Contents
- What Exactly Are Cryptocurrencies?
- Why Cryptocurrency?
- How To Invest?
- Choose A Currency
- Get A Wallet
- Diversification
- Avoid Mobile Wallets
- Prepare For Large Ups And Large Downs
Cryptocurrencies such as bitcoin have exploded in worth over the past 24 months, with studies suggesting over 8% of American’s have invested in some form of digital currency.
Hearing about something and investing in something are two very different things.
People often struggle to comprehend how cryptocurrency investing works and how returns are achieved.
As with most things within the investing world, it is better to get on the train early to maximise potential future returns – this is especially true with cryptocurrencies.
What Exactly Are Cryptocurrencies?
Essentially, cryptocurrencies are unique virtual mediums for exchanging money.
Special cryptographical process and blockchain technology are intertwined with the currency to conduct online transactions.
Unlike standard currency, cryptocurrencies are completely decentralized, no single entity has control over them, and in theory they are unable to be controlled by governments.
Furthermore, one can purchase a cryptocurrency in a similar manor to a stock, via an online trading platform.
Most crypto trading platforms offer little or no fees which is a large drawcard for investors worldwide.
Why Cryptocurrency?
There are several benefits to investing in a crypto currency, listed below are three of the primary benefits.
1. Security
Cryptocurrencies make it much easier for you to send money to someone in a secure manor due to the decentralisation aspect of a digital currency.
Cryptocurrencies are exchanged with the assistance of both public and private keys. This approach keeps everything secure and aids the low cost of transfer fees
2. Transparency
Blockchain technology is heavily relied on by cryptocurrencies, it allows the currency to create an online ledger than can be sent to the devices involved in a transaction.
This form of online ledger makes it simple to verify transactions and encourages all users of the currency to be honest.
3. Huge Returns!
We have all heard about the investors who have struck gold with cryptocurrency investing, whilst you may not become a millionaire anytime soon, you can still expect some fairly large returns.
Due to the volatile nature of digital currencies it is possible to earn large returns of a small initial investment, the key is to buy the right currency.
How To Invest?
The first thing a potential cryptocurrency investor has to think about is choosing an exchange platform to buy and sell the currency.
There are thousands of exchanges out there, some of the most popular are Bitfinex and Coinbase.
These exchanges make the purchasing of cryptocurrency a simple process – both debit and credit cards can be used to purchase currency on these platforms.
Conduct your own independent research into what exchange is best for you.
Choose A Currency
There are hundreds of different currencies available to purchase but the following are the most popular:
- Bitcoin
- Ethereum
- Ripple
- Litecoin
Amongst the 8% of American’s who have invested in cryptocurrency, 5% have invested in bitcoin.
Get A Wallet
Much like traditional physical currency cryptocurrency has to be stored somewhere.
There are two types of wallets: software and hardware.
If you are engaging in active trading of cryptocurrencies, then you require a software wallet as funds can be accessed immediately with little to no effort.
Hardware wallets are essentially specialised USB’s that contain your cryptocurrency balance within the storage of the unit – this means that they are completely offline and unable to be hacked.
If you are planning to invest in cryptocurrency in the long-term this is the best option for you.
Diversification
Much like you would diversify your stock portfolio a cryptocurrency investor needs to diversify their wallet.
You want to buy currencies that will act in opposite of each other, this is constantly changing so conduct your own research to find out which currencies are currently doing this.
Diversifying your portfolio will avoid the value of your currency holdings from being affected through the volatile cryptocurrency market.
Avoid Mobile Wallets
You may be under the impression that having your cryptocurrency accessible from your phone is a good idea, but it is the opposite.
Mobile devices are easy to hack – your cryptocurrency will be much safer in a software or hardware wallet.
Prepare For Large Ups And Large Downs
The cryptocurrency market is one of the most volatile markets that exist.
Only invest what you’re willing to lose to ensure that you do not put yourself in a potentially troublesome financial situation.
Trade safe!
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
