Investing in cryptocurrency is a good way to make money. In 2017, the popularity of crypto coins sharply increased against the background of intensive growth and interest in them from investors. Those who invested money in cryptocurrency managed to make good money. The value and popularity of virtual coins will continue to grow. And blockchain technology is spreading and being implemented in many sectors of the economy.
Two strategies for investing in cryptocurrency
As with any exchange-traded asset, be it currencies, stocks, or bonds, two main strategies are possible for the crypt:
- Investment
- Trading
Investment
Investing usually means that a person invests money, buys cryptocurrency, and does not touch it for as long as possible: a year, two, three. During this time, the price of cryptocurrencies on exchanges can rise 20-30 times.
When investing in cryptocurrency, you can only profit from the rise in the price of the asset.
Investment benefits:
- No time to waste
- Significantly less risk of loss.
Trading
Trading is a short-term type of money investment that allows you to make huge profits in a short period. The main task is to buy cryptocurrency as cheaply as possible, sell it at a higher price, and earn a profit.
Benefits of Trading:
- Potentially Big Earnings
- You can get money from falling prices.
Algorithm for investing in cryptocurrency
Below is a step-by-step algorithm for investing.
Choosing a cryptocurrency
Today there are over 7300 of them in the world. How to choose something from such a variety?
First, we decide on the investment goal. Cryptocurrencies themselves are potentially a very profitable asset. However, among them, there are two large groups.
Cryptocurrencies with a large capitalization and relatively slow growth. These are the ones that have a capitalization of at least $ 500 million and are added to the listings of most crypto exchanges, for example, Bitcoin, Ether, Ripple, Dash, and Monero.
Cryptocurrencies with a small capitalization, but with big growth potential.
Top 10 cryptocurrencies by daily trading volume
| Cryptocurrency | 24-hour trading volume in $ million | Cost of cryptocurrency in $ | Capitalization in $ billion |
| Bitcoin | 3 590 | 9 266 | 157.6 |
| EOS | 1 700 | 18.6 | 18.7 |
| Ethereum | 965.7 | 680.5 | 67.4 |
| Bitcoin Cash | 504.3 | 1 389 | 23.8 |
| Tronix | 406 | 0.08 | 8.1 |
| Ripple | 393.4 | 0.83 | 32 |
| Litecoin | 225.9 | 150 | 8.4 |
| Ethereum Classic | 187 | 21.4 | 2.2 |
| ICON Project | 155 | 4.73 | 1.9 |
| Cardano | 134.9 | 0.32 | 8.2 |
Choosing the amount
Different people have different financial capabilities. However, before investing money, it is advisable to decide:
- How much are you willing to invest?
- For how long?
- How are you going to diversify your investment portfolio?
The amount and term depend on how much free funds you have and how long you can do without them. It is advisable to carry out multilevel diversification:
Invest money, not in one cryptocurrency, but in several: 5-10 different ones.
Purchase not only crypto but also other investment instruments: stocks, bonds, and currencies.
The portfolio of such an investor will be much more stable and stable. With all the faith in blockchain, buying exclusively bitcoin or ether is too risky a decision.
Opening a cryptocurrency wallet
A cryptocurrency wallet is, in simple words, an agent program that, when accessing the Internet, connects to a central server and exchanges information with it. But in the case of cryptocurrency, instead of a central service, there are hundreds and thousands of devices that, just like you, have this program and store cryptocurrency coins.
There are two options for storing your cryptocurrency investments:
- Hot wallet on the exchange
- Cold wallet on your computer or laptop
It is usually more convenient to use a wallet on a reliable exchange. Firstly, in 1-2 clicks, you will be able to make any transactions on deposit, withdrawal, or crypto exchange of funds. Secondly, your cryptocurrency will not be stored on your computer, but on another device belonging to the crypto exchange.
It may seem that this is not a plus, but a minus. But cryptocurrency differs from bank accounts and payment systems: you own it only when your device, on which the wallet is installed, is working properly, you have access to it, and remember the private key. If the laptop overheats or the phone fell into the river, or you simply forgot the key, then no one will ever give you back access to your money.
If such a nuisance happens to the wallet of the exchange, it is obliged to get you another wallet with the same amount. That is why hot storage is almost always more profitable.
The only exception is if you decide to invest several million rubles or dollars in cryptocurrency. But then you have to spend money on a reliable server, to provide its maintenance and security.
Buying cryptocurrency
The best way to buy cryptocurrency is using crypto exchanges. Crypto exchange is a platform where sellers and buyers of cryptocurrencies seek and find each other.
Its disadvantage is that you may have to wait for some time until a seller/buyer is found offering the lot you need at the right rate. But on the other hand, you can buy a cryptocurrency at the most favorable price.
To deposit the exchange, you will need:
- Complete registration that includes entering passport data.
- Top up your account or crypto wallet.
- Start looking for suitable buy/sell offers.
- Then make a deal.
When to sell cryptocurrency?
Even before investing in a cryptocurrency, it is advisable to decide at what point you will sell it and take a profit. There are several options:
After a certain time, for example, after a year. Regardless of the price.
Upon reaching a certain financial result. No matter the time.
It is useful for new investors to set a minimum period for which they are ready to invest, and calmly wait for it to come.
With the explosive growth of the cryptocurrency in which you decide to invest, it is worth selling half of the amount every time you reach a significant price milestone. In this case, you will ensure yourself against losses in the event of a sharp collapse, but if the growth continues, you will retain some part of the cryptocurrency for sale at a very high price.
