The Timing Has To Be Just Right
Timing when a certain coin will surge is at best, very hard, and at worst, impossible. Investors may be rushing to buy or sell because of events you cant predict, like a tip on Reddit or because Tesla says its doing so.
All of a sudden you have that really dangerous fear of missing out for investors, says Megan Horneman, director of portfolio strategy at Verdence Capital Advisors. Everybody buys it, it rises significantly until the next hot topic comes out.”
Its like the dot-com bubble, she adds: the internet came out, investors bought anything that had a dot-com at the end of their name. But with cryptocurrency, its even more dangerous, because instead of buying companies with earnings youre basically buying somebodys idea there is no way to fundamentally value the currencies.
Dogecoin has built a strong community over the years, and its lightheartedness made it the perfect fit for the meme stock movement that earlier this year sent GameStop’s stock soaring, says Richard Smith, the CEO of the Foundation for the Study of Cycles and a financial cycles expert.
But I dont think thats something that you could have predicted, or that we can be confident is going to continue, he adds.
So what about those people who do get the timing right?
Theyre going to go into their entire investment philosophy thinking, This is how I can make money, its that easy, Horneman says. Its not.
How Do I Protect Myself
If youre looking to buy a cryptocurrency in an ICO, read the fine print in the companys prospectus for this information:
Who owns the company? An identifiable and well-known owner is a positive sign.
Are there other major investors who are investing in it? Its a good sign if other well-known investors want a piece of the currency.
Will you own a stake in the company or just currency or tokens? This distinction is important. Owning a stake means you get to participate in its earnings , while buying tokens simply means you’re entitled to use them, like chips in a casino.
Is the currency already developed, or is the company looking to raise money to develop it? The further along the product, the less risky it is.
It can take a lot of work to comb through a prospectus the more detail it has, the better your chances its legitimate. But even legitimacy doesnt mean the currency will succeed. Thats an entirely separate question, and that requires a lot of market savvy.
But beyond those concerns, just having cryptocurrency exposes you to the risk of theft, as hackers try to penetrate the computer networks that maintain your assets. One high-profile exchange declared bankruptcy in 2014 after hackers stole hundreds of millions of dollars in bitcoins. Those arent typical risks for investing in stocks and funds on major U.S. exchanges.
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Cryptocurrencies run on the blockchain, which is a digital ledger of the currency’s transactions and ensures the same coin is not spent twice. Transactions are processed on the blockchain network of thousands of machines – and in exchange for those computers’ hard work, owners have a chance at receiving a crypto coin.
The new coins are “mined” when computers solve complex mathematical problems to work out the legitimacy of transactions on the blockchain.
While many people do pay for their purchases with crypto, it’s more widely discussed as a form of investment – spurring whole websites that track the value of a single Bitcoin.
Using exchanges or wallet apps like Coinbase, Crypto.com and BlockFi, users will convert dollars to cryptocurrency and count on their investment increasing in value, just like a stock.
Also like a stock, you don’t pay taxes on crypto gains until you sell and cash out. The capital gains tax you would pay on Bitcoin or other crypto income will vary according to your income in that tax year – if you make under $40,000 per year, you would owe no tax on any crypto gains. They would be taxed at 15% if you earn up to $441,150 and 20% at any higher income, according to CNBC.
A cryptocurrency might lose value when a company no longer accepts it as payment, or when a lot of people try to sell at once.
Here are some scenarios to help understand dollars and crypto.
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Will Cryptocurrency Make You Rich
Be honest this quintessential cryptocurrency question has popped into your head at least once .
Youve probably heard that your brothers friends friend made a fortune on the hottest new crypto!
If it happened to that lucky son of a gun,why not you?
Making a quick buck on cryptocurrency certainly sounds nice!
Whether youre a crypto newbie or a bitcoin veteran everyone wonders if cryptocurrency could one day make them rich.
The short answer is that, yes it could. However, itll be hard work, and there are some strategies that you should definitely follow.
Of course, before discussing these cryptocurrency investment strategies, remember that Im not your financial advisor. Any strategies and investments that I mention are my educated opinions. Anyone online who doesnt admit to this when talking about crypto should simply not be trusted especially if they describe themselves as a cryptocurrency wizard or guru!
So, before you jump feet first into the crazy world of crypto, make sure you also do your own research.
# Find The Right Bitcoin Vendor
The first thing to do in this process is to choose the right bitcoin vendor.
There are a hundred and one different bitcoin vendor platforms that have been popping up in recent years. Ever since the first one that consumers could widely access was built, there have been many a webmaster trying to get in on the action by charging exorbitant fees for folks to convert their dollars into bitcoin.
Now its important for you to shop around before choosing any one specific bitcoin vendor. The vendor that you choose may also be location-dependent, as some vendors only have the authorization to operate in specific countries.
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Best Cryptocurrencies To Invest In For 2021
Cryptocurrency is digital money that isnt managed by a central system like a government. Instead, its based on blockchain technology, with Bitcoin being the most popular one. As digital money continues to gain traction on Wall Street, more and more options become available. There are currently more than 5,000 cryptocurrencies on the market.
While you can use cryptocurrency to make purchases, most people treat it as a long-term investment. However, volatility makes investing in cryptocurrency risky, so its important to know what youre getting into before you buy in. These are the top eight cryptocurrencies that are most worthy of investment in 2021.
Read The Projects Whitepaper
When youve found a cryptocurrency you like, the first thing you need to do is read the whitepaper.
A white paper is an authoritative report or guide that informs readers concisely about a complex issue and presents the issuing bodys philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision.
Reading the whitepaper will give you two tremendous benefits:
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Directly Earning In Cryptocurrency
Those who wont have the capital to invest in cryptocurrencies or buy expensive mining equipment have the option of earning cryptocurrency directly.
One way to do this is to sign up to a crypto exchange. Some crypto exchanges like Coinbase and BuyUcoin, offer a tiny quantity of free coin to users who sign up.
Some niche employers, with remote workers across borders, find it simpler to pay salaries in cryptocurrencies rather than fiat money due to forex fees.
Specialised social media sites most famously Reddit encourage participants to tip or donate coins to users who share important information. Non-franchise eateries are also starting to welcome payments in cryptocurrency.
Such miniscule earnings may not net large profits on trade, but they are an example of how cryptocurrencies are used as a medium of exchange for goods and services akin to fiat currencies like the Rupee or Dollar.
Cryptocurrencies: Can They Really Make You A Millionaire
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Its one of the news you hear more and more often, people who have invested small amounts in cryptocurrencies and millionaires sprang up in a few moments.
And in the turbulent times we have been going through since the beginning of 2020, with the coronavirus hitting the traditional markets mercilessly, there have been many who have re-evaluated their investment priorities and strategies.
At a time when confidence in the global economy was severely undermined, investment circles turned en masse to the cryptocurrency market in late 2020, when an exponential rise was recorded in the prices of some of them.
At a time when financial institutions were trying to assess and limit the generalized damage caused by the pandemic, amid growing fears of instability, the cryptocurrency market was a big winner.
The profits were crazy. Despite widespread uncertainty at the beginning of the year, cryptocurrencies became a $ 760 billion market at the end of 2020, approaching the all-time high of 2017 .
What was the value of the same market at the beginning of the year? Just over $ 185 billion! The amazing course of Bitcoin and other tokens in 2020 and 2021 created unprecedented interest in cryptocurrencies.
But can they really make you a millionaire?
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What Is Bitcoin And How Does It Work
The concept of digital money that people send online is not that complicated in itself. After all, most of us will be familiar with transferring money from one online bank account to another.
Bitcoin is a digital asset that operates like normal currency, but without the banks taking a cut with every transaction.
Unlike normal currency, there is no physical version of the coin.
Each bitcoin is created using an encrypted code, which is a string of numbers and letters. The same equation used to create the code is can unlock it .
Other important points about bitcoin:
- Cryptocurrencies, like bitcoin, are a form of payment that uses blockchain technology to send data in cyberspace
- Each bitcoin must be mined
- It is finite: only 21 million bitcoins that can be mined in total
- Cryptocurrencies are decentralised meaning they are not regulated by a financial authority, like a government or central banks
Find out more: Is cryptocurrency a good investment?
How To Invest In Bitcoin
No matter where you choose to hold your Bitcoin, peoples philosophies on how to invest it vary: Some buy and hold long term, some buy and aim to sell after a price rally, and others bet on its price decreasing. Bitcoins price over time has experienced big price swings, going as low as $5,165 and as high as $28,990 in 2020 alone.
I think in some places, people might be using Bitcoin to pay for things, but the truth is that its an asset that looks like its going to be increasing in value relatively quickly for some time, Marquez says. So why would you sell something thats going to be worth so much more next year than it is today? The majority of people that hold it are long-term investors.
An important note, though: While crypto-based funds may add diversification to crypto holdings and decrease risk slightly, they do still carry substantially more risk and charge much higher fees than broad-based index funds with histories of steady returns. Investors looking to grow wealth steadily may opt for index-based mutual and exchange-traded funds .
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Will Swing Trading Cryptocurrency Make You Rich
Swing trading cryptocurrency basically means buying low and selling high quickly.
Sounds pretty easy right?
The strategy takes advantage of the crazy volatility of many cryptocurrencies.
By volatility, I mean how quickly a crypto rises or falls in value. Bitcoin can literally vary by $1000s within a few hours!
To make swing trades work, you must place a buy orderand a sell order. Make sure the orders are within the volatility range of one another. When movement happens in the crypto market, you can be reasonably assured that you will come out with more money than you had before.
The downside to this is that since crypto is so volatile, you may have only one of your orders actually go through. This happens if the prices rocket in the opposite direction. This is a risk whether you are swing trading just one currency, or swing trading between two.
Nevertheless, make sure you practice swing trading before doing it with large sums of money.
There are apps for that!
Why Invest In Cryptocurrency
Investing in cryptocurrencies is a smart way to diversify your portfolio as major coins like Bitcoin and Ethereum have proved to have no strong price correlation with global stock markets. If you think that cryptocurrency will be widely adopted, then it, probably, makes sense for you to purchase some tokens to add some diversification to your portfolio.
If investing in cryptocurrencies seems too risky to you, you may consider other ways to profit from the growth of cryptocurrencies. For instance, you can buy stocks of reputable digital companies like Coinbase or PayPal, which makes it easy to trade cryptocurrency futures. While investing in these companies can be profitable, they do not have the same growth potential as direct investment in cryptocurrency.
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Is It Smart To Invest In Bitcoin
When investing, its wise to buy low and sell high but Bitcoin is difficult to value. Its volatile and lacks the dividend payments of many stocks and bonds. Actually, supply and demand may be among the major factors in its valuation.
How To Get Started Investing In Cryptocurrency
In October 2013, 1 Bitcoin was worth about $196. At the time of writing, the bitcoin price is about $61,548.91. This data shows an over 31,000% increase in the price of Bitcoin in the space of 8 years. The information also proves how rich you can become if you invest in cryptocurrency.
Despite the data given above, many people are still confused about the meaning of cryptocurrency and how to invest in it. By the end of this article, you will understand cryptocurrency investment. You will also learn how to buy Dogecoin, Bitcoin and invest in them as well.
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Understanding Risk Versus Reward
It’s easy to get caught up in crypto’s monumental gains. Bitcoin has surged 372% in the past year. Its competitor Ethereum is up more than 1,500% in the same time period, and Dogecoin has soared by more than 19,000%.
Based on those numbers alone, it seems hard not to get rich with cryptocurrency. But it’s important to remember that past returns don’t necessarily equate to future earnings, and crypto is still a very high-risk investment.
Crypto prices could continue to rise, but they could just as easily plummet. In fact, Bitcoin’s price has already dropped by more than 26% over the past month, proving that cryptocurrency is incredibly volatile.
Part of the reason crypto experiences so much turbulence is that it’s a highly speculative investment. Nobody knows what the future holds for cryptocurrency. Whether it becomes a runaway success or a massive failure is anyone’s guess. If it succeeds, you could make a lot of money by investing now. But if it crashes and burns, you could lose everything.
Traditional Buy And Hold
This method of making money from cryptocurrency is preferable for people with long investing horizons who are willing to take a chance. This would involve buying a crypto asset of choice from a crypto exchange and buying more when possible or when prices drop conventionally called buying the dip.
After months or years of HODLing holding on for dear life the asset may be sold at a significant overall profit compared to purchase cost.
Long established crypto coins such as Bitcoin, Ethereum and Litecoin do rise and fall in value daily, but have generally maintained an upward trend across years. Newer coins, such as Chia, are more likely to debut at a higher price due to hype, lose value and take a long time to recover, with the possibility of being snuffed out of existence if there arent enough buyers in the market or enough utility yielded by the function it serves.
Before choosing which cryptocurrency to hold onto as a long term investment, it is critical to read the coins whitepaper. It will explain its origins, the purpose it serves, and give enough information to ascertain whether it will stand the test of time.
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