ETF have good custody and that they’re not going to disappear.”
That said, are you a believer? Are you thinking about taking a leap, or at least getting in on the ground floor, before the anticipated mad mainstream rush?
Let’s break down the details of cryptocurrency trading for beginners:
SoFi Invest offers a new way
to trade crypto.
It’s in the Wallet?
Offline, cryptocurrencies are stored in “wallets.” A wallet is a software program that stores both private and public keys that allow you to send and receive digital currencies and keep an eye on your coin.
Hot wallets give you easier access, but they can also more easily be hacked. Cold wallets are harder to open. If you plan on holding on to your investment for a long time, you may want to opt for the cold wallet. If you need to dip into your coin more than occasionally, consider the hot wallet.
There are a number of wallet providers , and you’ll want to do some due diligence before choosing one.
Learn to Chill
Cryptocurrency is still a relatively new technology, which means it can act like a newborn: crying jags, not understanding how things work, crawling and stumbling, and behaving irrationally.
You’ll need to get used to huge price swings, instability when least expected, rollercoaster performance reports, and general anxiety on your part. Be sure you can take it.
Tune Out The Naysayers
Cryptocurrency trading for beginners means getting involved in a new idea. When that happens, get ready for the know-it-alls and Negative Nellies to tell you what’s what. You’re going to hear that cryptocurrency is overhyped, just a fad, or a wicked scam.
Of course, you’re going to do your due diligence and make up your own mind with educated decisions, so let don’t let them rattle you. Also, what may be true and unfortunate for one cryptocurrency may not be the same for another.
Get Professional Insights
Here’s the thing: Maybe cryptocurrency isn’t for you right now. The fact is, cryptocurrencies aren’t endorsed or guaranteed by any government—and they are volatile and involve a high degree of risk.
Not only that, but consumer protection and securities laws don’t regulate cryptocurrencies in the same way that they regulate traditional investment products. If you instead want to learn more about traditional investment products, now’s the time to check out SoFi Invest®.
With SoFi Invest, you’ll get access to financial planning and personalized advice, all based on how you want to invest and what your future goals are. All you need to do is make an appointment to chat with one of our SoFi Invest Advisors.—there is no obligation and no cost.
We’ll work with you to make sense of an investment strategy and help you map out a plan (and stick with it).
With an automated investing account with SoFi, we’ll invest in thousands of assets, actively managing them, which can help you get a clearer vision of your future path. To avoid veering off the road, we’ll automatically rebalance your investments as needed, so that they stay on track.
Choose how you want to invest.
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The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including
FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member
FINRA / SIPC .
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