Learn How To Invest In Cryptocurrency What To Consider Before Investing And How You Can Make Money While Investing In Cryptocurrencies
Cryptocurrency has moved into the mainstream as an investment asset class. If you’re looking to add some to your portfolio, it may be difficult to figure out how to get started. Crypto is currently unregulated, and investing in it can feel more Wild West than Wall Street.
Read on to learn the basics of cryptocurrency and how to get started investing in it.
Gateio Launches New Market Marker Incentive Program For Corporate Clients
And the last way of investing in bitcoin is indirect mining. Some companies provide investors with an opportunity to get bitcoin by using cloud mining or host mining strategy. For a certain sum of money, they lend you their computing power to mine a cryptocurrency, while they take care of the hardware. It is much easier than mining on your own since you dont have to worry about hardware and the cost of such investment will be lower. It is the most optimal, eco-friendly, and cheap way of mining bitcoin. We will review this method of investment in cryptocurrencies further in this article.
Will Astronomical Jumps In Cryptocurrency Prices Continue
True that prices of several crypto assets witnessed massive jumps in 2021. But the trend may not remain the same next year. Experts are of the view that prices may stabilise next year with increasing maturity in crypto markets.
Meanwhile, the Government of India is also planning to soon introduce a Bill to regulate crypto assets and exchanges operating in the country. It is expected that crypto laws would help remove several uncertainties for investors.
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Why Invest In Ethereum
The significant rise in ethers price following its ICO in 2014 can be attributed to its success as the leading smart contract-enabled blockchain in the market.
Ethereum boasts the largest number of decentralized applications and a massive developer community. Whats more, it is the go-to blockchain for the burgeoning decentralized finance market and the booming non-fungible token market.
Launching at an ICO price of $0.31 back in 2014, ETH has hit an all-time high of over $2,231 in mid-April 2021, highlighting crypto investors belief in the future of Ethereum, despite the networks scaling challenges.
Whether you should or shouldnt invest in ETH is, of course, entirely up to you and your risk tolerance as an investor.
How To Store Your Crypto Investment In A Secure Wallet
Cryptocurrencies are generally like computer codes. They cant be saved in a physical location, unlike traditional fiat currencies. That is why we need crypto wallets which are hardware or software that allows storing or trading of cryptocurrencies by interacting with blockchains.
One needs to have dedicated crypto wallets for storing these virtual currencies. Though there are a lot of platforms available in the market which provides storage services for crypto, however, we have compiled a list of some best crypto wallets that are secured and trusted by many investors.
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# Best Cryptocurrency To Invest : Basic Attention Token
Basic Attention Token is by far one of the most interesting cryptos in the market today. This is because it is an ETH-based token that functions as the underlying fuel for Brave browsers blockchain-based digital advertising platform.
For those of our readers who may not be aware of what Brave is, it is the worlds only web browsing app that pays users for their surfing activities. Users are given a certain amount of BAT tokens for all of the ads they view on the browser.
Crypto Futures Etfs Vs Crypto Spot Etfs
Crypto futures ETFs are backed by crypto futures contracts rather than physical crypto. To understand this better: bitcoin futures are contracts that allow two parties to agree on buying or selling bitcoin at a predetermined price and date.
That said, the value of a futures ETF derives from the movement of the price of bitcoin futures. So, essentially, it tracks the price of bitcoin futures instead of tracking the price of bitcoin.
Conversely, crypto spot ETFs track the actual price of the crypto itself. The main idea behind spot ETFs is allowing non-crypto savvy investors to get exposure to crypto without having them own the actual asset, using a familiar and regulated product.
Other benefits to ETFs include relieving investors from the hassle of managing private keys, storing bitcoin, and most importantly, the ability to short bitcoins price. This is because it does not allow users to bet on the price of an ETF to go down.
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Advantages Of Cloud Mining And Hosting Mining
This way of investing in cryptocurrency is far more convenient than mining on your hardware since there is no need in buying and setting up the mining farm. Also, it is less expensive than buying bitcoin or mining it on your own. Another benefit is that thanks to efficient process organization, cheap electricity, and favorable climatic conditions it is much easier and cheaper to mine 1 crypto coin. With cloud mining, it is much more convenient, less expensive, and far more efficient to invest in digital currency than in any other way. Cloud mining is also far more eco-friendly than mining with your hardware. Such farms are built specifically for mining at suitable places with effective cooling, which reduces the carbon footprint.
Risks Of Investing In Binance Coin
What sets Binance Coin apart from its competitors is that it was created by a company instead of a group of tech developers. Although Binance Coins commitment to maintaining a strong blockchain has won over many skeptics, some investors remain leery of this cryptocurrency and its potential security issues.
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Should I Invest In Cryptocurrencies
Whether cryptocurrencies are right for you depends on your goals and risk tolerance. While some traders have made money on the dramatic swings in the price of Bitcoin or other cryptocurrencies, others have found out the hard way that what goes up can most definitely come down. Thus, investors in this speculative asset should never venture more than they can afford to lose.
1TradingView.com, as of 06/07/2021.
Where To Buy Cryptocurrency
The cryptocurrency topic has seemingly exploded .
And thats where this question comes into play: Where can you buy cryptocurrency?
You can buy cryptocurrency in what is known as a cryptocurrency exchange.
Lets take a look at how a cryptocurrency exchange works in the graphic below.
The cryptocurrency exchange I use is called Coinbase.
Coinbase is arguably one of the best and most established cryptocurrency exchanges in the world.
Coinbase allows you to hold, buy and sell over 30 cryptocurrencies.
- Offers a digital wallet
- Offers FDIC protection for any USD stored in your account
- Offers insurance in the case the website is hacked
- Only requires $2 to open an account
- Offers 30+ cryptocurrencies
One thing to know is that the trading fees could be a little steeper than other cryptocurrency exchanges, ranging from 0.5% to 4.5%, depending on how you pay for your cryptocurrency .
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Deposit Money Into Your Account
Once you have completed the KYC process, you are supposed to deposit money in your account by pressing the Deposit Fund button.
You can choose any payment method from the following to make your deposit. These options are credit / debit cards, PayPal, Bank transfer, E-wallets Skrill and Neteller, Trustly, Rapid transfer and more.
What Are The Risks And Drawbacks
As you might expect with a highly speculative investment, cryptocurrencies carry notable risks, including:
- Volatility: Cryptocurrency prices historically have been highly volatile, and fluctuations could result in significant financial losses.
- Fraud:According to the Federal Trade Commission, Many people have reported being lured to websites that look like opportunities for investing in or mining cryptocurrencies, but are bogus. And while login credentials are typically required to access a cryptocurrency exchange, these can be stolen or lost.
- Lack of recoverability: With conventional financial accounts, theres normally a recovery process if you forget or misplace your login credentials. If you lose your cryptocurrency key, however, you cannot retrieve your cryptocurrency. Similarly if you lose access to the place where you store your key, you will effectively lose possession of your cryptocurrency.
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What Is Bitcoin And How Does It Work
The concept of digital money that you use 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 with notable differences. Cryptocurrencies are peer to peer payment methods, without the banks taking a cut with every transaction. There are no physical version of the coins either.
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, ethereum and cardano, 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
- Most platforms will allow bitcoin purchases using credit cards
What Are The Main Attractions Of Cryptocurrency
At the moment, it seems as if the two primary attractions of cryptocurrency are:
And for those who bought cryptocurrency prior to the price explosion in 2017 or the most recent price increase in 2021, it’s probably been the best investment in a lot of portfolios.
So what should you do if you want to get in on the cryptocurrency action?
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What Bitcoin Price Volatility Means For Investors
Bitcoins volatility is more reason for investors to play a steady long game. If youre buying for long-term growth potential, then dont worry about short-term swings. The best thing you can do is not look at your cryptocurrency investment, or set it and forget it. As experts continue to tell us each time theres a price swing whether up or down emotional reaction can cause investors to act rashly and make decisions that result in losses on their investment.
# Best Cryptocurrency To Invest : Kyber Network Crystal
The Kyber Network Crystal is a cryptocurrency that provides its users with the option of facilitating instant token swaps, Additionally, it should also be remembered that the Kyber network serves as a decentralized, peer-to-peer crypto-asset exchange that makes use of a dynamic reserve pool, that allows the system to maintain its overall liquidity in a highly seamless manner. Lastly, much like Crypterium, the Kyber network too makes use of a deflationary model to minimize its liquidity issues.
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The Risks And Rewards
Virtual currencies, including bitcoin, experience significant price volatility. Fluctuations in the underlying virtual currency’s value between the time you place a trade for a virtual currency futures contract and the time you attempt to liquidate it will affect the value of your futures contract and the potential profit and losses related to it. Investors must be very cautious and monitor any investment that they make.
Allocate Only A Small Percentage Of Your Portfolio To Cryptocurrencies
You’ll have to decide in advance how much of your portfolio you want to allocate to cryptocurrency. With recent advances, particularly in the price of Bitcoin, it can be difficult to make a rational decision. All investing is ruled by a combination of greed and fear, and it may be hard to keep the greed part under control given the advances cryptos have shown in recent years.
Up to this point, both the current uses and the future of cryptocurrencies are uncertain.
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Bitwise 10 Crypto Index Fund
BITW is an index fund that offers exposure to bitcoin and other major cryptocurrencies. The fund attempts to match the return of an index made up of the ten most highly valued cryptocurrencies. The selected cryptocurrencies are screened and monitored for specific risks and weighted using market capitalization. As a result, the selected digital currencies rebalance monthly.
BITW has grown over ten times in assets since it became available over-the-counter in 2020 December. It was trading $120 million in assets then currently, it has grown to $1.2 billion.
Assets under management: $1.2 billion
Expense ratio: 2.50%
Invest In Cryptocurrency Stocks Rather Than Tokens
Investing directly in cryptocurrencies themselves isn’t the only way to gain exposure to the industry, and there’s a safer option: cryptocurrency stocks.
A cryptocurrency stock is any company that’s somehow involved in the cryptocurrency sector. It could be a company like Tesla, for example, which has made substantial investments in Bitcoin. It could also be an organization like Nvidia that builds the technology behind the high-powered computers used during the mining process. Or it may be a company like Square that allows merchants to accept cryptocurrency as a form of payment.
If cryptocurrency eventually becomes widely adopted, any of these stocks could benefit. But even if it doesn’t succeed, these stocks could still be strong long-term investments.
Before you invest, however, keep in mind that a company’s involvement with cryptocurrency is only one part of the equation. Be sure you’ve done your research on the company as a whole because buying solid, long-term stocks should be your first priority. If those stocks are also involved in cryptocurrency, that’s a bonus.
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How To Invest In Cryptocurrencies
Once you’ve found a cryptocurrency you think will make a good investment, it’s time to start buying.
The first step is to open an account with a cryptocurrency exchange. Most stock brokers don’t support trading in cryptocurrency. Coinbase is one of the most popular and beginner-friendly exchanges in the U.S. Other options include Gemini, and newer brokers such as Robinhood and SoFi support crypto. Just be sure the exchange you want to use also supports the cryptocurrency you want to buy.
Once you’ve funded your account with fiat currency, you can make an order to buy your cryptocurrency. Orders on an exchange work the same way as orders in the stock market. The exchange will match your buy order with someone making a sell order at the same price and make the trade.
Once your trade is complete, the exchange will hold your cryptocurrency for you in a custodial wallet.
Buying cryptocurrency is the easy part. As a crypto investor, you have to be prepared for volatility. Crypto, in general, is more volatile than traditional asset classes such as stocks. Price swings of 10% or more in just a few hours are very common.
Additionally, you should consider how much of your portfolio you ultimately want to allocate to a specific cryptocurrency and to the asset class in general. With the volatility of crypto, be sure to give yourself wide bands of acceptable allocations. If your investments fall out of those bands, be sure to rebalance.
The Ups And Downs Of Bitcoin
Its hailed by fans as a market-disrupting liberation and demonised by many personal finance experts as a dangerous creation. One things for sure is that bitcoin is volatile.
Since December 2020, bitcoin has enjoyed a theatre of dramatic ups and downs. We outline some of these here: is a bitcoin crash coming?
The problem is that the price of cryptocurrencies is not underpinned by any intrinsic value. It is determined by one thing: confidence, says Mark Northway, investment manager at Sparrows Capital.
So if you decide to invest, be prepared for a bumpy ride.
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Alternative Ways Of Mining Cryptocurrency
Apart from the ways of obtaining digital currency that we mentioned before there is an alternative solution. Cloud mining can be called an improved version of the usual mining method. Here you lease or purchase mining equipment from a third-party hardware provider, which takes responsibility for maintaining and supporting the hardware. This method is much easier and less expensive than mining with your equipment. Cryptocurrency cloud mining comprises a couple of different models with different approaches: leased hash power and hosted mining.
The leased hash power approach means that you lease a part of the overall computing power of a specialized mining farm. In this model, the investor gains the overall part of cryptocurrency produced by a farm. Also, in this model, the provider is responsible for maintaining the farm. To start cloud mining with leased hash power you need to go to the cloud mining company, create an account and make a contract by selecting a contract period and the amount of rented hash power.
Get Your Records In Order
Cryptocurrency exchanges wont be required to send taxpayers 1099-B forms, also known as tax-reporting summaries, until the 2023 tax year. So the onus is on traders to keep accurate records of their transactions. Many exchanges, such as Coinbase, allow you to download your trading history, which might make it easier for you, tax software or a tax preparer to calculate gains and losses. If you made trades off-exchange, though, you might need to set aside some additional time for digging.
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Crypto Lending For Yield
Do you know where to find the best cryptocurrency interest rates?
As DeFi and CeFi applications continue growing and expanding, adding lending services, staking services, margin exchanges and more over the past few years it is becoming increasingly difficult to determine where investors can find the best yields for their idle capital. Answering the question of which platform has the best yields and interest rates is difficult as the rates are a moving target. Instead its best to look at each and see how an investor might benefit from adding that service of protocol to their portfolio.