How to Invest in Cryptocurrency
How to invest in Cryptocurrency is an important skill and if you have ever thought of or had interest in cryptocurrency, this article would provide you with in-depth knowledge on cryptocurrencies.
Cryptocurrency is a digital asset which is designed to work as a mode of exchange that uses strong cryptography to secure financial transactions, verify the transfer of assets as well as controlling the creation of additional units.
With the increasing interest to invest in cryptocurrency there are a host of cryptocurrencies that include the likes of litecoin, ripple, bitcoin, ethereum, to mention but a few.
However, the most sort for cryptocurrencies are bitcoin and ethereum as they appear to be the hottest investment product currently available. Cryptocurrencies offer a more secure and safer means for a host of transactions that involve finances and assets and in no distant time would be the major method for carrying out transactions thereby substituting the existence of the euro, dollar and the likes. Open a free account today and start trading!
In recent times the bitcoin has made investors millionaires because of its value in the investment market thus explaining why it’s in the market. Having a bitcoin automatically makes you a shareholder in the business of cryptocurrencies and as far as investment goes, if bitcoin ever substitutes the monetary reserves of the central banks or becomes the dominant currency for international trades, the value of one bitcoin could be worth more than 10,000 dollars. With the growth of the bitcoin, buying and keeping cryptocurrencies is a long term investment bound to yield major profits in the nearest future.
Research shows that the value of the bitcoin experience an increase of about 25,000 percent in 2011, likewise the ethereum which equally had an increase in value of about 2,700 percent in 2016, both totaling to maybe one of the quickest upturns the cryptocurrency has experienced in recent times.
Generally speaking, the cryptocurrency market rose from just under $18 billion in early 2017 to about $800 billion at the end of the same year and though the market cap experienced an abrupt decline since its peak, the entire market was still worth about $200 billion as of September 2018 which is more than 10 times its value since the start of 2017.
How to invest in cryptocurrency involves investment assets with such and incredible growth rate is bound to create doubts and second thoughts on whether or not its worthy venture and as such questions like: Is this the right time to invest in cryptocurrency? Shouldn’t I have invested in it about a year or 2 ago? But as the popular saying goes “better late than never” this might just be the right time to invest in it. Before any investor goes into any form of investment, they must have done their research and made sure they are properly informed and equipped with all the knowledge of the product of interest before they venture into it and that’s why we have written a guide to enable you understand all there is to know about cryptocurrencies like; how to invest in cryptocurrency, making a decision on which type of cryptocurrency to invest in, how to create a cryptocurrency-portfolio, where to buy cryptocurrencies, how to store the and equally how to tax your gains.
It is however pertinent to know that cryptocurrencies are not like any normal or regular investments, its volatility greatly exceeds that of any other investment class and in some parts unregulated. There is also a chance that cryptocurrencies get banned, that exchanges get hacked or an investor loses his or her cryptocurrency key. Cryptocurrency is indeed a high-risk investment.
This is why it is important to know how to invest in cryptocurrency.
WHY INVEST IN CRYPTOCURRENCIES?
Whether 1 should invest in cryptocurrencies or not has been a topic of debate lately and being such a young asset, the market of cryptocurrency is extremely volatile and is surrounded by stories of either extreme success or massive failure. The real question here is making an informed decision consisting of probability, timing, and if the investment profile fits the investor, which is ensuring you have covered all there is to know about cryptocurrencies before you. That being said, there are a couple of reasons why investing in cryptocurrency is next to the best decision that can be made investor as listed below;
- It has a high ROI (return on investment).
- It also has a huge growth potential looking at its statistics in recent years the crypto world is extremely intimidating.
- It gives one ideological empowerment in the sense that an investor in cryptocurrency has leverage over banks, government and other monopolistic co-operations.
- Bragging rights! Yea I said it, being a part of the crypto world gives you bragging rights and having bragging rights and equally being rich along the way is a combination only a few have.
The crypto world is blossoming to be a real game-changer that could change the way we do things. Start investing today.
Unfortunately, for every success story, there’s an equal number of personal Bitcoin disasters. Some of which are as a result of starting the venture for the wrong reasons, hastily making bad decisions and also letting ones emotions cloud our decision making. They are however a few setbacks when it comes to cryptocurrency, some of which are;
- Cybersecurity issues; being that cryptocurrency is a digital technology, it will be subject to cybersecurity breaches, and may fall into the hands of hackers. The upside to this is as technology advances, issues with cybersecurity are also being worked on daily.
- Price volatility; because of how volatile the asset is which is tied to lack of its innate value poses a major problem to investors and is an important concern but one that can be overcome.
HOW TO INVEST IN CRYPTOCURRENCY
Before an investor decides to invest in cryptocurrency, there are a few things that should be taken into consideration. Firstly you need to decide if you want to invest directly or indirectly, then you would still need to verify if you want to be in direct control of your cryptocurrency or if you would prefer a custodial service like coinbase.
Investing in cryptocurrency requires the following:
- A cryptocurrency wallet; this choice is a deciding factor on whether you are in direct control of your cryptocurrency or not.
- A means of obtaining cryptocurrency; as an investor that decides to venture into cryptocurrency, one would need one or more cryptocurrency exchange broker to buy cryptocurrency from/ trade cryptocurrency on.
- A method of selling cryptocurrency; Part of the benefits that comes with investing Is the ability to cash out. Note that to cash out you’d most likely need to convert your cryptocurrency to a top coin like bitcoin or etherum etc.
- Decide on the type of cryptocurrency you are interested and want to invest in because it is best to have an idea of the cryptocurrency you are in interested in, the duration of time it has been in the market, because the longer it has lasted in the market the more trustworthy it is. its market value and its basic tech solutions.
- Decide on the type of investment you are after.
- Learn to study the market behavior during different times.
HOW TO INVEST IN BITCOIN
As earlier talked about, before you venture into any investment at all not just cryptocurrencies, you should have taken the time to learn and understand the market you are investing in.
Bitcoin as well as other cryptocurrencies operate on a technology called blockchain which is popularly referred to as distributed, decentralized public ledger. Before you can actually invest in bitcoin, there are a few things an investor needs in order to be able to achieve that;
- Digital wallet: to enable an investor carry out transactions on the bitcoin network a program called “wallet” needs to be run. The wallet in this context isn’t the conventional leather wallet where we store our monies but are made up of 2 unique and distinct cryptographic keys; a public key which is the location where transactions are deposited to and withdrawn from, this key appears on the blockchain ledger as the users digital signature and a private key which is the password required to buy, sell, and trade the bitcoin in a wallet.
- Personal documents: users/investors need to verify their identities when registering for digital wallets. This is a prerequisite to enable you buy and sell bitcoin.
- Secure internet connection: when trading bitcoin online, doing so with utmost discretion and from a secure connection is recommended so as not to be susceptible to attacks from hackers and cyber criminals.
- Bank account, debit card or credit card: When transactions are carried out and you need to exchange USD or another currency for bitcoin, you will need funds to make those transactions. Bitcoin wallets can connect directly to your bank account, debit card, or credit card.
- Bitcoin exchange: Once you’ve set up your wallet with a payment method, the next step would be to get a place to actually buy bitcoin. Bitcoin and other cryptocurrencies can be bought from online marketplaces called “exchanges,” similar to the platforms that traders use to buy stock. Exchanges is a platform that connects you directly to the bitcoin marketplace, where you can exchange traditional currencies for bitcoin.
DECIDE ON WHICH TYPE OF CRYPTOCURRENCY TO INVEST IN
The bitcoin still remains the most popular cryptocurrency in the crypto market today but they however have been the introduction of a few others like;
- Tron etc
it is necessary to be strategic in understanding the fundamentals of a digital asset, as this can play a major role in the level of risk involved. Fundamental analyses are the best indicators for long-term investors, so understanding of how a coin or Initial Coin Offering (ICO) functions, its history, how long it has been in the market, its market value and what it brings to the table before choosing to participate in its development is of utmost importance.
Be aware that anyone who tries to tell you that a particular cryptocurrency is the best to invest in probably has a large vested interest in it, If you don’t understand what a cryptocurrency does or why it’s valuable, then don’t its best not to invest in it so a profitable investment strategy is to have a portfolio of currencies.
Understanding every technical details of every cryptocurrency isn’t a necessity but it is important to have the necessary knowledge about a currency that you want to invest in and make a very informed decision.
Conclusively, there is a significant upside to investing in cryptocurrencies now and with the introduction of blockchain which is still very young in the industry, there is huge prediction by professional investors that the value would rise far above what was recorded in 2017 and thus making cryptocurrency a worthy investment.