It’s been a crazy few months for the cryptocurrency market. Bitcoin, Ethereum and other currencies have skyrocketed in value and then plummeted again. As a result, it can be tough to know where to invest your money or how much you should risk. We’re here to help you navigate the world of crypto-investing with some simple CryptooGuide and general guidelines that will give you an edge on the competition!
What are cryptocurrencies?
A cryptocurrency is a digital currency designed to be secure and anonymous in most cases. One of the main characteristics of cryptocurrencies is that they operate on a decentralized basis, which means any institution or government doesn’t control them. Furthermore, a blockchain usually confirms the transactions, a public transaction database functioning as an independent verification system for each cryptocurrency. In other words, these currencies aren’t printed – they’re produced by people and increasingly businesses, running computers worldwide, using software that solves mathematical problems.
Why invest in cryptocurrencies?
Whether you’re looking for increased financial returns, a convenient way to purchase goods and services, or an investment opportunity that offers potentially high rewards, cryptocurrencies could be the right choice for you. You could invest in cryptocurrencies without actually owning any. There are now index funds and exchange-traded funds (ETFs) “that offer a simple and low-cost way to buy the underlying cryptocurrency with a single trade.” For example, if you bought $50 worth of HIVE Block chain Technologies Ltd., the only publicly traded cryptocurrency mining company in Canada, you would own a small fraction of the company and be entitled to a corresponding portion of the profits.
How to invest in cryptocurrencies?
- Investing vs Trading: The first thing to note is that cryptocurrencies are traded 24 hours a day, seven days a week via online exchanges. The sheer volume of activity on these platforms makes it easy to buy and sell – typically without incurring any fees – making this an attractive prospect for investors. The ability to trade at any time is the main distinction between investing in cryptocurrencies and traditional financial instruments such as shares, which you can only exchange at certain times throughout the day.
- Cryptocurrency exchanges & wallets: Online exchanges offer a quick and easy way to turn fiat money into cryptocurrency. You register, deposit your fiat currency of choice (e.g., GBP), choose the currency you want to buy (e.g., BTC), and click “Buy”, much like when purchasing a book on Amazon. Of course, it’s essential to choose a secure platform that has good reviews from other users, but this is generally the same process as opening a new bank account or getting a loan.
With a valid account set up, it’s easy to transfer coins from the exchange into a secure online wallet, which is a program that runs on your computer or smartphone. Many people use free software such as Exodus Wallet, but you can also buy many other wallets.
After the purchase is complete, you can store your coins in an online wallet, or if you have a more advanced understanding of how blockchain technology works, you can download the official software for the currency directly onto your computer.
- Risks and scams: as with any investment, it’s not a smooth ride. In the past year, cryptocurrency has been volatile – the value of currencies like Bitcoin and Ether would rise by 20-30% in a day and then crash back down just as quickly. As a result, people who got in early made some significant gains, but people who bought more recently have lost 90% or more of their investment.
It’s essential to be wary of scams and only use trustworthy websites. There have been reports from numerous people of having money stolen from their exchange accounts and wallets, so it’s essential to do your research before you put any money into one!
You can trade cryptocurrency on several online exchanges worldwide, but remember – this is a risky business. It’s easy to get overwhelmed by all the jargon and complicated software you need to use to make trades yourself. If you’re not an expert, it’s almost always better to invest via a fund or another trader who already has experience.
It’s up to you whether you want to be a trader or holder. Many people have made significant profits through trades, but it’s important to remember that the value of your cryptocurrency can decrease as well as increase! For this reason, many investors choose to hold onto their coins for the long term.
Advantages of investing in cryptos:
- potential for huge returns: The market is still very young. Cryptocurrencies are about 8 years old, compared to the stock market, which has been around for hundreds of years. It means that there’s much room for growth. The market is less mature than other types of investment. That means that there’s much room for significant gains! If you bought shares in Amazon or Apple stock when they first went public, you would have made incredible returns. It is even more true with cryptos because most are the only coins in their category.
- Decentralization: because cryptocurrencies are not ‘owned’ by any government or company, you’re free to do with them as you please. Several block chain technologies are being developed right now, and they’re all fighting to become the dominant currency in their industry. The best coins will likely become the biggest winners over time.
- Global market: you can buy coins from anyone globally – there’s no need for a US exchange if you’re from China.
- New cryptos are cropping up all the time, and many will die off quickly. So it’s essential to stay up-to-date on which ones are still around if you want to make money! The most significant gains usually come from the little coins.
- Quick, secure and inexpensive: a Bitcoin transfer from New York to Beijing costs about $1.50 and takes 10 minutes, compared with cross-border bank transfers, which can take up to five days! It offers a low entry point: investing a few dollars is enough to get started; you don’t have to have huge stacks of money to begin trading or investing in crypto.
- It’s possible to generate significant, stable and predictable profits: you can store your coins and sell them at any time – no need for a 3-5% weekly gain that the stock market typically needs. It’s also effortless to predict which coins will do well.
- You’ll be exposed to new technologies before the masses get on board: there are thousands of projects out there that you’ve probably never heard of. If you invest in the right ones, it’s possible to make 10x or 100x your money (in rare cases) compared to what you would have made had you invested on an exchange like Coinbase.
Although it might seem intimidating to invest your hard-earned money in the crypto market, you will soon reap the rewards worth a lot with little research and market study. Happy trading!