Cryptocurrency is relatively new compared to fiat money and stock trading instruments, but it has expanded into a massive universe that the uninitiated may find it difficult to understand. Nevertheless, it is worth understanding this topic, if only because it can bring significant profits (of course, in conjunction with risks). Today the editorial staff of Btcnewsweb.com will talk about how to invest in cryptocurrency and how these risks are justified.
General principles of investing in digital currencies
The essence of investing is to invest money today, and tomorrow (relatively speaking, the term can be any) to make a profit from it. But in fact, the investment pays off only if you observe sufficient caution and the basic rules, which we will talk about in the course of the story. Otherwise, there is a risk of losing all investments. It is important to learn how to conduct your own analysis, as the opinions of analysts are not always the best indicator.
When making deals, take your time, especially if you plan to invest for a long time. One successful trade is much better than many useless ones.
The main types of crypto investments:
- Long-term investments (buy & hold). The method is considered the safest, since it depends little on the constant volatility of the market, only the general upward trend of the coin is important.
- Short-term investments (up to 1 year). They assume a possible sale of assets, if the market situation is favorable for this.
- Speculative trading. Trades are made on a daily basis with a very high frequency, thus the profit is formed from small constant fluctuations in the rate.
- Investments in blockchain projects. Almost always noteworthy new projects raise funds through crowdfunding, for example, IEO or ICO. The problem is that finding a really worthwhile project and predicting its growth is not so easy.
It should be noted right away that experts recommend investing only part of your investment portfolio in cryptocurrency, since these are high-risk assets due to their unpredictable volatility. The rest should be invested in stocks, bonds, real estate and other more or less stable instruments. Cryptocurrency can be a good investment, but only if its price rises. Dividends are not paid on it, as is the case with shares. The thing is that initially the crypt was created not as an investment asset, but as a replacement for fiat means of payment.
Next, you need to choose which cryptocurrency to invest in. There are thousands of them. The most popular is bitcoin, but altcoins are also suitable in terms of investments – in fact, all top coins have maximum prospects.
Mining can be called a separate type of investment in cryptocurrency. Indeed, in this case, in order to receive digital coins, it is necessary to purchase expensive equipment and constantly maintain its performance, pay electricity bills. First, you should calculate the potential profitability of the process using special calculators, since it depends on many factors.
Video from the EXMO exchange. Investing or Trading:
Methods of investing money in cryptocurrency
There are several ways to acquire digital assets, each of which has its own specific characteristics and is fundamentally different from the others:
- Cryptocurrency exchanges. There are many different types of crypto exchanges at the moment – spot, futures, margin trading, regulated or unregulated, decentralized or centralized. It is important to choose a platform that has been operating for a long time, is in the top on trusted services like CoinGecko, and has high liquidity and trading volumes.
- p2p sites. Although they are conventionally called exchanges, they work in a completely different way. Here users interact directly with each other without intermediaries. The buyer pays for the coins with fiat, transferring it directly to the merchant’s card or other account using the details that will be given to him, and then, when the seller receives and confirms the payment, the cryptocurrency is automatically transferred to the buyer.
- Exchangers. These services are best suited for a one-time purchase / sale of cryptocurrency, and almost all popular fiat methods are suitable as a payment method. With the help of exchangers, you can buy cryptocurrency in a matter of minutes and add it to your wallet. To choose a suitable service, you can use the BestChange analyzer, where there are only those exchangers that have been successfully operating for several years.
- Payment systems (AdvCash, Payeer, Capitalist). Electronic wallets with support for cryptocurrencies are a convenient and often profitable option for their instant purchase. The purchase is carried out using an internal account in the system, funds are also credited to the internal account (with the exception of AdvCash, where crediting to the linked account of the Binance exchange is supported).
- Telegram bots. Bots are added to the Telegram messenger as regular contacts, after which, with their help, simply by clicking on commands in the chat, you can invest money in cryptocurrency by choosing the most convenient offers from all the services presented by the service. The base from which the bot takes data is usually a p2p exchange or an exchanger.
- Cryptocurrency wallets. These services are intended primarily for secure storage of cryptocurrency, but they can also be used to purchase assets directly from your bank card and receive them to the wallet address you use. This method can be associated with high commissions, but at the same time it can be called one of the most convenient and safe.
In addition, there is the possibility of buying cryptocurrency through cryptomats, specialized devices that can be found in large cities around the world, except in those countries where digital coins are completely banned. Check if there is a cryptomat nearby using the website https://coinatmradar.com/.
Advantages and Disadvantages of Investing in the Crypto Market
✅ Possibility of quick and significant profit.
✅ The deflationary nature of cryptocurrencies.
✅ Manufacturability and innovativeness of assets.
✅ Fast and confidential transactions.
✅ Large selection of available assets for investment.
❌ High risks.
❌ Difficulty in forecasting.
❌ Technical difficulties.
❌ There are a lot of scammers and intruders in the field.
Safe investment: how to store cryptocurrency
Whichever cryptocurrency you choose for investment, you should take care of a wallet in advance to store it, or rather, to store a combination of keys confirming your ownership of assets and their transfer / receipt.
You can get both a software and a hardware wallet. The former greatly facilitate access to the currency at any time and allow you to actively perform trading operations. Hardware wallets are physical devices similar to USB drives. They are more secure than software, because they store keys independently of the Internet. Great for storing assets that you haven’t been using for a while.
Examples of software wallets are Exodus, Edge, Guarda, Jaxx, Metamask.
Examples of hardware wallets are Ledger, Trezor, Safepal.
Is it worth investing in cryptocurrency
One word that can be used to describe the entire crypto market is volatile. Currency rates can rise and fall by thousands of percent in a year or even a month. For example, the dynamics of the Bitcoin exchange rate in recent years, starting from the moment when it began to attract active attention:
- December 2016 – $ 891
- December 2017 – $ 19,423
- December 2018 – $ 3,751
- December 2019 – $ 7,335
- December 2020 – $ 26,476
- February 2021 – $ 44,880
In general, there is a positive trend, despite the rate jumps. Therefore, with long-term investment, holders rely on long-term profit. As for making money on momentary market movements, this is rather the lot of traders, the frequency of transactions of which is at least several transactions per day.
If you are ready for a certain risk and think that BTC or another cryptocurrency has potential for growth at the moment, then nothing prevents you from trying. But it’s better to start with small amounts. Read the material about the fear and greed index – this parameter will help you choose the best entry point.
Cryptocurrency can provide good prospects for your investment portfolio, but pay enough attention to asset diversification. A single piece of advice cannot be given here, since decisions are made depending on the needs of a particular investor.
The same applies to the volume of investments. The number of investments is determined based on how much you are inclined to risk, for how long you are going to invest and on the financial situation in general.
Video from Currency.com exchange. Which altcoins will grow in 2021 (forecast):
The crypt has disadvantages, but there are also advantages. If the pros outweigh the cons, then you can try investing in cryptocurrency, but it is imperative that you know what you are doing and don’t invest more than you can afford to lose. If you are planning to successfully invest in coins, then make sure you are financially prepared and understand how the market works. These assets are considered to be a very risky investment, therefore they should occupy a relatively small part of the investment portfolio.
Even if you were skeptical a few years ago, the hype around cryptocurrency in recent years could have convinced you. Digital coins are quickly gaining the hearts of both veteran investors and newbies. Nevertheless, most experts call for caution, since due to its youth, the crypto market has not yet acquired any fundamental principles and is mostly a technical game.