Investing in crypto: what is it and how does it work?
Cryptocurrency is a hot topic these days, but there are still many people who don’t know how to invest in this market. Luckily, the world of crypto is more accessible than ever before and it’s easier than you might think for beginners to get involved.
In this article, we’ll explain what cryptocurrency is, why you should consider investing, the benefits, the risks and most importantly: how to do it. We’ll also provide tips for those who are just getting started.
What is cryptocurrency?
Cryptocurrency is a digital or virtual currency that uses cryptography to secure its transactions and to control the creation of new units. Cryptocurrencies are typically not backed by any government or central bank, meaning their value is based on what investors are willing to pay for them at a given time. They are stored in digital wallets and can be traded for other currencies or real world goods and services.
Bitcoin, the first and most well-known cryptocurrency, was created in 2009. It is often described as “digital gold” because of its limited supply and its role as a store of value. Like gold, it too can be used to purchase or hold as an investment. Since bitcoin’s creation, hundreds of other cryptocurrencies have been launched and can be traded and used in the same way.
It’s also important to remember that while there are some similarities between Bitcoin/crypto and other national currencies, they are not identical. Cryptocurrencies are not a fiat currency, meaning that they have no legal tender (not issued by a recognized central authority) and cannot be used to pay taxes. In fact, in some countries, cryptocurrencies are banned altogether.
New normal or still an alternative?
People who are new to investing in crypto might find it easier to think of it as an alternative to traditional currencies like dollars or euros. In the same way that you use a dollar to buy things, your crypto can be used to purchase items and services as well.
While this is true, it’s not always easy to spend crypto in your everyday life. Currently there are very few stores where you can actually spend coins like Bitcoin or Ethereum. However, this is changing and more stores are beginning to accept cryptocurrencies as payment.
The most popular use for cryptocurrencies is speculation on their value against government currencies like the US dollar or Chinese Yuan, but this is not one of its only uses. Cryptocurrencies can also serve as an alternative investment for people who don’t want to invest in traditional asset classes such as stocks or bonds. Since cryptocurrencies are decentralized and as such not subject to government or financial institution control, they cannot be influenced by political and economic factors and thus bring a new way of safety.
The number of people who hold cryptocurrency is only going to grow as people become more comfortable with the idea of a decentralized currency. If you’re looking for a way to invest in the future, cryptocurrency is certainly a great option.
Why should you consider investing in cryptocurrency?
The market of cryptocurrencies is gaining more and more momentum, not only from small retail investors from all over the world, but also from private and big public companies and institutions like investment funds or banks. Even governments are joining the game, for example El Salvado Bitcoin is already the legal tender so people can get credit or pay debt, taxes, sign contracts and use it as official government currency.
A lot of millionaires and billionaires were born by investing in the crypto market and its capitalization has reached over $3 trillion and it’s continuing to grow as more investors jump onto the crypto bandwagon. The rise of cryptocurrency is therefore undeniable and has the power to change the future and help people create wealth like never before. It is a new technology which of itself has the potential to grow in value much faster than traditional investments like stocks or bonds.
A large majority (92%) of millionaires around the world agree that virtual currencies like Bitcoin make the world economy better because they create valuable opportunities for citizens who don’t have access to traditional financial tools or do not want their personal information shared with banks or other financial institutions. As such it serves as a great alternative for people who want to be part of the growing economy without having their identity disclosed or financial institutions controlling their money.
The best time to invest in virtual currency is now — and the next day and the next and so on. With cryptocurrency still being in its infancy and only growing more popular, you will be able to see some serious returns on your investment sooner than you think.
Investing in cryptocurrency
There are many ways to invest in cryptocurrency. Some people buy and hold crypto, believing it will increase in value over time. There are also numerous day-trading strategies that have been developed for trading cryptocurrencies on exchanges. And then there are people who invest in new crypto projects by initial coin offerings (ICOs).
Another way you can get involved is through cryptocurrency mining. Mining involves using a computer to solve complex mathematical problems in order to verify cryptocurrency transactions on a blockchain.
Either way, the easiest and most effective way to invest in crypto is through an exchange-broker-wallet hybrid like Coinbase/GDAX or Robinhood . These platforms simplify the investing process by allowing users to invest in cryptocurrency through USD. For example, on Coinbase you can deposit money from your bank account and then buy coins directly through the platform.
How to start investing in cryptocurrency
Here are some tips on what you should do if you’re considering investing in cryptocurrencies:
1. Get to know the market
The best way to get started in crypto is to buy a small amount of several different coins and then wait for the market to settle. This will give you a better understanding of how the market works and how individual coins perform.
2. Don’t invest anything you can’t afford to lose
Cryptocurrencies are a high-risk investment, so you should never invest anything you can’t afford to lose. The value of cryptocurrencies can go up or down quickly, so there’s always the risk of losing money. If you’re not comfortable with the risk, reconsider your investment or don’t do it at all.
3. Always do your own research before investing in a project
It’s also important to do your research before investing. Make sure you understand what a specific coin is, what it’s used for, and how it works. Cryptocurrency is still a relatively new market and there are many scams out there, so be careful when choosing which coins to invest in.
4. Keep track of regulations surrounding cryptocurrency and taxes on gains
Remember that cryptocurrency is an investment and there are already some tax rules imposed, but they may vary from country to country. Since regulations surrounding cryptocurrency are also constantly changing, always stay up to date on the latest news and avoid unnecessary issues.
5. Remember to use a secure wallet to store your cryptocurrencies.
It’s important to take the time and effort necessary to protect your investments. Cryptocurrencies can be stolen or lost if you don’t store them properly. There are many different types of wallets available — choose one that best suits your needs. Make sure you keep your wallet password safe and backed up. If you lose your wallet, you won’t be able to access or use your cryptocurrencies.
*** Bonus tip
If you’re looking for a simple investment in cryptocurrencies and would like to stay on the smart and safe side, then copy trading is a strategy you should strongly consider. This method of investing has proven to be successful time and time again because it allows investors with limited capital or market knowledge and lack of time to invest their money.
There are many ways that someone can make use of this strategy including both day trading as well as investing long-term. You have full control of your investment and can also add or remove it at any time. One of the best copy trading platforms is Iconomi, a global, user-friendly and efficient platform for investing and managing your cryptocurrencies. You can choose professional traders you want to follow based on their results and your goals. A great place to start are GoldHorn, Carus-AR and Diversitas.
What are the benefits of investing in crypto?
Cryptocurrencies offer a number of benefits to investors, including:
Cryptocurrencies can be transferred between parties quickly and easily, making them ideal for transactions such as buying goods or services.
Cryptocurrencies are not regulated by any central authority, meaning that they are not subject to government or financial institution control.
Cryptocurrencies offer users a high degree of anonymity, which is beneficial for those who want to keep their transactions private.
Cryptocurrencies are secure due to their use of encryption technology.
All cryptocurrencies are treated equally, meaning that they can be exchanged for one another without any loss in value.
What are the risks of investing in crypto?
Cryptocurrencies are still a relatively new investment, and there is no absolute guarantee that they will continue to be valuable in the future. Their prices can be extremely volatile, which means that it is possible to make large gains or losses in a very short space of time. Another risk associated with investing in cryptocurrencies is the threat of hackers, who can break into exchanges and wallets where currencies are stored. Furthermore, the anonymity of transactions using crypto currencies also makes it difficult to track down those who have used them for illegal purposes.
If/ when you do decide to invest in cryptocurrencies, it is important to do your research and understand the risks involved. Don’t forget to spread your money around, invest in several different cryptocurrencies and never leave your money invested in only one cryptocurrency for an extended period of time. Make sure that you are comfortable with the risk of losing what you have invested and stay up-to-date with the latest crypto news and information. If you follow and copy strategies from the leading experts in the industry, you can avoid making any sudden mistakes or at least manage them better with their help.
What is the future of crypto?
The future of cryptocurrencies is still uncertain, but there is no doubt that they will continue to play a role in the world economy. It is likely that they will eventually be regulated by governments, but until that happens they will remain a viable investment option. As both, new and experienced investors are finding ways to get exposure to the cryptocurrency space, now still seems like a good time to invest, especially for those who can stomach potentially significant losses.
The world of crypto has the power to change how we think about money and investing. Cryptocurrency has quickly become one of the most popular investment options of recent years and while there is tremendous potential for growth, there is also a considerable amount of risk involved. Before investing, do your own research and make sure to understand the process and follow people with expertise and knowledge on the topic. The more you know, the less “scary” the investments are. And if you don’t know or lack time for learning, there are good trading strategies that you can simply copy and stay informed with what’s happening on the market. The future of investment is here and you can start building yours now!
Hopefully this article has answered some questions about how investing in cryptocurrencies works and how you can get started! You can also reach out to us if you have any further questions or need help investing.
Author: Špela Krajnc @ Brandician.eu