There has been discussion about cryptocurrency since the day it was launched. The crypto market is volatile but provides the opportunity for profit if the trade has been conducted in this digital asset. Many prevalent cryptocurrencies have seen a significant rise in their prices and instant lows. Professional traders have been looking forward to cryptocurrency trading for years and are aware of all the market speculations. But what about those who are new to the crypto market?
Here is a comprehensive guide on cryptocurrency investment that covers all the basics of crypto investment, its benefits, potential risks, and many more. Follow this guide and find answers to all your questions regarding cryptocurrency investment.
Cryptocurrency is a digital currency that is available virtually everywhere, and its units are generated by codes based on cryptography; these codes also verify the transaction of funds. These currencies are not backed by any central authority like a bank, financial institution, or government. All the records are kept by a distributed ledger which is a blockchain. The information cannot be altered once the transaction order is defined in this ledger.
It is a great asset for investment and financial returns; investors or traders consider it future money due to crypto being decentralized. There are many things associated with crypto and its investment which we will see further in this article.
Various types of cryptocurrencies are in the market; as of now, there are around 20,000+ cryptocurrencies. At first, Bitcoin was the only cryptocurrency in the market, and various others arose afterward. All other cryptocurrencies which are coin based are called altcoins; the reason behind this name was the alternative to bitcoins.
Some cryptocurrencies launched after Bitcoin gained high market value and are considered among investors. Let’s look at the list of top 10 cryptocurrencies per the market cap.
Considering the crypto ecosystem, it is hard to define which cryptocurrency will make the most money or contain the most risks. Hence, learning about cryptocurrency before investing in it is advisable.
In the past few years, the world has seen frequent changes that have affected the economy worldwide. From covid to the Ukraine-Russia war, there has been a significant economic disruption, affecting the traders too. These are some major scenarios; hence, the market needs a lot of time to bounce back.
Most investors look forward to cryptocurrency investment as a medium of economic recovery in 2023. It is still considered a volatile market that shows frequent changes, but traders consider it a viable investment strategy. From 2021, mainstream investors are turning their attention toward digital currencies.
High-level investors are including crypto assets in their portfolios so that they have their reach to a varied range of financial markets. This is creating a trend among other investors to start considering crypto as a mainstream method of investment. The crypto market is highly unpredictable, but with a good strategy and little risk, it is a progressive and developing market to invest in this year.
The unpredictability of crypto makes investors think twice before investing in it. Various scams have been in the headlines when it comes to crypto. Therefore investors should consider specific points when they think about investing in crypto assets. These points will also help you understand the basic need for this currency.
One of the most intriguing features of cryptocurrency is its decentralized nature; this makes it most attractive and risky at the same time. Without any central regulations, fraud and other scams are high. Many investors believe there will be new regulations to operate crypto in 2023.
Trusted cryptocurrencies have faced a lot of uncertainty in the market, and before investing in crypto, checking up on the valuation is needed. Many investors are researching various ways to control the volatility for their benefit and not lose their massive funds.
The crypto market depends on the buying and selling conduct of the holders. If there is mainstream adoption of a particular currency and external users also show interest in the same, then market sentiments change accordingly. Investors analyze such changes in the market and invest in a cryptocurrency, which provides a higher profit potential.
Experienced investors only sometimes invest in a particular asset; instead, they spread their money across multiple digital assets. This diversified their portfolio. The investment should include less volatile crypto assets and some volatile but high-reward crypto assets. If you learn to diversify your portfolio, it will provide profits for a long time.
Crypto is an evolving technology that is based on blockchain technology. This open-source technology allows investors to view cryptocurrency’s latest development or activity. This provides a future perspective of the investment market.
ICOs, or initial coin offerings, are extremely risky and are considered ground zero for new investors. With so many cryptocurrencies in the market, it is difficult for investors to identify the reliable one. For this, investors should check out the cryptocurrency whitepapers on their respective websites before investing in them.
Funds and investments in crypto are to be held in trustworthy wallets or exchanges to protect them. With the increase in crypto’s popularity, various wallets and exchanges are coming up in the market. Investors should analyze them and choose the crypto storage method wisely.
Remembering the password to all your crypto wallets is not possible. It is suggested that one should keep their private keys safe, and the best way to do so is by using cold wallets. These wallets are hardware devices not connected to the internet, which secures your keys and keeps them safe from hackers.
Whenever you plan to invest in cryptocurrency, focus on the regulatory measures of digital currencies according to the country’s government. There can be many doubts around when you start filing taxes; for all the information regarding taxes, you can check out our guide on tax filing.
If you are investing in cryptocurrency for the first time, you must know where to buy and store it. With multiple exchanges in the market, investing in cryptocurrency has become accessible to all. Accounts for investing can be set up in minutes, but proper research on that cryptocurrency should be done before that. By following these 5 steps, you can get started investing in cryptocurrency.
While buying stocks, we tend to check the financial health and potential risks of the company; similarly, one should evaluate the unique features of each crypto before investing in them. Investors can choose several different currencies to invest in. There are many market frauds and scams like pump and dump schemes.
To avoid these, do not choose the crypto that is new to the market, small in amount, and is gaining a lot of attention in social media. One should not take investment risks based on any influence they come through on social platforms.
Choose the currency you want to invest in wisely by conducting proper research and analyzing its performance in the market. Also, try to use large platforms to avoid exposure to fraud and eliminate cybersecurity risks.
Exchanges and investment platforms provide you with the facility to buy cryptocurrency. There are multiple exchanges that are readily available in the market. But certain factors must be considered when choosing a reliable exchange or investment platform.
These factors are:
• Fees or charges
• Volume of trading
• Minimum investment required
• Available cryptocurrencies for purchase
These are the fundamental factors that a new investor should consider before investing and choosing the exchanges for it. Some of these factors vary in different exchanges, and as per your needs, you can choose which one will be appropriate for you.
Being an entirely digital currency, crypto needs a safe storage method. There are various ways to store cryptocurrencies, like cryptocurrency wallets, platforms used for investing, or by writing down private keys.
The safest way to store crypto is through wallets; these wallets can be hot or cold. One thing to consider in this is that crypto is developing day by day, so choose the platform for storage wisely. The platform should take responsibility for the custody and safekeeping of your currency; it should be regulated and well-protected from hackers and other cyber threats.
It is generally said that holding your cryptocurrency investment in the wallet provides an extra layer of protection and security.
Like other investments, one should predefine the amount they want to invest in crypto. This amount depends on the risk tolerance, the budget of the person, and the investment strategy. Many crypto exchanges have minimum investment requirements which need to be considered.
If one wants to invest in high-value coins, then one can invest in dollars. Multiple exchanges allow you to invest as per the amount available to you. By doing so, you don’t have to buy a whole Bitcoin; instead, invest the amount you have in Bitcoin. Investing only 2% of your overall portfolio in a single currency; this will help you limit the risk associated with crypto.
Crypto investment is not like other general investments; it can be used to buy things you need or hold this currency for an extended period. All this depends on the investment strategy and the goals that you have defined. With the help of available platforms, you can invest wisely; these platforms focus on regular investments, diversification of money, and holdings for the long term.
Managing your investments helps you keep up with the market changes and systematically shift your investments to more safe and reliable crypto assets.
There are direct and indirect ways to invest in crypto, traders may consider direct ways to be in the crypto market, but there are other ways too.
With Blockchain ETFs, an investor can invest in companies that may be profited from the emergence of blockchain technology. Through these, one gets exposure to the major publicly traded companies in this domain. Another benefit is that these companies are not only in crypto-related businesses but also in other financial fields.
This diversification dilutes the exposure to cryptocurrency investment and reduces the potential risk, which can be either upside or downside.
Multiple companies in the market generate profit when crypto gets a rise, regardless of any particular winner. Investing in such stocks is a good option; potentially, these brokers get most of their profits from crypto trading and provide revenue to their investors.
Crypto can be invested in funds like products. A few crypto funds allow the certainty of price swings in some major cryptocurrencies. This way, investors can easily define the risk they are willing to take and then invest in the funds more likely to provide higher returns.
Crypto Futures are a way to invest in crypto if you are looking for something other than instant benefits. It is a fast-moving market, so the volatility ratio is higher than exchanges. Futures provide a power of leverage, which means you generate massive returns or face losses due to market drop. Hence, it is a predefined time to receive your investment; one must study the market and invest accordingly.
These are some other ways to invest in crypto that an investor can consider; each method varies in risk and profit associated with it.
Investors can manage, grow and diversify their investments with the help of major crypto investment companies. There are various companies in the market that support investment in crypto. Let’s take a look at some companies supporting crypto investments.
Crypto investment is seen as high risk. Hence, new investors should research well before building up their portfolios. As per the need, one can apply some basic strategies of investment while getting started in the crypto market.
The most common strategy with the crypto asset is HODL. This implies that a person buys a certain amount of crypto and then holds it over to wait like the stocks with a view that its value will rise. For new investors, it is easy to get market exposure and understand the particular currency.
Investors need to store their currencies and sell them at the right time. HODLing is considered a valid means of investment as the tokens remain with you for an extended period. It is the most straightforward strategy if you are not looking for derivative trading.
Due to its volatility, the crypto market is getting highly popular among day and swing traders. It is the opposite strategy of HODL. Instead of holding crypto for some years, these short-term traders profit from small market fluctuations in the crypto price.
These investments are long selling or short selling based on the cryptocurrency’s market value. It may sound like an easy strategy, but it requires finer approaches toward the market.
It is a way of making crypto from your cryptocurrency; some companies need liquidity and get them from the pool. Some specific platforms operate like this and allow their users to lend their cryptocurrency investment in the liquidity pool. In exchange, the users get a fee based on the platform charges.
Liquidity mining is done on the DeFi platforms. Before being in this strategy, one should thoroughly understand how they work so that there will be security when you commit your cryptocurrency investment according to the platform’s protocol.
When it comes to your cryptocurrency portfolio, the strategy that tends to work is the diversification of the investments. There is a vast range of crypto assets where one can diversify their portfolio.
For this, decide which crypto you want to invest in and how much budget you allocate for one investment. Investing in crypto is most appropriate as many financial institutions support DeFi.
Crypto has been a topic for a while, and it certainly has some benefits that keep investors stuck with it. Let’s look down at some major benefits of investing in cryptocurrency.
In previous years, crypto was not highly correlated with other classes of investment. Hence its potential growth was limited, and risk factors were high. After the mass drawback in the global economy, consideration of cryptocurrency rises a lot among investors, and its correlation with other financial assets.
With this hike, the reliability of crypto has increased, people are considering taking calculated risks, and the investment graph of crypto is constantly increasing.
Some cryptocurrencies are compared with precious metals like gold as they are highly fungible and durable. A cryptocurrency is hard to destroy and limited in supply, which makes it scarce. As it is fungible and can be changed for other commodities, the purchasing power of some crypto assets is increasing.
Apart from that, any centralized authority does not control crypto, and the government does not fix the purchase prices. This gives a free hand to the crypto market for varied prices of multiple cryptocurrencies.
Depending on various strategies, crypto is considered a long-term investment for investors. There are various types of crypto assets to take into consideration. If a person plans to invest for a long time, then crypto is a beneficial investment.
Crypto is decentralized and based on the distributed ledger, so the network integrity is not compromised. The chances of fraud and hacking are minimal; protecting your investment does not need additional care, and hence the currency is safe for the long run.
Every financial asset has specific things to consider, making the currency a little risky. Here are some drawbacks one should consider before investing in crypto.
The cryptocurrency market possesses volatility due to its decentralized nature, and the market is unpredictable regarding the giant swings. The value of the rise and fall of the currency can not always be defined; this uncertainty keeps crypto prices going through constant fluctuation.
This constant change can affect a person’s investments, and there is an equal probability of profit and losses.
Cryptocurrency is hard to hack due to its decentralized nature and distributed ledger technology. Despite that, crypto is an online asset and is vulnerable to hackers. Crypto inherits the same risk a person has doing various online activities.
Crypto blockchains are highly secure, and getting through it is hard, but their connectivity with the internet can’t be ignored, making them a target for hackers.
Like other traditional investment measures, crypto is not covered by any authority, and any financial institution does not regulate it. Some countries consider crypto legal but don’t have a centralized authority to regulate that.
In recent times, there have been some discussions among the financial sectors for the centralization of crypto. In the future, there can be some laws or rules to regulate the flow of crypto in the market.
Investments can be made in varied ways, but keeping that safe is a task. Keeping them secure is much needed, whether physical money or crypto. There are multiple concerns for the safety of the currencies you have invested in. Here are some ways to keep your crypto safe and secure.
There are multiple cryptocurrency exchanges in the market, but dealing with the established one will help lower the risk of fraud and even simplify the overall process. Some exchanges are also digital wallet providers; this helps the clients to keep their keys safe and trade using them whenever they want.
Whenever you decide to invest in crypto, make sure to use a strong password for the security of your currencies. There are various ways to keep a strong password; one can use a mixture of alpha-numeric series or imply special characters to build a strong password.
One can protect the access of their storage using 2FA and with a secure connection to the internet.
The most common way digital hackers use is a phishing attack. Most new investors fell for these traps and shared their wallet credentials with them. Attackers use fake websites and emails to trick people into luring schemes, and when they fall for it, hackers get the credentials. To be secure, never share your wallet credentials with anyone, and don’t trust too-good-to-be-true schemes.
Crypto is available online and is accessible through the keys. These keys need to be stored safely, and the information regarding keys has to be private so that any third party cannot access them. There are multiple ways to store crypto keys so that one can choose the reliable method for themselves.
The keys are the main when investing in crypto; these keys prove the ownership of the currency. If anyone successfully gains access to these keys, there is no way to prove your authority over your investments. When connected to the internet, the vulnerability is high regarding any attack. Hence one must store their currencies in a cold wallet, which is not connected to the internet and can also be kept anywhere you want.
Back up your wallet on a timely basis so that in case of a glitch, you do not lose all your data. Regularly backing up your wallet builds another layer of security for your keys. Keep these backed-up data in multiple locations like PCs, hardware, and files.
This is a reliable feature in which investors can add multiple signature devices; this protects the data when one of the devices gets compromised. With this facility recovering the data gets easy. In this, various peoples own access to certain coins, and by all of them together, these coins can be operated. So if anything goes wrong with one person’s device, there are other places where it is still safe.
There can be instances where people will forget the password of their wallet or may have misplaced the crypto keys. In such situations, seed phrases save the day. The seed phrase is a random sequence of words in which the data is stored, which is required to access or recover the cryptocurrency. Seed phrase security applies to both blockchain and crypto wallets.
Being a highly speculative area of the market, many investors think twice before investing their money in the crypto market. For beginners, the most common advice is to start with small investments and put the money you can afford to lose. There are various ways to enter the crypto market and start investing. For this, we have made the above comprehensive guide to help new investors discover their path and understand the basics of investing before going for it.