The best tips on investing in crypto from some of the experts here at Finance Success Revealed. What is crypto? Why Bitcoin? We cover that and more! Let’s jump into it.
Many people nowadays are interested in learning how to invest in cryptocurrencies like Bitcoin and Ethereum. This increase in interest is due to the success that these cryptocurrencies have experienced since they were first created. When it came on the market in 2009, Bitcoin was thought to be a fad or just an interesting phenomenon but now, even central banks are investing in it. This article will explain how you can invest in one of the many different altcoins that are available today.
What are cryptocurrencies?
Cryptocurrencies are digital currencies which don’t use a centralized authority. All of the transactions that take place are verified via cryptography through a decentralized system, which is known as the blockchain. The most popular cryptocurrency is Bitcoin (BTC), which was was founded by Satoshi Nakamoto in 2009. Bitcoins have to be mined and it uses what is know as a Proof pf Work system.
Ethereum is another popular type of cryptocurrency, which went live in 2015. Ethereum, or ETH, currently uses Proof of Work like Bitcoin. However, it’s looking to change to Proof Of Stake in order to conserve computing resources. This may cause the value of ETH to rise.
Many people want to invest in cryptocurrencies but there are several factors that hold them back. For example, most people don’t really understand how cryptocurrencies work. They’re accustomed to fiat currencies and even though they understand the value of fiat currencies can be readily adjusted by governments, they’re not sure how altcoins are different.
Just as all fiat currencies have not always been a good store of value, all cryptocurrencies are not a good store of value. Hundreds have come and gone over the years, yet many, like Bitcoin, have grown in value over time. This is why many investors, governments and traders are seeing Bitcoin as a global currency that may eventually replace the Euro and US dollar.
What is the blockchain?
The blockchain can be thought of as a set of digital ledgers. When a transaction is being added to the blockchain, it has to be verified at several different points or nodes. This makes it difficult or near impossible for a false transaction to be added to the digital ledger.
The blockchain is completely independent of central banks, so if war breaks out, no one can edit transactions in order to suit a particular party. The blockchain allows buyers and sellers to conduct transactions directly, so the middleman is eliminated and the fees that would be charged by middlemen are also eliminated.
You can use Bitcoin and other altcoins anonymously. All forms of cryptocurrency are also subject to sudden increases in price, which make them feel like other other investments. Since banks aren’t required for cryptocurrency transactions, you can’t usually go to them to purchase Bitcoins. However, there are many established exchanges where you can purchase your preferred cryptocurrency.
Why is Bitcoin so interesting to investors?
Investors and governments around the world have been looking for alternative stores of value for a long time. Many don’t want to put all of their confidence in the Euro or US dollar because these currencies are vulnerable to political decisions.
Nowadays, more people are also looking for investments that support their digital lifestyle. Many people hardly use paper to conduct transactions and do most of their banking, bill payments and other financial transactions via electronic transfers. Bitcoin fits perfectly into this lifestyle, allowing individuals to make purchases from countries overseas by using funds from their Bitcoin wallet.
In several cases, you don’t need to exchange Bitcoin for a fiat currency n order to do a transaction. So, if you live in Pakistan and want to purchase a product in the UK, you can use BTC and never lose money due to the spread. At the same time, if you wish, you can trade BTC for another cryptocurrency or fiat currency by using a digital currency exchange, like Binance.
There’s a lot o trading activity that takes place every day and all of this has made Bitcoin interesting to speculators. They’re betting that the price of Bitcoin will continue to rise exponentially, giving them the same mind-blowing returns that the Winklevoss twins and other early investors have enjoyed.
While this article discusses factors that you should consider when investing in cryptocurrency, it is by no means an endorsement of any one. Like any investment that you might make, cryptocurrencies are subject to changes in the market. Bitcoin has undergone fluctuations over time. Exercise due diligence and don’t just follow speculators because they rarely pay attention to fundamentals.
If you want to invest in cryptocurrency, it is possible that several of them will continue to rise in value over the years. Ensure that whatever you decide to invest, is money that you can put aside for a long time and we hope that this information helps you to make the best choices.
Only Use A Small Portion of Your Portfolio for Cryptocurrencies
The money that you invest in cryptocurrency should be part of your overall investment portfolio. It should be money that you have already decided to set aside for investment. You should never, under any circumstances, put money into Bitcoin or Ethereum because you hope to make 30% on it by the end of the month and pay off your loans.
If you have money set aside for car loans or other debts, make sure you pay those debts with the money you have designated for them. Do not use that money on a risky investment like cryptocurrency. The cryptocurrency market does offer great profits on your investment but you cannot predict how the market will behave.
There are several companies out there that claim you can get 2% every day or even more, by trading cryptocurrency by using different means, such as bots. Do not place money that you need for your bills in any of these options. A lot of things can happen that can potentially disrupt the market.
In the real world, markets are connected and a pandemic, political upheaval in a country and other unexpected changes can affect your plans. While cryptocurrencies always recover and rise again, you cannot accurately estimate when this will happen. If your money is locked in cryptocurrency during a slump, you won’t be able to access its real value to pay your bills.
Cryptocurrency Should Be Part of A Diverse Strategy
Cryptocurrency should never be your only investment. It should be part of a diverse investment strategy, whether you are 18 or 81. If you have spoken to an investment advisor, you probably know what your risk profile is like.
Each investor’s risk profile comes with recommendations on the percentage of their funds that they should place in investment options that are considered to be high risk. The money that you place in Bitcoin should be a part of the money that you’ve set aside for high risk alternatives.
For most people, it is recommended that only 5% of your investment portfolio should go into cryptocurrency. That means if you have $1,000 to invest after your living expenses are taken care of, only $50 should go into Bitcoin. While that may seem like a small sum, you’ll stand a real chance of tripling that money in just a few years. On the other hand, if the Bitcoin or Ethereum market experiences a slump, you’ll only watch as 5% of your money drops in value.
Cryptocurrencies were not Intended to Be Investments
Cryptocurrencies are fairly safe but for the most part, they were not designed to act as investments. They are primarily a means of exchange. There’s only a limited amount of Bitcoin available and demand for it is increasing. As demand increases and supply decreases, the price of Bitcoin must rise.
That makes the investment an interesting option for people who want to make a profit over the long term. Even countries like the United States, Switzerland, Japan and South Korea have decided to hold part of their funds in Bitcoin.
Cryptocurrency is not usually recommended as a short-term investment because it fluctuates too rapidly. Just like stocks, you should invest in cryptocurrency expecting to see a return after several years, not a few weeks or months. Always remember that the value of cryptocurrency is determined by the market, not by manipulation, as is the case with sovereign currencies.
Best Tips On Investing in Crypto: Always Do Your Research
Some people say that the best time to invest in cryptocurrency is now, while others recommend waiting until the market hits a slump. They say that because they are of the option that during a slump you can get crypto at a lower price and make a bigger profit when the price goes up. Don’t make your own buying decisions based on what other people say, even if they currently have a little more experience in the market than you.
Do your own research and reading. Learn how to analyze the behavior of cryptocurrency by using all the information that’s provided via the stock-to-flow graphs for Bitcoin. Study the long-term Bitcoin charts so that you can become familiar with the four-year cycle that it goes through. Try to understand why it goes through this cycle, so that if factors arise that cause changes in the behavior of other investors, you can adjust accordingly.
You have to be mentally prepared to wait through to the end of each four-year cycle. The main aim of Phase 4 is to eclipse the resistance that previously existed and prompted a Bear market. You have to be prepared to stay on a steady course when during Phase 4, big players with big money, like Tesla, announce that they’re buying a large quantity of Bitcoin. News of the sudden purchase of billions of dollars worth of Bitcoin can affect its price and the value of your own investment, so you must be mentally tough if you want to benefit from an investment in cryptocurrency.
Select your Cryptocurrency Wisely
Some cryptocurrencies have performed better over time than others on the market, so you should always evaluate a cryptocurrency based on its history and its potential for real growth, before you buy any of it.
Several cryptocurrencies have come on the market and gradually faded away. Always be aware that if you invest in a crypto that’s started by your favorite brand, it could potentially grow or go down to zero.
Bitcoin and Ethereum are among the most reliable cryptocurrencies today. They can be invested in without too much worry that you will see all of your money disappear overnight. However, you should still proceed with caution even with these.
Choose A Reliable Platform for Your Purchases
There are several reliable platforms which have been serving traders for many years and these make it easy to buy the type of crypto that you’re interested in. Robinhood, Binance, eToro and Coinbase are all well known among traders. if you trade forex or stocks, you may already use these platforms to purchase instruments, so you know that their fees are affordable and they keep your information secure.
Gemini and Unifimoney also allow you to keep many of your activities in one place, even making it easy to do your regular banking transactions with your funds. You can trade and store all of the most popular cryptocurrencies with these platforms and eliminate the need to have separate apps for banking, crypto, Forex, options, futures and other investments.
Store and secure your Crypto
Many people store their crypto in secure hot or cold wallet, which is basically a software program that lets you keep track of the amount of crypto you own. You can keep all of your crypto in this wallet, regardless of the type that you have.
For example if you have recently traded a fiat currency for ETH and Bitcoin, you can easily use your wallet to monitor how much of each you own. All of your transactions on the blockchain are recorded in your wallet and this information is stored on the cloud can easily be accessed via a mobile app.
Most platforms that offer wallets, like Coinbase, already use encryption to protect your data. However, if you want additional security you can use a VPN such as NordVPN, to ensure that all of your online transactions are encrypted and no one can see any of the details.