What You Must Know Before Investing In Cryptocurrency
When it comes to cryptocurrencies, one of the biggest challenges for investors is not getting caught up in the hype. Digital currencies have quickly risen to a place of prominence in the portfolios of many retail and institutional investors. At the same time, analysts have continued to caution investors about their volatile nature and unpredictability.
If you’ve decided to invest in the cryptocurrency market, as with any other investment, it’s important to do your research before you hand over any money. Below, we’ll explore the things you should know before you invest.
Should You Invest In Cryptocurrency
Owning some cryptocurrency can increase your portfolio’s diversification since cryptocurrencies such as Bitcoin have historically shown almost no price correlation with the U.S. stock market. If you believe that cryptocurrency usage will become increasingly widespread over time, then it probably makes sense for you to buy some crypto directly as part of a diversified portfolio. For every cryptocurrency that you invest in, be sure to have an investment thesis as to why that currency will stand the test of time.
If buying cryptocurrency seems too risky, you can consider other ways to potentially profit from the rise of cryptocurrencies. You can buy the stocks of companies such as Coinbase, Square, and PayPal or invest in an exchange like CME Group, which facilitates crypto futures trading. While investments in these companies may be profitable, they do not have the same upside potential as investing in cryptocurrency directly.
High Returns If Done Right
Weve already told you how much Bitcoins gone up and how the long-term trend is bound to continue upwards. So we wont repeat ourselves. But we will take the chance to tell you about a few other cryptocurrencies.
In 2020, even with the pandemic in full swing, lots of crypto have seen big gains. The worlds second largest crypto, Ethereum started the year at $145, and is now at $600. And some are tipping it to become as popular as Bitcoin.
And Ripple started the year at just over 20 cents and is now around 65 cents. And may others are headed in the same direction. Further proof, that nows the time to get in the door, if you havent already.
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Remember The Past Is Past
A mistake that many new investors make is looking at the past and extrapolating that to the future. Yes, Bitcoin used to be worth pennies, but now is worth much more. The key question, however, is Will that growth continue into the future, even if its not at quite that meteoric rate?
Investors look to the future, not to what an asset has done in the past. What will drive future returns? Traders buying a cryptocurrency today need tomorrows gains, not yesterdays.
Imagine Investing Your Money In Money It Is One Of The Most Valuable Investment Opportunity We Have Today
Theres no doubt about it crypto is making big waves. Youve probably been hearing more and more about it on the news, and heard people talking about it more. But there are those whove been just reading the headlines and discussing it while others are busy getting to work on becoming part of this revolution and grabbing the huge opportunities.
Aluxers, if youre still not convinced of what opportunities crypto has to offer, were going to spell it out for you here.
Welcome to Alux.com the place where future billionaires come for inspiration. If youre not yet, youre missing out.
If you prefer seeing money rather than just reading about it, were on the same page. Heres the video version of this article:
With that provided, lets jump right into the article and learn about the first reason why we should be going all in on crypto.
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Question: Why Should Anyone Invest In Crypto
In addition to initial coin offerings , there are now many new types of blockchain investment products, from to non-fungible tokens. Many digital currency enthusiasts believe that these investments could produce a new batch of digital currency millionaires . But those who have not yet invested in the digital currency space may be wondering if there are compelling reasons to start now. Below, we’ll consider some of the reasons people might want to buy digital currencies, as well as some other considerations before investing.
Why Am I Investing
First, assess why you want to invest in the first place.
If you’re just afraid of missing out, then you should probably pause before moving forward. It’s important to truly understand bitcoin, cryptocurrency or any asset prior to investing in it.
“‘Educate before allocate’ is a phrase that me and my friends are using,” says Boneparth, who has invested in bitcoin since 2014.
Taking a step back may be difficult, especially now as bitcoin hits an all-time high, but it’s worth taking some time to research what it is, how it operates and what the risks are before parting with your money.
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Cryptocurrencies Are More Volatile Than Traditional Investments
The value of Bitcoin and other cryptocurrencies can fluctuate wildly. Its common for them to rise or fall by 10% or more in a single day. But when you step back from the day-to-day view and consider crypto as a long-term investment, youll have a better sense of its potential.
Look back at the historical value of Bitcoin, Etherum, or any other coin thats grabbed your interest. Then compare it to the historical value of any other investment youre considering.
Granted, crypto is unique in a number of ways and its too new to know where it will be in the future. But the most popular cryptocurrencies have appreciated much faster and more reliably than virtually any other assets.
Coinbase Is The Worlds Number One Cryptocurrency Exchange For A Reason
Financial experts were pretty skeptical about cryptocurrency when it first came out. In fact, most thought it was just a fad. But now its pretty clear that those experts were very wrong. Crypto has been around for over a decade, now, and its stronger than ever. If youre ready to invest in what a lot of successful people think is the most important asset class of the 21st century, the best and easiest way to do that is with Coinbase.
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What Is Binance And Can I Still Use It In The Uk
The UK financial watchdog has blacklisted cryptocurrency exchange Binance and banned it from carrying out any regulated activity over concerns about its money laundering controls.
The regulator has also ordered the company to stop any form of advertising in the UK.
Binance isnt based in the UK, so the British regulator doesnt have the power to stop investors from buying and selling cryptocurrency using the exchange. However exchanges do have to register with the FCA to operate in the UK.
This is a clear warning that investors should be very cautious.
How Secure Is Cryptocurrency
Cryptocurrencies are usually built using blockchain technology. Blockchain describes the way transactions are recorded into “blocks” and time stamped. It’s a fairly complex, technical process, but the result is a digital ledger of cryptocurrency transactions that’s hard for hackers to tamper with.
In addition, transactions require a two-factor authentication process. For instance, you might be asked to enter a username and password to start a transaction. Then, you might have to enter an authentication code that’s sent via text to your personal cell phone.
While securities are in place, that doesn’t mean cryptocurrencies are un-hackable. In fact, several high-dollar hacks have cost cryptocurrency startups heavily. Hackers hit Coincheck to the tune of $534 million and BitGrail for $195 million in 2018. That made them two of the biggest cryptocurrency hacks of 2018, according to Investopedia.
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Playboy, which has rebranded as PLBY Group under new leadership, became a stock market darling early in 2021 when it began selling fractional ownership in the companys original artwork. Examples include legendary centerfold photographs of actresses such as Marilyn Monroe and memorabilia from the Playboy Mansion, like a Matisse painting that features a cigarette burn from the Beatles John Lennon, PLBY Group CEO Ben Kohn told me in April.
Divvying up and selling digital rights while still holding on to the physical versions and the copyrights to the works helped Playboys stock jump almost sixfold in a matter of months and its enterprise value nearly triple to more than $2 billion.
One of the only speed bumps to the fractionalization of literally everything has been the fear of possible action by the US Securities and Exchange Commission , which has recently begun exploring the question of what qualifies as a security and what does not. The answer to that question will be incredibly important, says Guy Hirsch, USA managing director at the online investment brokerage eToro.
You have a lot of things that are not being fractionalized because people dont want to break the law
Wave then breaks the investment into fractional shares, offering clients the option to sell their shares in the whiskey business on a secondary market.
How To Invest In Bitcoin And Make Money
Like any investment, making money depends on what price you buy and sell an asset for. If you sell when its price is higher than you bought it for, you will make money.
If you sell for a lower price than you bought it for, you will lose money.
- If you had invested in bitcoin at the start of 2020 and sold on 31 December 2020, you would have made a 300% profit
- If you had invested in bitcoin at the start of 2018 and sold on 31 December 2018, you would have made a 73% loss
Bitcoin is extremely volatile so the trick is not to panic and crystallise your losses by selling when its value inevitably falls. This is the same with all investments.
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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.
Increasing Acceptance Of Cryptocurrency
Over the last few years, cryptocurrency user acceptance has increased all over the globe. Many businesses start accepting cryptocurrency owing to its decentralized nature. When cryptocurrency was initially launched, it was primarily used for private exchanges, but that has changed with its application and concept being accepted by more people worldwide. Extreme returns and adaptable volatility are also other reasons you should put your resources in crypto markets as soon as possible.
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Coinbase Makes Trading Simple
Why should you build your cryptocurrency portfolio with Coinbase? Because its no fluke that they are the most widely used crypto exchange in the world. They are the biggest player in the crypto game because they make trading radically simple.
Creating a Coinbase account and linking it to your bank account takes just a few minutes. From there, this simple and intuitive platform will walk you through making your first trades, managing your portfolio, setting up automatic recurring buys, and more. There are tons of guides, tutorials, and other educational tools that will teach you all the basics, and the intuitive user interface is a breeze to navigate, whether youre accessing it via browser or their mobile app.
Coinbase allows investors to trade over 4,000 digital assets. These include mainstream coins like Bitcoin, Ethereum, and Litecoin, plus a solid variety of altcoins like Cardano, Polkadot, Ripple, and Solana. Coinbase also offers stable-coins like USD Coin, which are pegged to the U.S. dollar. And there is talk that they will soon become a major player in the emerging NFT marketplace.
So if you think youre finally ready to dip your toes in the $2 trillion crypto market, theres no better place to start than Coinbase. to create your account and start trading in a matter of minutes.
Amazon To Accept Bitcoin As Payment
If the rumours are true, the technology company could accept bitcoin payments later this year. This could drive the price of the cryptocurrency upwards.
Amazon is also said to be looking at launching its own cryptocurrency.
This comes after Amazon posted a job advert looking to hire someone to develop its digital currency strategy.
Amazon isnt the only tech giant to be branching into cryptocurrency there are rumours circulating that Apple will use some of its large cash reserves to invest in bitcoin.
Senior Investment and Markets Analyst, Hargreaves Lansdown
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How Many Cryptocurrencies Are There What Are They Worth
More than 10,000 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs. The total value of all cryptocurrencies on Aug. 18, 2021, was more than $1.9 trillion down from April high of $2.2 trillion, according to CoinMarketCap. The total value of all bitcoins, the most popular digital currency, was pegged at about $849 billion, regaining some ground from recent price lows. Still, the market value of bitcoin is down from April high of $1.2 trillion.
How To Keep Your Cryptocurrency Safe
Its important to know that cryptocurrencies are not insured by the FDIC the way that checking and savings accounts are. That said, the FDIC does not insure stocks, bonds, mutual funds, or the majority of other investments either. So in that sense, investing in the S& P 500 is no safer or more dangerous than buying crypto.
Its also important to understand that crypto accounts can be hacked. To protect your crypto investments be sure to use all of the available security options provided by your crypto exchange and digital wallet.
Two-factor authentication is the most common of these protections. Even with 2FA enables, be sure to use a unique, complex password for any of your crypto accounts. And of course, never share your private keys with anyone.
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What Are The Risks Of Owning Bitcoin
The greatest risk is the hacking of bitcoin exchange platforms and the bitcoin blockchain platform. To date, the bitcoin platform has never suffered a serious hacking event, but certainly many third party exchanges that hold bitcoin for their clients have been hacked, and bitcoin has been stolen.
In Canada, many were victims of the QuadrigaCX debacle. A total of 76,319 unsecured creditorsvirtually all of them QuadrigaCX clientshave come forward to claim they are owed $214.6 million collectively. In the case of QuadrigaCX, the founder died and allegedly took the keys to his deathbed.
There are many other risks, including from governments that may attempt to circumvent or regulate this new currency, which is in competition with their own fiat currencies.
The ownership of bitcoin might also be concentrated in too few names, who can then control or manipulate the bitcoin price.
For a full rundown on the risks. you might check out the prospectus for the 3iQ bitcoin fund.
Join An Online Community Of Cryptocurrency Enthusiasts
Because the digital currency space is such a trendy area, things tend to develop very quickly. Part of the reason for this is that there is a robust and very active community of digital currency investors and enthusiasts in communication with one another around the clock.
Get plugged into this community to learn about the buzz going on in the cryptocurrency world. Reddit has become a central hub for digital currency enthusiasts, but there are also many other communities online with active discussions going at all times.
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How Much Can I Afford To Allocate
Once you understand how much volatility you can stomach, you can determine how much money you can afford to invest.
“Be very careful about how much you allocate and understanding what you can tolerate, because if 80% of your net worth is tied to bitcoin, and it goes down 30%, that’s rough,” Boneparth says. Depending on what you can afford, a smaller allocation in bitcoin can hedge for any potential downturns in the market.
Should I Invest In Cryptocurrency
Plain and simpleinvesting in cryptocurrency is not a good way to build wealth for your future. If you really want a solid investment, dont mess around with adding some crypto coins to your digital wallet. Heres the better plan: If youre out of debt, have an emergency fund that will cover three to six months of expenses, and youre ready to invest, then focus on investing 15% of your income in growth stock mutual fundswhich are way more secure than crypto.
Dont give in to stupid just because theres a lot of hype. Weve talked to people who have taken out a mortgage or cashed out their entire 401 early to invest in cryptocurrencyheck no! Dont put it all on the line and risk your financial future, your retirement dreams and your familys well-being. If you cant afford to lose the money, dont invest it in something as unstable as crypto.
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