Use Coinbase to purchase cryptocurrency as part of a well-diversified portfolio. Coinbase offers a broad selection of cryptos, a secure and convenient app for iOS and Android, various educational resources, and FAQ material to help users get started.
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WHAT IS A CRYPTOCURRENCY?
Cryptocurrency can mean a lot of things, and the definition seems to change slightly depending on the type of “coin” you’re purchasing. Essentially, it is a unique digital token that is stored on decentralized networks and verified by technology like blockchain.
In theory, this decentralization and structure minimizes the influences of governments and hackers and preserves the purchasing power as a result, etc. There are myriad theories. Regardless, cryptocurrency is a disruptive technology (meaning the industry status quo is challenged to adapt) and I believe it is here for the long haul and I believe a well-diversified portfolio should contain some element of crypto.
For all the perceived benefits, there are valid criticisms of the crypto market to be aware of. Here are a few areas that have been points of risk and controversy for the cryptocurrency market. Keep in mind: these are examples, and a quick Google search will bring you “into the weeds” fairly quickly.
In general, Cryptocurrency is VERY Volatile
Some of you might remember the bitcoin ascension to almost $20,000 USD at the end of 2017. From there, in one year, it dropped to ~$4,000 USD. This is just an example, but it makes the point about how much it can move in a relatively short amount of time. With that said, my approach has been to invest a fixed amount and regular intervals. I do not try to “time” the markets.
Crime and Cryptocurrency
Unfortunately, with the anonymity, Bitcoin (a type of cryptocurrency, perhaps the most famous) has been criticized for use in illegal activity. It has also been the incentive for a lot of hacked exchanges where people lost a lot of money. To be clear, I am not saying cryptocurrency illegal – it is how people use it that can be questionable. Investopedia has a good overview of some finer points – check it out, here!
Are Cryptocurrencies Safe?
I don’t have an enormous presence in the crypto markets and I don’t plan to anytime soon. However, I think it makes sense to cautiously gain exposure overtime. Times are changing, and crypto assets seem more and more likely to be an established part of the financial system. They are safe, but there is more risk associated with them as well (e.g. volatility, and storage).
Don’t get swept-up in the Frenzy!
I would strongly advise a strategic approach. Be careful to avoid the “gambling” mentality of chasing particular crypto “up” and “down” the market. Also, cryptocurrency markets are effectively open 24/7, unlike the stock market we’re all familiar with. Cryptocurrency has a reputation to maintain: it will move dramatically!
Keeping your Cryptocurrency Safe
Since the beginning, times have certainly changed. In my opinion, the market is growing more stable each day. Exchanges like Coinbase offer investors reasonable security. However, users should be aware that their cryptocurrency is likely stored in a wallet maintained by the exchange. Not necessarily a “problem” per se (and this probably depends on who you’re talking to), but it is not as secure as transferring your coins into your own “hard” wallet. This allows users to have cold storage, not connected to the internet.
WHAT IS COINBASE, AND HOW DO I USE COINBASE TO PURCHASE CRYPTOCURRENCY?
Coinbase is one of several exchanges where one can purchase cryptocurrency. I think it is an excellent platform, easy to use, easy to understand, and helpful for getting established. However, the fees are on the steep side, and when I do buy cryptocurrency I try to buy it in batches to minimize the impact of the fees. There are also premium/ advanced profiles for those who wish to pursue serious cryptocurrency trading.
Is Coinbase Safe?
Firstly, and most importantly, practice good security with your cryptocurrency investments. Use a solid password, security questions, and the like. Don’t leave your password lying around, etc. If you plan to invest a lot, consider cold storage options so you can better protect your crypto assets.
I like Coinbase because it is relatively safe and it allows me to invest in a broad range of crypto assets. Naysayers may argue that there aren’t enough altcoins available, and that may be true. However, I’m not an aggressive speculative investor in the sense of buying all coins on the market and I like that Coinbase will not offer a currency that they cannot support. For me, this works fine. Find your style, and see what works for you!
Use Coinbase to earn free Cryptocurrency!
As I’ve mentioned, I use Coinbase to gain broadly diversified exposure to cryptocurrencies. Within that platform, I really like using their “Earn” feature to pick up a few more cryptos… for free! I have personally used this several times and it has been pain-free each time. The “Earn” feature which allows users to “discover how specific cryptocurrencies work – and get a bit of each crypto to try out for yourself.” Check it out, here.
Watch the fees when buying Cryptocurrency on Coinbase
Admittedly, I’m spoiled with the likes of Robinhood where trades are free. Coinbase is not set up that way, and the fee changes depending on the size of the transaction. They are transparent and it is easy to see what the cost is before executing the order. If you decide to dabble in cryptocurrency or get more involved, keep an eye on the fees!
Mêtis in our Cryptocurrency Matters
I remember it clearly! Bitcoin was the cryptocurrency I started with, and I purchased it on Coinbase. I was able to purchase fractional portions of the virtual currency, and have since expanded into several others. Litecoin, Ethereum, and Bitcoin are the “base” and I use Earn to get exposure to others as they become available. Coinbase also offers “stablecoins” which attempts to match the value of the USD. I generally don’t buy these. My strategy has been to invest in the “true” cryptocurrency options.
I keep a fairly close eye on the “free” offerings that show up on the Coinbase website via “Earn” and capitalize on those when I can. No transaction fee!
Personally, I try to invest approximately 1-2% of my total portfolio value in cryptocurrency. I might scale that up in the future, but right now that fits well with our overall financial strategy.
I wish you the best of luck in your endeavors! Keep up the hard work, keep developing yourself, and keep cultivating Mêtis in your Money Matters. Diligently pursue excellence in your finances, my friends!
Here are a few more posts that might interest you:
- The Psychology of Investing
- Leaving an Inheritance for Your Children
- 5 Sources of Income for Retirement
- A Practical Financial Strategy during COVID-19
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