It can be confusing to navigate your way in cryptocurrency as a beginner.If you’re reading this article my assumption is that you’re a beginner with that reason I will simplify the basic knowledge you need to know.

The world of finance is no exception to the modern transformation going on in different sectors. With the release of cryptocurrency in 2009, the world of finance saw a beautiful transformation.

After it’s invention, it has captured the attention of investors and the general public. 

Navigating and understanding cryptocurrency as a beginner is more important than ever in this modern times, especially those interested in finance and technology. Let’s dig in

Defining Cryptocurrency And History

Cryptocurrency is a form of virtual or digital currency that makes use of cryptography for its security and operates a decentralized system.

Cryptocurrencies are like traditional currencies that can be used to make payments , has value and can be used to store value, the only exception is that this currency is digital. 

To record transactions transparently and securely a technology called blockchain is used.

Cryptocurrency is decentralized unlike government 

Unlike traditional currency that’s issued by the government Cryptocurrency is decentralized.  

By decentralization I mean that cryptocurrency is free from control and manipulation from any entity.Examples of popular cryptocurrency are bitcoin, etherum, and litecoin. 

The history of cryptocurrency can be traced back to the 20th century after the creation of digital currency was attempted. Their names are DigiCash and E-gold.

Meanwhile, in 2009 cryptocurrency was released by anonymous person or group of people using pseudonym Satoshi Nakamoto. It was only the creation of cryptocurrency that gained popularity.

Cryptocurrency had a long standing issues of double spending, but the innovation of bitcoin blockchain solved that issue. This blockchain technology also solved the problem for the creation of other currencies.

How Does Cryptocurrency Work?

The technology blockchain is used to record transactions made with cryptocurrency. Blockchain is a distributed ledger maintained by a network of computers, or nodes. Miners have to validate any transaction that it’s broadcast to them.  These crypto miners have to make use of powerful computers to solve complex mathematical puzzles. These miners have to validate a transaction before it can be added to a block and permanently recorded on the blockchain. 

Cryptography techniques are used to secure transactions of cryptocurrency on the blockchain, this technique makes it impossible for outside or unauthorized parties to alter transactions. 

Furthermore, there’s a reduced risk of hacking and fraud because of the decentralized nature of blockchain technology which ensures that there’s no single point of failure.

Watch this video for more on cryptocurrency 

Benefits and Misconceptions of Cryptocurrency 

In traditional system of holding currency the individual doesn’t have full control of their funds, this is entirely different in the digital system where individuals have full autonomy of their funds. This financial autonomy translates to the fact that banks or government don’t have access to peoples funds and they can never freeze your account when you’re using cryptocurrency.

Another benefit of transacting with cryptocurrency is that, there’s the high chance of your fund appreciating in value faster than when your money is in the traditional currency. This offers greater opportunity for investors to generate substantial returns on their investment. 

However, remember that with greater risks comes with greater loss or gains. The crypto market is highly volatile and speculative, and investing in it carries great risks.

One misconception people have about cryptocurrency is that they believe it’s a get-rich-quick scheme. But they forget that making substantial profits from investing in cryptocurrencies requires you to have enough knowledge about the marke, being patient and executing your trade at the right time. It’s necessary to understand that investing in such volatile currency comes with high risk. To be successful in cryptocurrency it requires research, risk management and have long term perspective. 

This high volatility has also led Perpetua believe that this digital currency isn’t regulated. In as much as cryptocurrencies activity is outside the traditional financial system, they are still regulated in many jurisdictions. These regulatory frameworks main target is to protect consumers, prevent fraud, and ensure the integrity of financial markets. Due to advancements in security measures and best practices have made cryptocurrency investments safer than what it was in the beginning.

Blockchain 

What Is Blockchain?

You have been hearing about blockchain. What really is blockchain?  

A blockchain is a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network. We can say it is basically a digital database which records transactions in a orderly and immutable manner across a network of computers. 

In blockchain decentralized database, every participant(node) has a copy of the entire ledger. But it’s different in the traditional centralized database where you don’t have a copy of the ledger.

How does blockchain work?

Each collection of validated transactions by the miners are carried on cryptocurrency are grouped into blocks.

The term “blockchain “ came about because these blocks are linked together in a chronological order, and they form a chain of blocks.

Each participant (node) is allowed to maintain a copy of all the blockchain, this creates redundancy and resilience against data loss

To secure the integrity of blockchain, cryptography is used to maintain its security. The blocks of each transaction contains cryptographic hash of the previous block, this creates a cryptographic link between block.

Furthermore, to verify the identity of participants, digital signatures are used to authenticate transactions.

To understand this better there’s something called consensus mechanism.

Consensus mechanisms are protocols or rules that activate nodes in the network to agree on the authenticity of transaction and the order in which they’re joined to the blockchain.

Common consensus mechanisms include Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS).

The cryptocurrency Miners are rewarded with newly created cryptocurrency and transaction fees for validating transactions and all other efforts. All transactions are broadcasted to the network and validated by nodes using predefined consensus rules. Transactions are grouped into blocks and added to the blockchain in a sequential order once verified.

Watch this YouTube video to learn more about 

blockchain:  

Guide on buying your first cryptocurrency as a beginner 

When buying your first cryptocurrency, this journey is an exciting step into the world of digital assets, increasing your opportunities for investment, financial sovereignty, and participation in decentralized networks. 

From selecting a reputable exchange to securely storing your digital assets, I will guide you on navigating your way in your first purchase of this digital currency. The first thing to do is when navigating cryptocurrency as a beginner. 

• Choose a Cryptocurrency Exchange
  • Research on different Exchanges: Begin your research and check different cryptocurrency exchanges to understand and find one that marches your needs and wants in terms of security, fees, supported cryptocurrencies, user experiences and terms and conditions.
  • Check out for Reputation and Security: Choose an exchange with a strong and reliable proven track record of security measures, things like two-factor authentication (2FA), cold storage for funds, and regulatory compliance should be taken into consideration.
  • User Experience: Also consider checking out things like user interface, trading features, and customer support provided by the exchange to ensure a smooth and seamless trading experience.
• Setting Up An Account
  • Account Setup: After choosing your preferred cryptocurrency exchange, follow the account creation process. This process typically involves providing personal information, verifying identity (KYC), and setting up security features such as 2FA.
  • Fund Your Account: fund your exchange account using various payment methods provided by your cryptocurrency exchange, including bank transfers, credit/debit cards, or cryptocurrency deposits.
• Selecting Your First Cryptocurrency
  • Research on different Cryptocurrencies: Get all the required knowledge on different cryptocurrencies to understand their use cases, technology, development team, market potential, and community support. Know everything that’s involved. Take courses, watch videos and read articles. Consider factors such as market capitalization, liquidity, and long-term viability when selecting your first cryptocurrency.
  • Diversify your portfolio: use diversification strategies to protect yourself for future uncertainties. consider mixing well known cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), as well as promising altcoins with potential for growth.
• Placing Your First Order
  • Buying Cryptocurrency:After carrying your research and getting all the knowledge required place a buy order for your chosen cryptocurrency on the exchange, specifying the amount you wish to purchase and review the order details making sure that you input the right details before confirming the transaction.
  • Understanding Market Orders vs. Limit Orders: Research the difference between market orders (executed at the current market price) and limit orders (set at a specific price), then choose the order type that suits your trading strategy and objectives.
• Storing Your Cryptocurrency
  • Choosing a Wallet: Research and select a secure cryptocurrency wallet to store your digital assets, check out factors like security features, ease of use, and compatibility with your chosen cryptocurrencies.
  • Secure Your Assets: Ensure the security of your cryptocurrency holdings by safeguarding your private keys and backup phrases, implementing proper password management practices, and exploring additional security measures such as hardware wallets and multi-signature wallets.

Trading Cryptocurrency: Tips and Strategies

As a beginner in this field trading cryptocurrency can be create a lot of hormonal rush both mixed with excitement and fear. As time goes on the challenges mixed with opportunities for substantial gains as well as risks of significant losses will either force you to continue or quit. I’ll reveal various tips and strategies to help you navigate the cryptocurrency markets more effectively and increase your chances of success.

• Conduct Research:
  • Market Analysis:Research thoroughly on the market before making any trades. Constantly check and analyze price trends, market sentiment, and news events that may impact prices.
  • Fundamental Analysis: Analyse the fundamental news that are most likely going to affect the cryptocurrencies you’re interested in, including technology, team, adoption, and use cases. Understanding the underlying value of a cryptocurrency can help inform your trading decisions.
• Develop a Trading Plan:
  • Set Clear Goals: Define your trading goals, whether they’re short-term profits, long-term investment growth, or a combination of both. Establish realistic expectations and timelines for achieving your goals.
  • Risk Management: Implement risk management strategies to protect your capital and minimize losses. Determine your risk tolerance and set stop-loss orders to exit trades if prices move against you.
  • Diversification: Spread your investments across multiple cryptocurrencies to reduce risk and exposure to any single asset. Diversification can help balance potential gains and losses in your portfolio.
• Choose the Right Trading Strategy:
  • Day Trading: Day trading involves buying and selling cryptocurrencies within the same day to capitalize on short-term price movements. It requires quick decision-making, technical analysis skills, and strict risk management.
  • Swing Trading: Swing trading aims to profit from medium-term price trends over several days or weeks. This strategy involves identifying trends and trading opportunities based on technical and fundamental analysis.
  • Long-Term Investing: Long-term investing involves holding cryptocurrencies for an extended period, typically months or years, with the expectation of price appreciation. It requires patience, research, and confidence in the underlying value of the assets.
• Stay Informed and Adapt:
  • Stay Updated: Keep abreast of market developments, news, and regulatory changes that may impact the cryptocurrency market. Follow reputable sources of information and stay skeptical of rumors or hype.
  • Adapt to Market Conditions: Be flexible and adaptable in your trading approach. Cryptocurrency markets are highly volatile and unpredictable, so be prepared to adjust your strategies based on changing market conditions.
  • Learn from Experience: Continuously evaluate your trading performance and learn from both successful trades and mistakes. Keep a trading journal to track your decisions, analyze outcomes, and identify areas for improvement.
• Practice Discipline and Patience:
  • Exercise Discipline: Stick to your trading plan as long as it keeps working for you only change if it’s not giving you the profits and avoid emotional decision-making. Always remember that discipline is essential for maintaining consistency and avoiding impulsive trades driven by fear or greed.
  • Patience: Success in cryptocurrency trading takes patience and right timing in executing trades. Close your mind to the expectations of becoming profitable overnight, and be prepared to weather periods of volatility and uncertainty.

Conclusion

Navigating cryptocurrency as a beginner can be daunting, but this guide simplifies the basics. With the rise of cryptocurrency in finance, understanding its fundamentals is crucial. From buying your first cryptocurrency to trading tips, this guide equips you with essential knowledge. Remember to research, set clear goals, and stay disciplined. By staying informed and adapting to market conditions, you can navigate the cryptocurrency market confidently and achieve your financial goals.