Crypto investing for beginners – insights you might need in 2023

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As time goes on, new altcoins appear out of obscurity and challenge Bitcoin and Ethereum's statuses. However, even in this context, Bitcoin remains the king of the market, with over 43% of the crypto market capitalisation. The oldest digital token has gained worldwide attention and doesn't seem to slow down. 

The growing interest, adoption, and investment in Bitcoin and other currencies have investors curious about trading digital currencies. The following recommendations and market insights take the reader through the basics of trading digital currencies. 

What is cryptocurrency?

Cryptocurrency is a digital asset that, similarly to cash, provides users with a source of purchasing power. Because it's an avenue for investment, people buy it to obtain a financial return. Investors can actively take part in the evolution of this transformative technology and its developing applications if they invest in digital tokens in the long run. While predicting the future is challenging, experts believe crypto and blockchain technology is ubiquitous. 

Digital coins are different from traditional currencies because they're decentralised; hence no central authority regulates, issues, or backs them. Units of cryptocurrency are created through different processes that rely on blockchain, an innovative technology that powers several kinds of processes. Blockchain also functions like a distributed ledger technology that enables the production of a secure encrypted record of cryptocurrencies and their transactions. 

What kind of cryptocurrencies can you find on the market?

We use the term cryptocurrency to refer to digital tokens relying on blockchain technology. However, it's a generic word used to describe a category of assets that includes over 20,000 virtual currencies. Bitcoin is the best-known virtual currency; therefore, most investors know how to buy bitcoin but struggle with what purchasing altcoins might imply. All digital tokens alternatives to Bitcoin are called altcoins, and some of them have gained a large base of enthusiasts, amassed large market value, and built high profiles. 

Here is a top of the most valuable cryptocurrencies by USD market cap for August 2022. 

- Bitcoin
- Ethereum
- Tether
- USDC
- BNB
- Binance Coin
- XRP
- Cardano
- Solana
- Dogecoin

No one can say which cryptocurrency will become the most successful in 2023 as the crypto ecosystem is still new, and many networks are still in their development stages. Even if the cryptocurrencies from the above list are the most established ones, there's still a risk of loss if you do not possess the required knowledge to craft a trading strategy. That's why it's paramount to research each crypto before adding one to your portfolio. 

Some things to consider before investing in cryptocurrency in 2023

If you're a beginner trader, it's crucial to know that cryptocurrencies are volatile and often experience large swings over short periods, making you have second thoughts if you're a risk-averse investor. You might find it surprising, but everyone can launch a cryptocurrency because, as stated before, the market is unregulated. Therefore, you should research a project before investing to avoid scams. 

It's also recommended to consider why you want to join the crypto industry. Do you want to invest in a new project? Do you want to cash in on a trend? Do you have a strategy you wish to employ in mind? Cryptocurrency is still new, so it's difficult to analyse the risk of adding tokens to your portfolio. 

Experts believe cryptocurrency is a great long-term investment, but it's wise to be cautious and clear about your goals and expectations before diving in. Regardless of your investment type, adopting a long-term perspective is vital, especially when you trade assets that experience rapid price fluctuations. As a beginner trader, you might be tempted to make emotionally-driven decisions when investing in highly volatile assets like cryptocurrencies. Develop a trading strategy to match your style and goals, and stick to it. 

Is investing in cryptocurrency in 2023 a good decision?

Whether adding cryptocurrencies to your portfolio or not in 2023 is a wise decision depends on several factors. As with other forms of investing, the answer comes from how high your risk tolerance is (in psychological and financial terms), how long you're willing to expect to cash out, and how diversified your portfolio will be. Cryptocurrency is highly volatile, so the value of currencies can go up or down quickly in the coming months. The market is in the bear phase now, and specialists expect it to enter the bull stage somewhere around 18 months. This could bring drastic spikes in assets' prices. 

However, simply because the crypto market offers countless trading opportunities doesn't mean it's the right investment for you. As stated before, you must consider all factors before you put your money into it. 

How much should you invest in cryptocurrency?

Crypto specialists recommend investing 1% to 5% of your net worth in crypto or other volatile assets. If you want to know how much of your portfolio to dedicate to cryptocurrency, specialists believe that it's best to limit the exposure to unstable digital assets and never invest more than you afford to lose. Having a small exposure to digital currencies can improve the risk-adjusted return profile of your portfolio. Your overall investment portfolio and risk tolerance tell you how much you should invest in virtual currencies. 

If you want to add cryptocurrencies to your portfolio in 2023, consider diversifying your investments. The type of cryptos you're holding greatly impacts your profit. Coins like Bitcoin and Ethereum have promising long-term use cases and are less susceptible to market manipulation. Mix established cryptocurrencies with new ones and more speculative projects. Crypto experts recommend holding no more than 2% of the overall portfolio in a single cryptocurrency. 

Final words

Bitcoin, Ethereum, and other digital currencies continue to gain popularity, but if you want to invest in them, it's best to educate yourself and find out more about the crypto market. We hope the above insights guide your steps. 

By Cynthia Madison

© 2021 Copyright Cynthia Madison - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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