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- Minimum amount – $100
- Term – 1 year
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Pouring money today into cryptocurrencies can pave a path to financial freedom in the future, provided you make the right investment decisions. Although cryptocurrencies like Bitcoin and Ethereum are on everyone’s lips, most people do not consider alternative currencies a reliable asset to pump hard-earned bucks into.
- What is Cryptocurrency?
- What Is The Technology Behind Crypto?
- Why Blockchain?
- Why Cryptocurrencies?
- Why Do Cryptocurrencies Exist?
- How Does Cryptocurrency Get Its Value?
- How to Invest in Cryptocurrency
- Why Invest In Cryptocurrency?
- Things to Consider Before Investing In Cryptocurrencies
Indeed, due to their extreme instability in the market, digital coins present quite a risky investment product, as your chances to get filthy rich are practically the same as your odds to forever lose your capital.
But how can you know what fate has in store for you without trying?
People, who just a decade ago were buying Bitcoin at a fraction of its price, are now zillionaires. In its infancy, Bitcoin was so cheap that you could purchase 1000 Bitcoin units for a single dollar. So, financial happiness starts with clever investment choices. In this article, we will lay out how to invest in cryptocurrency and shed light on whether electronic coins present a good investment instrument.
What is Cryptocurrency?
Cryptocurrency is a digital payment platform that does not rely on banks to verify transactions. It is a peer-to-peer electronic system that allows users to send and receive payments anywhere in the world. Unlike real-world fiat that exists in the form of paper banknotes and metal coins, cryptocurrency is not physical and exists in the form of a piece of computer code that is registered and stored on the blockchain that powers this cryptocurrency.
Bitcoin and Ethereum are the strong locomotives of the cryptocurrency space and the priciest tokens so far. Virtual currencies that emerged after Bitcoin are called altcoins (alternative coins). There are also stablecoins, which market price is tied to the value of some relatively stable assets like EUR, U.S. Dollar, or gold.
What Is The Technology Behind Crypto?
Blockchain technology is a novice and complicated phenomenon. We could investigate it better, but the plethora of intricate terminology and long explanation might make your head combust.
But essentially, the blockchain presents a chain of data blocks where the history of all transactions taking place within the network is registered and distributed. It is a decentralized technology, meaning the entire blockchain software is spread across multiple computing machines.
The blockchain generates a unique code for each crypto token and then splits this code over different random computers, which makes it nearly impossible to compromise the whole blockchain and steal the assets.
For example, the blockchain created 12CB33 code for a crypto unit:
- “12” will be kept on Computer X
- “CB” will be kept on Computer Y
- “33” will be kept on Computer Z
If a cybercriminal intended to hack this code, they would have to hack all three computers to get the entire code. Luckily, the token codes are very lengthy in the real blockchain and distributed across thousands of different machines.
A computer that contains a piece of the token code is called a node, and together, these nodes create the public ledger. The public ledger ensures that all cryptocurrency data is actual and safe. If data changes, every node will verify its records against the data in other nodes. This helps to prevent hacker attacks.
If you want to make legal changes to the data (for example, when you receive tokens from another user), you only need to utilize your cryptographic key, such as a password/pin-code.
The undeniable advantage of blockchain is that you can only add data to code. You cannot erase/delete any data. This ensures that the history of transactions and ownership remains unchanged at all times.
Blockchain cannot be controlled by any government, central bank, or entity. It basically serves as a record of digital payments controlled by the users themselves, not by any central authority.
While cryptocurrencies are not governed by any governmental body (like the Federal Reserve supervises the issuance, value, use, and supply of all U.S. Dollars), they are maintained by the network. The network belongs to the cryptocurrency company that controls all the tokens of the cryptocurrency and manages its supply.
OK, it feels like central governance.
The matter is the cryptocurrency network has no unified location or central server where tokens are kept. There is no single virtual bank.
The blockchain (sometimes called a distributed ledger) processes transactions without the mediation of traditional banks. It means buyers and sellers can transact directly with each other, not letting banking institutions interfere.
Since there is no intermediary between transactions, operations within the blockchain are very cheap, instantaneous, and secure, which are the major reasons behind cryptocurrencies’ allure.
The cryptocurrency got its name because it uses encryption to verify payments. This means that advanced coding is used to store and transfer cryptocurrency data between wallets and open registers. The purpose of encryption is to ensure the security of digital currencies.
Why Do Cryptocurrencies Exist?
Many companies issue their own cryptocurrency to be used to purchase the goods or services of that company. For instance, the Basic Attention Token (BAT) was created to access the ground-breaking Internet browser called Brave, where you will not encounter irritating ads and data-grabbing malware. Top-performing cryptocurrencies can then be listed on popular cryptographic exchanges where you can buy, sell, or trade tokens with other people – this is pretty similar to stock trading.
How Does Cryptocurrency Get Its Value?
Before you begin to invest in cryptocurrency, you need to understand what determines its value.
For most investment elements, the value will be defined by the market situation. For instance, in the real estate sector, the value of a certain house will be determined by its age, size, location, exposure to natural disasters, and dozens of other factors.
In the stock market, the value of a company’s stocks will be dictated by the current performance of that company, the professionalism of its key employees, the contracts it signs, etc. If that company pays out lucrative dividends, it is obvious that its stocks will be expensive, too.
Cryptocurrency value also reflects market trends but in a slightly different way. There is no real-world asset that can be impacted by the local economy. And the value is not linked to corporate revenues. The price of a cryptocurrency token depends on whether or not people will buy and sell cryptocurrency units.
You got it right.
The value of any cryptocurrency is determined by consumers’ desire to purchase that asset. If lots of people will buy the coin, its price will go up. If people stop buying it and start selling their tokens out, then its price will drop.
This is, perhaps, the strangest trait of cryptocurrencies. But the investors that buy and sell tokens are far away from being morons. Indeed, trading with volatile assets potentially promises seven-figure gains if done smartly and rationally. A volatile asset is a financial product that can experience both an extreme rise and a dramatic fall in price.
Crude oil is one of the most sensitive commodities in the world. It may pose a significant investment risk for a novice investor, but it can also yield fat returns to those sharks of Wall Street who take their time to study the asset’s market data and predict the next trend.
Similarly, virtual currencies can deliver huge returns if an investor feels the pulse of the market and knows when the next move will take place.
How to Invest in Cryptocurrency
Cryptocurrencies are not a universally available financial product that is offered by every mediocre bank. They are still considered something exotic and untried in the space of financial institutions. Since crypto flows are virtually unregulated, most financial organizations refuse to buy or sell coins. However, you can easily and legally invest in cryptocurrencies.
Getting Started with Investing In Cryptocurrency
Before you put your personal finance on the line, you need to decide how much of your budget you can safely allocate to investing in cryptocurrency. Virtual coins are notoriously known for their unpredictable volatility. For many years, Bitcoin has been literally priceless, but its value reached the historical $64,000 per unit in a matter of a few months before it began to stabilize back.
It is hard to stay rational and keep your greed under control when you see the advances the cryptocurrencies as Bitcoin and Ethereum have shown during recent years.
Nevertheless, try to invest in crypto as much as you could safely afford to lose. The exact sum is up to you, but make sure you will not suffer financially or emotionally if your personal investments burn one unhappy day.
Investing in cryptocurrencies is not the same as investing in commodities like metal or oil. Interest or dividends are not paid here. To the question of whether cryptocurrency is a good investment, it entirely depends on its potential surge in price in the future – and on the assumption that cryptos will stay there for a while.
Initially, cryptocurrencies were not supposed to be investment products. They were created as the mediums of exchange with the aim to weaken the prevalence of sovereign fiats like the U.S. Dollar, Euro, or Yen. It was hoped that cryptos would eventually become a more efficient means of payment, especially online. This is because the crypto’s value is determined strictly by people themselves and not by government manipulation, which is usually the case with national currencies.
While cryptocurrencies are witnessing an increase in appreciation, the sheer majority of merchants are reluctant to accept tokens as a valid payment mode. This suggests that virtual coins have failed to become a full-fledged medium of exchange, and the largest portion of transactions occurs between individuals only.
In short, the current uses and perspectives of cryptocurrencies are still vague.
Choose Your Cryptocurrency
In this instance, you may develop a strong headache, as cryptocurrencies are veritably numerous. Hundreds of options, with the new coins appearing every single day. Some of them stay and thrive while others go and get forlorn. And remember: the whole concept of cryptocurrencies appeared only a dozen years ago.
Bitcoin holds the leadership in the world of virtual tokens. It is the oldest and priciest coin as of today. It is also the asset that drives the most attention and investments from willing investors.
Ethereum was the second cryptocurrency to appear. Steadily developing and expensive, Ethereum is believed by some experts to dethrone Bitcoin from its dominant position one day. There are throngs of other well-established coins that manage to maintain their worthiness, including Litecoin, Ripple, DASH, Tether, etc.
Since Bitcoin is the pioneer in the cryptocurrency world and occupies the dominant position in the marketplace, it seems to be the most reliable asset to consider for investment. However, you do not need to put all eggs into one basket. Try to maximally diversify your crypto investment portfolio and buy several different coins because, while one crypto may be performing very well, another may start depreciating. That way, you will mitigate your risks.
You must realize that most cryptocurrencies just come and go. Many of them have been flatlining since the launch, while others have already disappeared. Any investments you make today could translate into losses tomorrow. And given the volatility of cryptocurrencies, your investment may melt completely in a matter of a few days or even hours.
Find a Secure Platform to Buy Cryptocurrencies
The biggest downfall of investing in virtual currency is that you cannot buy them from a traditional bank or a credit company. Banks generally do not offer them, neither do investment brokerage firms.
At this stage, you could start thinking that your options to acquire electronic coins are limited, but in reality, things are always different than we may deem.
There are lots of ways to invest in cryptocurrency and become a crypto investor.
To begin with, there are plenty of dedicated cryptocurrency exchanges on the Internet where you can buy and sell both deep-rooted cryptocurrencies like Bitcoin, Ethereum, or Ripple as surely as emerging coins.
The world’s largest crypto exchanges are Coinbase, Binance, and Kraken. Each of them offers an extensive selection of virtual assets that can be bought for fiat, including debit/credit cards and wire transfers.
Before you can invest in cryptocurrency through one of these platforms, you will be required to complete a verification procedure and, depending on the size of your purchase, prove a source of income.
Online cryptocurrency exchanges will also automatically generate a wallet for your account where you can store and manage your possessions. However, virtual exchanges are the most insecure way to hold your savings, especially if you buy tokens in large amounts. Consider storing your cryptocurrency assets in a more secure place.
Cryptocurrency exchanges are for-profit platforms, so expect to pay fees for every transaction, including buying and selling tokens.
Choise.com: A Multi-Faceted Crypto App
Choise.com brings the whole world of cryptocurrencies to your fingertips. A free yet sophisticated mobile app, Choise.com is designed to address all your cryptocurrency-related needs.
Far more than a crypto wallet, Choise.com allows you to buy the most popular cryptos with your debit card and trade over 200 crypto pairs.
Choise.com, the ultimately secure solution, ensures all your assets remain intact, no matter how many tokens you hold in your wallet.
The app’s dashboard allows you to perform a host of operations with the assets in your inventory. You can buy and sell, send and spend, cash out and take loans using your crypto funds as collateral.
Alternatively, you can buy some top-performing coins like BTC or ETH and put them in a professionally managed portfolio to grow your virtual capital and capitalize on the price jumps. The in-built AI-powered market prediction feature will help you stay on top of current rates and make data-driven investment decisions.
If you still hesitate to start investing in cryptocurrencies, you can spend your tokens immediately after purchasing, thanks to the Crypterium Visa Card. It is essentially a virtual or plastic (or both) Visa card that can be topped up from your Choise.com wallet. This enables you to spend tokens like conventional money – you can pay with crypto everywhere, online and offline, while the merchants will receive the payment in fiat!
Choise.com is a convenient way not only to buy, sell, and hold cryptocurrencies but to drive multiple advantages from your cryptocurrency ownership.
Store Your Cryptocurrency
As it was already mentioned, you can store your tokens in the place where you bought them. Moreover, in the case of Choise.com, all your assets will be insured by the company’s strategic partners, so you do not have to worry about the safety of your virtual funds – it is guaranteed.
Your options where to store tokens are extremely wide – as the market is brimming with various solutions to choose from. Generally speaking, all crypto storage tools are divided into two big categories: hot wallets (mobile, desktop, web-based software programs) and cold wallets (hardware devices with a USB cable to connect to a PC).
A cryptocurrency wallet stores the private and public keys that let you get connected to the coin’s blockchain, where the codes of your tokens reside. The wallets themselves do not store your personal coins but provide access to the distributed ledger through the use of your public and private keys. Along with serving as a gateway to the blockchain, a crypto wallet also records the transactions and sends them to the network. The wallet also displays your current balance.
Types of cryptocurrency wallets:
- Desktop wallet is a program that you install on your PC. Since the private keys are kept on your own computer, they are harder to hack than online products.
- Web-based wallet is found on the cloud that you access from any computer. They are very intuitive, but your private key is kept online and secured by a third party.
- Mobile wallet is an app you download on your smartphone or tablet. Such products generally allow you to store multiple coins and offer additional functionality to help you make the most of your tokens.
- Hardware wallet stores your private key on a physical gadget, such as a USB device. These solutions are very secure because your private key is stored offline and could hardly be accessed by an unauthorized party. Still, hardware wallets are often very expensive.
It is entirely the matter of preference where you keep your virtual capital, try to reach the equilibrium between convenience and security.
Protect Your Investments
After purchasing coins, you need to take measures to safeguard your investments. If you opt for anything, but cold storage, consider using a VPN when you manage your crypto online to encrypt and secure your transactions properly.
A Virtual Private Network brings an extra layer of protection to your Internet connection. When all the data is effectively encrypted, no one would be able to see your online transfers and steal the information, especially if you are a big crypto investor.
No matter which coin you decide to buy, sell, or store, keep in mind that cryptocurrencies can both spike and crash in price very quickly. Since digital coins are not traditional investment instruments and cannot be supervised by any authority, it is hard to predict their next move. So when you decide to invest in cryptocurrencies, remember the simple truth: what goes up may go down as well.
Why Invest In Cryptocurrency?
Investing in cryptocurrencies is a smart way to diversify your portfolio as major coins like Bitcoin and Ethereum have proved to have no strong price correlation with global stock markets. If you think that cryptocurrency will be widely adopted, then it, probably, makes sense for you to purchase some tokens to add some diversification to your portfolio.
If investing in cryptocurrencies seems too risky to you, you may consider other ways to profit from the growth of cryptocurrencies. For instance, you can buy stocks of reputable digital companies like Coinbase or PayPal, which makes it easy to trade cryptocurrency futures. While investing in these companies can be profitable, they do not have the same growth potential as direct investment in cryptocurrency.
Things to Consider Before Investing In Cryptocurrencies
There is a shortlist of potential pitfalls behind investing in cryptocurrencies:
- Cryptocurrencies are volatile digital assets, and they lack stability and governmental control.
- Cryptocurrencies are exposed to manipulations from celebrities and social media. Hype or scandals around this or that coin can be created deliberately to influence people’s investment decisions.
- It is hard to predict the crypto’s next surge/fall as the demand is fully dictated by users themselves, not by the market factors.
- By most jurisdictions, cryptocurrency is considered an asset like a stock or real estate property. When you sell tokens and make some profit, in most countries, you will have to pay a capital gain tax on what you have earned.
- No one could guarantee that the crypto project you are investing in will be successful. There is fierce competition between thousands of blockchain projects, and scam projects are also ubiquitous. Only a small portion of emerging cryptocurrency startups will eventually stay and thrive.
- Regulators can illegalize the entire crypto industry at any moment, especially if governments begin to seriously view cryptocurrencies as a threat to the economy rather than just innovative technology.
A cryptocurrency is a digital asset that resides within the blockchain technology that assigns ownership of each token. The value of each coin is based on the demand, while units of a cryptocurrency possess no intrinsic value. Cryptocurrency is a high-risk investment product because it is an unstable asset, and investors should buy and sell rationally. It is easy to start investing in cryptocurrency. Just set an account on an online cryptocurrency exchange or dedicated multi-functional wallet, purchase tokens for fiat, and hold them long-term or short-term while waiting for the right moment to come.