How Cryptocurrency Investments Work
Investing information for beginners
So, you want to get involved in crypto? Well, to even begin the process of trading cryptocurrencies, you have to understand exactly what that entails from registration to finally selling your assets. Simply knowing that cryptocurrency is a safe investment to make won’t cut it, because everyone that you’re up against believes in the same thing as well. To really get an edge on other people claiming to be crypto experts, you should gain a better understanding of how crypto investments work. After all, the more you understand about how these trades work, the better you’ll be able to analyze and assess crypto markets.
This is not financial investment advice.
This article will introduce key aspects of crypto investing from the stance on a beginner investor.
In this article
Why Invest In Crypto?
Many critics of digital assets will be quick to claim that purchasing and selling cryptocurrency isn’t an investment, but more so a risky gamble that might just pay off. But don’t all investment opportunities pose some kind of risk or uncertainty? Well, that’s not the case here according to investing expert Warren Buffett who claims that the lack of intrinsic value in Bitcoin and other altcoins is what makes this situation unique. The risk and volatility involved in cryptocurrency does not justify any kind of investment into this space — or does it?
Making safe investments in the world of crypto can yield incredible returns that would turn a leprechaun green with envy. Not sure if you believe it? Take a look at the S&P 500 stocks and compare the rate of return with that of the cryptocurrency market. Imagine having invested $10,000 in U.S. stocks back in early 2016. Today, that amount would be valued close to $13,000. What if you put that money into Bitcoin instead? Well, today you would have the opportunity to be $60,000 richer had you made that investment. If you still aren’t convinced, let’s look at Ethereum as well. Had you invested $10,000 into Ethereum, you would have seen your money multiply 46 times in just over 6 months, leaving you with $470,000.
The potential for insanely high growth and returns is what attracts many investors to the crypto space, and while most of the focus has been on Bitcoin, the plethora of cryptocurrencies available provides ample variety and investment opportunities. The underlying blockchain technology in all of these coins is revolutionizing the world by disrupting all sorts of industries and markets outside of finance. As a result, we’ve seen many prominent companies buy into the potential of blockchain, leading to the investment of millions of dollars into the digital asset space. As we see this market continue to creep out of its relatively new emergence, the potential for cryptocurrency to become the future of finance is realized every single day. This grown further emphasizes the importance of getting involved now before you regret it in the future.
Review: So, why invest in crypto when you can invest in tangible assets like stocks, gold, or even real estate? Blockchain. That’s right, the enormous price leaps are justifiable when you have an innovative backing like blockchain, resulting in realistic long-term gains. There are bundles of reasons why you should invest in crypto, none more appealing than it’s potential growth and promising technological future.
How Do Crypto Investments Work?
When people tell you that they’re investing in cryptocurrency, several questions might arise like “Which coin did you buy?” or “How do you even buy a cryptocurrency?” Unless you are already investing in crypto, you may not know how it all works. Not matter! You should definitely understand how it works even if you don’t want to invest at all. The better understanding you have of how investments work from an investor’s perspective, the better you’ll be able to analyze the market for yourself.
To actually purchase and sell cryptocurrency, you must use an exchange to get started. Most exchanges offer numerous cryptocurrencies to invest in while some only offer a few, so choosing the right exchange to use is the first important step in potentially investing. Next, you’ll have to set up an account which, depending on the exchange service, may or may not require you to provide your social security number, ID documents, and verifying your bank account. There are decentralized exchanges that only require minimal personal information in order to get you started. Although it may seem tedious, the logistical information is set in place to protect your identity and keep your account secure so you can start trading away! But what actually happens with each transaction?
Each crypto transaction can take place in a variety of ways. First, and most common, is through an exchange, where you can purchase cryptocurrency by using fiat or other digital assets. Don’t want to buy crypto from an exchange for some reason? In that case, you can actually buy and sell cryptocurrency directly with people by using peer-to-peer digital asset platforms. Besides mining, purchasing Bitcoin through exchanges or P2P are the only ways to get your hands on it.
Crypto investors use wallets to keep their assets safe and secure online or on a physical hard drive offline. Once you’ve successfully purchased coins through one of these sources, hold them until the price increases and sell for a profit. There are several investment strategies which you can use to maximize returns, leaving you happier and wealthier.
Review: Now that you understand a bit more why cryptocurrency is a safe investment, research online exchanges to find one that suits you best. Trade online and keep your digital assets secure using crypto wallets which will keep all your coins safe from hacks or system malfunctions. Go through the process of setting up an account and make the effort to trade in order to gain key industry experience of how markets work.
What Should I Buy?
As mentioned previously, there’s a wide variety of cryptocurrencies to choose from when it comes to investing. Building your portfolio relies heavily on personal preference and individual goals, but one key trait that all successful portfolios have in common is that they’re relatively diversified. Diversification is one of the most important rules of investing in all industries, so crypto is no exception. Just like any other market, crypto consists of different types of assets which can move independently of large players like Bitcoin. In order to construct the best portfolio, you should invest in many different kinds of coins to reduce risk and ensure reliability and profitability. However, the evaluation process of researching and determining which coins are worth the effort to look at is painstakingly long.
The CoinBundle platform takes all the researching and due diligence process away, making investing in cryptocurrencies much easier. Who wants to spend countless hours watching videos and analyzing charts of coins which might have a promising product when a team of highly experienced analysts can do it for you? With that being said, performing your own due diligence is still extremely important and can lead to finding hidden gems that can make you a lot of money. Use resources like coinmarketcap.com to keep track of how the market is doing as well as how individual coins perform. At the end of the day, you can look to more detailed investment strategy tips to further develop your portfolio. One thing is for sure: diversification is key.
Review: Diversify, diversify, diversify! One of the most important rules of investing across all types of markets is to spread out your assets. Instead of putting all your eggs in one basket, research multiple kinds of coins to invest in and make it happen.
There’s a lot that goes into executing a crypto trade, from finding the right exchange to buying the right coins for you. What separates the typical crypto user from a smart investor is understanding how these investments actually occur, as well as what to expect when performing your own due diligence. Maximizing returns can vary from person to person depending on which strategies they choose to follow, but the biggest key is diversifying your portfolio. If you can properly assess the market and construct a well-balanced portfolio, the opportunities are endless when it comes to cryptocurrency investments.
What has been your most valuable lesson learned as a beginner crypto investor?
Let us know in the comments!