Even though many people have started investing in cryptocurrencies, there are still people who do not know how to invest in Cryptocurrencies? Right, if you are one among them, this is for you!
Cryptocurrencies outnumbered every other asset category last year. They have been continuously doing this from the start of this year, thus making a lot of investors think about whether they should include crypto coins like Bitcoin, Ethereum, or other currencies in their portfolios.
Well, the opinions differ based on the type of cryptocurrency, like Bitcoin as an asset has flung in popularity and is gaining widespread demand from investors worldwide. Bitcoin, the largest cryptocurrency, is trading all-time-high, and even the second-largest crypto, Ethereum, is also making records, keeping the bullish sentiments at ease.
So, one thing is sure cryptocurrencies are not going away, so you have to understand the dynamics of the crypto world to learn how to invest in cryptocurrencies?
How To Invest In Cryptocurrencies?
There are various cryptocurrencies in the market with different fundamental values.
Investors should understand that cryptocurrencies can be present one day and can be gone forever the next day, which can leave your investment worthless. Therefore, it is crucial to plan a strategy for investing in cryptocurrencies, and one should know how to manage the risk.
The Cryptocurrency Trading apprentice will have to consider some things like- transaction fees, type of cryptocurrency available on the respective platform, resources for education, and some other features that will align with your interest.
There are many cryptocurrency exchange platforms to choose from like Coinbase, Gemini, Tradestation, and many others that provide easy, accessible, and safe platforms to own and transact crypto coins. Whenever investing in a cryptocurrency, contemplate its role in your portfolio.
Experts say it is best to take a balanced approach while investing in cryptocurrencies. Like a small portion of 2%-5% can safely be allocated in cryptos for your investment portfolios because the volatility of the capital can cause its price to change drastically.
For any investor, who wants to invest in cryptos to diversify their portfolio, experts say cryptos are the minor correlated assets to stocks and bonds, which means they can be an effective shield against those other asset categories. And since bond results are not keeping up with inflation, you can turn to some cryptocurrencies as an alternative for bonds anytime.
There are some cryptocurrencies that will provide significant stability to your portfolios. Thus, even though they have volatility, they are inflation-protected.
How To Start Investing In Cryptocurrencies?
Here are some quick and convenient steps that will help you invest in these digital currencies:
1. Select a trustworthy Cryptocurrencies exchange
There is no uniformity in cryptocurrencies trading because of the absence of crypto regulation in India. But by using crypto exchange platforms, you can conveniently buy or sell any digital currency.
2. Open a trading account
You will have to open a trading account at a Cryptocurrencies Trading Platform of your choice. It will be similar to the one you have in your bank. While registering for your account, the platform will verify your specifications based on your chosen service, the total amount you plan to invest, and the available coin trading options. It may require you to share your KYC data and set up payment options. And crypto exchange functions throughout the year, unlike the regular stock exchange.
3. Finance your account
After successfully opening an account, transfer some money into your crypto trading account to purchase crypto coins. You can share the funds online from your bank account to your crypto-exchange account. However, you have to wait to buy any digital currency, depending on your waiting period.
4. Purchasing cryptocurrencies
Now, you have to decide which crypto coin you intend to invest your money in. Popular crypto coins are Bitcoin, Ethereum, Cardano, Tether, XRP, Dogecoin, and more.
5. Store your cryptocurrencies
Storage of your digital currency is the most critical part of the process of investing in cryptos. Crypto exchange platforms do not have any formal agency backing them, and they do not carry your insurance policy. They can also face the issue of being hacked. It is advised to hold your purchased crypto coins in crypto wallets. Thus, it would help safely store your codes in your account and your assets.
6. Plan a strategy
You have to make an unbeatable strategy to gain more profit. This can be done by adopting Elliott Wave Theory. The Elliott Wave Theory focuses on the psychology behind the market movements, so it works well for speculative capitals like cryptos.
You can also get some crypto experts’ opinions for expanding your cryptocurrency investment. Moreover, one should always start from small investments and carefully follow market behavior instead of blindly taking anyone’s advice.
Advantages Of Investing In Cryptocurrencies
Some of the advantages of investing in cryptos are-
- Diversification- as you may know, the value of cryptos doesn’t correlate with the value of stocks, bonds, or any other asset categories.
- Return Potential- cryptocurrencies always offer strong returns as the adoption increases. Many people will agree that the expected return for a known crypto coin investment is more significant than stocks.
- Extra UtilityUtility- dissimilar to stocks, some digital currencies offer UtilityUtility. For instance- BTC can be used to pay for goods and services, and some other token can also provide access to discounts or projects on a service.
But there are also some significant disadvantages for investors in cryptocurrencies-
- Narrow Regulations- there are finite regulations in the crypto industry, which means that you don’t have the same shield as you have while investing in a heavily regulated stock market. So, if your account gets hacked, your investment can completely be gone without any recourse. And if the currency you are investing in is a scam, then there is nothing you can do about it. Moreover, unlimited regulation can also decrease the demand for some crypto coins, adding risk to your investment.
- Volatility- the value of cryptocurrencies changes wildly daily. And such significant price swings can be difficult for some investors to digest.