How Crypto Is Used
Crypto-assets were first developed as a digital form of currency, to be used as money. Some stores accept crypto as payment for goods and services, and some ATMs let you withdraw it as physical money. However, crypto is not legal tender in Australia and is not widely accepted as payment.
Crypto is more commonly used as a speculative, longer-term investment, as most people dont access their balance for everyday transactions.
How To Invest In Crypto Without Buying Coins
The easiest way to get investment exposure to crypto without buying crypto itself is to purchase stock in a company with a financial stake in the future of cryptocurrency or blockchain technology.
But investing in individual stocks can bear similar risks as investing in cryptocurrency. Rather than choosing and investing in individual stocks, experts recommend investors put their money in diversified index funds or ETFs instead, with their proven record of long-term growth in value.
Believe it or not, most individuals with a retirement plan or an investment portfolio allocated in an index fund already have some exposure to crypto, says Daniel Johnson, a CFP with ReFocus Financial Planning.
Many of the best index funds like S& P 500 or total market funds include publicly traded companies that have some involvement with the industry by either mining crypto, being involved in the development of blockchain technology, or holding significant amounts of crypto on their balance sheets, says Johnson.
For example, Tesla which holds over a billion dollars in Bitcoin and accepted Bitcoin payments in the past is included in any funds that track the S& P 500. Since its 2020 inclusion, its become one of the most valuable, and therefore influential companies in the index. And Coinbase, the only publicly traded cryptocurrency exchange, is in the ARK Fintech Innovation ETF.
You Invest Your Life Savings
Rule number one of investing dont invest more than you can afford to lose.
You should go into this ready to lose whatever you put in. Ultimately, as the price swings up and down, you should remain calm and still be living a healthy life with room for regular spending.
Ive heard countless horror stories of people investing greedily with their entire life savings or borrowing large sums of money. This is a HUGE mistake.
Funny enough, even if you hit it big, your greed will likely win you over. For example, if you invest $50,000 and at one point have $150,000, then your mind will rationalize and normalize these winnings to feel less significant than they are.
The next thing you know, the market drops, and you are back at break even, or at a loss.
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How Stable Are Cryptocurrencies
In January this year, Bitcoin skyrocketed to $40,000 . Continuing its bull run, it reached an all-time high of $65,000 towards the end of April. Then in May, it plunged and throughout June it remained below $30,000 . Again the prices have skyrocketed, and at the time of writing this article, the price of Bitcoin is Rs 51 lakhs approx.
How Much You Would Need To Invest
Dont put all your eggs in one based and invest your entire net worth in cryptocurrencies, especially volatile and unpredictable altcoins. Even if youre bullish on crypto as a long-term investment, you should keep some capital aside to buy the dips.
To be on the safer side, some investors put 20-30% of their savings into these digital currencies and also diversify into other assets. Alongside crypto, eToro offers stocks, forex, commodities, and ETFs.
In case you have excess or less disposable income, then that figure can be adjusted accordingly. However, dont pour too much money into cryptocurrency as that would bring unnecessary risk to you, and dont invest too little expecting to become a millionaire.
If you are willing to take on more risk open accounts on several cryptocurrency exchanges to split up your funds and keep some of your funds in Bitcoin, which has never had a 90% or higher price correction, as many altcoins have.
For example the bear market from $20,000 to $3,000 was an 85% drawdown and took three years to recover. Some altcoins lost 95-99% of their value and never recovered .
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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.
» Learn more: What is bitcoin?
Best Cryptocurrencies To Invest In 2022 For The Long
The Crypto industry is known for its price fluctuations or volatility. Over the years, this industry has seen both significant price rises and heart-rendering market crashes.
In light of the variable nature of this market, it is necessary to not pump your entire resources into a single currency as you stand the possibility of losing everything in case that currency crashes on the market chart.
For all these reasons, experts have always advised you to diversify your portfolio if the investors are opting for long-term investments. Here, we will give you some recommendations regarding what all cryptocurrencies are best suited for your long-term investment, and how much percentage of your money you should allocate to every single crypto.
Bitcoin will be the obvious first choice if any investor is aiming for long-term growth. Market projections show that the Bitcoin price could cross the mark of $300,000 by 2025 and $380,000 by 2027.
With an increase in acceptance of cryptocurrencies in mainstream usage, Bitcoins importance will continue to soar as this is the widely known crypto among the general public after all.
However, you cant risk out your entire investment on Bitcoin, therefore, Ethereum should be the next in line for your crypto investment. Ethereum has been one of the best performing digital currencies in recent times. It has recently witnessed its all-time high of $4,850 in 2021.
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Top Cryptocurrencies To Consider As A Beginner Investor
As a beginning cryptocurrency investor, you shouldn’t try to find a diamond in the rough. You should get your feet wet with more established cryptocurrencies that have built-out networks to support them. That will allow you to get more familiar with the mechanics of cryptocurrency investing, as well as how it fits into your portfolio.
Bitcoin is an easy place to start. Every cryptocurrency exchange will support trading in Bitcoin. It’s well-established, and you know what you’re getting with Bitcoin. It’s nothing fancy, just digital cash, but it has a first-mover advantage that had made it widely adopted. That gives Bitcoin a competitive advantage when it comes to being actually usable as a medium of exchange.
Ether is also a good choice for beginner investors. Ethereum’s technology is behind most DeFi projects, which use the Ethereum blockchain to execute smart contracts and provide financial services without a central authority. Anytime a user wants to write a smart contract to the blockchain, they’ll have to pay Ether to do so. Increased adoption of DeFi applications will lead to greater demand for Ether.
How Cryptocurrency Investment Works
Cryptocurrencies came into existence in 2009 with the creation of the first cryptocurrency Bitcoin.
Bitcoins do not have a physical presence like the US dollar or Indian Rupee note. You can only see the bitcoin address, like the one shown below.
Bitcoin codes are generated during the bitcoin mining process. Mining process needs large powerful computers and a continuous electricity supply. Its not profitable to mine bitcoins in India due to the high cost of electricity in India.
Most of the bitcoins are mined in China and countries like Norway where computer infrastructure and electricity are cheap.
People like you and me can buy bitcoins directly from the crypto exchange. I will go through the bitcoin buying process later in the article.
I should also inform you that Its a good practice to keep the cryptocurrencies safe in a wallet rather than keeping them in the exchange for safety reasons.
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How To Invest In Cryptocurrency Six Proven Ways
Its been said that cryptocurrency is the best investment opportunity since the internet, and one can hardly dispute this.
Thousands of dollars are invested in cryptocurrencies all over the world even with uncertainties that investors will succeed with their investment.
To make sure you get the best return on your investment, its important to learn how and ways to invest in cryptocurrency properly, and how it works.
Of all investment options in cryptocurrency, trading wears the crown of popularity. But aside from trading different cryptocurrencies, there are other ways enthusiasts can invest in cryptocurrencies.
Bitcoin may still be on top of the cryptocurrency list, but there are many other opportunities in cryptocurrency that could bring big returns.
The trick is knowing where to look
Were not talking about just buying Bitcoin or Ethereum, which are already doing well, but other open opportunities in the crypto-space.
This topic will cover How to invest in cryptocurrency, other means aside from trading tokens.
Get A Feel For The Industry
Particularly for those investors who are new to digital currencies, it’s essential that they develop a sense of how the digital currency world works before investing. Take time to learn about the different currencies on offer. With hundreds of different coins and tokens available, it’s crucial to look beyond the biggest names, like Bitcoin, Ether, and Ripple.
In addition, it’s important to explore blockchain technology to get a sense of how this aspect of the cryptocurrency world works.
If you don’t have a computer science or coding background, it’s likely that some aspects of blockchain technology will be a challenge for you to parse out. There are many primers on blockchain technology that are intended for a layperson to understand.
Once you’ve identified the cryptocurrency for investment, look into how those tokens make use of blockchain technology and if there are any innovations that they provide that make them distinct from the rest of the field. By better understanding cryptocurrencies and blockchain technology, you’ll be more fully equipped to determine whether a potential investment opportunity is worthwhile.
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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 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.
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Do You Have To Pay Taxes On Cryptocurrency
If you buy and sell coins, its important to pay attention to cryptocurrency tax rules. Cryptocurrency is treated as a capital asset, like stocks, rather than cash. That means if you sell cryptocurrency at a profit, youll have to pay capital gains taxes. This is the case even if you use your crypto to pay for a purchase. If you receive a greater value for it than you paid, youll owe taxes on the difference.
You Dont Back Up Your Sensitive Information
Always back up both 2FA and wallet data.
If you lose access to your computer and havent backed up your private keys, seeds or passphrases, then you wont be able to access your coins anymore.
Same for exchanges: youll be locked out of your accounts if you lost your phone and havent kept a safe copy of the 2FA keys.
Wallets and exchanges will often guide you through the process, so make sure to read and follow their instructions carefully.
For 2FA, I recommend you backup your keys so when you get a new phone, you can recover all of your accounts to log in. Do not forget to do this, as it will be a huge pain and time sink if you forget!
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Best Cryptocurrencies To Invest In 2022 For Short
If you are planning to make a short-term investment in cryptos, you should target those coins whose prices get increased whenever they are in the headlines. One could invest in Shiba Inu the price of which pumped significantly when it got listed on a recognized crypto exchange.
The popularity of crypto gaming has also led Axie Infinity to come into the eyes of investors. Axie Infinity provides opportunities to its users to earn tokens by showcasing their gaming skills. As crypto gaming is becoming popular among all gaming enthusiasts, this crypto is bound to display positive growth in upcoming years.
Further, one could also watch out for Floki Inu, which is an ERC-20 token on the Ethereum blockchain technology. It is dubbed as the next Shiba Inu by all dog-themed meme coin lovers. Floki Inu is also in the area of play-to-earn gaming through its flagship product called Valhalla. This meme coin has managed to pull on steady growth since its inception.
Considering the new blend of the crypto market and gaming industry, Floki Inu comes out as a good alternative to other altcoins in terms of short-term investment.
How To Invest In Bitcoin
Investing in BTC is similar to investing in stocks, except far more volatile because of the daily swings in BTC. Here are the steps to invest in stocks from the beginning:
The main difference with BTC is for step three you buy BTC or another cryptocurrency instead of stock.
With BTC, the above flow is similar in most cases but it depends on the exchange or trading platform. In some cases, you can buy BTC using your credit card or by transferring funds from your bank account.
For other platforms, you must transfer BTC directly. This is known as a direct deposit of BTC.
Well discuss how to invest in BTC for US citizens. The methods vary across countries because of differences in laws and regulations. Some countries require more private information than others to verify you are legitimate.
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Broader Institutional Cryptocurrency Adoption
Mainstream companies across industries have taken interest and in some cases themselves invested in cryptocurrency and blockchain in 2021. AMC, for example, recently announced it will be able to accept Bitcoin payments by the end of this year. Fintech companies like PayPal and Square are also betting on crypto by allowing users to buy on their platforms. Tesla continues to go back and forth on its acceptance of Bitcoin payments, though the company holds billions in crypto assets. Experts predict more and more of this buy-in.
Weve seen a tremendous amount of inflow of attention, and thats going to continue to drive the growth of the industry for a while now, says Abner.
Some experts predict bigger, global corporations could jumpstart this adoption even more in the latter half of this year. What were looking at is institutions getting involved in crypto, whether its Amazon or the big banks, says Weiss. A huge retailer like Amazon could create a chain reaction of others accepting it, and would add a lot of credibility.
Indeed, Amazon has recently sparked rumors that its making moves to that end by sharing a job posting for a digital currency and blockchain product lead. Walmart is also recruiting a crypto expert to oversee its blockchain strategy.
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.
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Can You Lose All Your Money In Bitcoin
Yes you certainly can. Crypto is very risky and not like conventional investing in the stock market.
Bitcoins value is based purely on speculation. This is different to company stocks where the share price will move depending on how the business is performing.
Important: Cryptocurrencies are unregulated by the UK watchdog, the Financial Conduct Authority.
There are three main ways to lose all you money with bitcoin:
- The value plummetsand you sell: crypto is volatile with its price determined by sentiment. Though technically you only lose money if you sell an investment for less than you bought it for. This is known as crystallising your losses.
- Your memory: experts estimate 20 per cent of all cryptocurrency has either been forgotten about or lost with a current value of around $140billion, according to Crypto data firm Chainalysis
- Cyber crime: hackers and scammers are thought to steal around $10million worth of cryptocurrency every day, according to Atlas VPN
Some people choose to take their holdings offline and store it in a physical device called a cold wallet, otherwise known as a hardware wallet or cold storage similar to a USB stick. While this protects from online attacks you risk losing your holdings.
As with any investment, do your due diligence and dont pin all your hopes on one company or one cryptocurrency.
Spread your money around so you spread the risk and only invest what you can afford to lose.