How to Invest in Cryptocurrency

A Background On Cryptocurrencies

As mentioned above, the first cryptocurrency to be created, more than 10 years ago now, was Bitcoin. This cryptocurrency still remains the largest, and the most popular, and is one of the best performing investable assets in the cryptocurrency space, if not in the entire world. 

Bitocion began just after the 2008 financial crisis and was created to be a new and alternative financial system that did not require the banks tio run it after they had recently failed in a housing collapse that affected the entire globe. 

Bitcoin has grown and evolved in these last ten or eleven years and has become much more of an asset than it has a currency. In fact, Bitcoin has often been likened to gold and has more than once been called digital gold. The way in which Bitocin reacts in its market, and its ability to increase in value quite rapidly, is part of the reason it is seen as more of an asset today than a currency. 

That being said, Bitcoin is still used to transfer value, but there has also been a growth in alternative cryptocurrencies — also called altcoin — that have birthed their own markets and presented their own opportunities for investors. Many of these altcoin, also similar in technology to Bitcoin, offer different potential and different uses. 

There are a number of other altcoin which are trying to be stores of value and are great for investors to try and make money off of, and then there are other cryptocurrencies that are more similar to money — but even these have markets that make them quite investible. 

Is It Too Late To Invest In Cryptocurrencies In 2020?

Many people would have become aware of Bitcoin, and then the rest of the cryptocurrency market, when the major coin managed to reach its all time high of $20,000 in December of 2017. Since then, the coin has struggled to get back to such heights and has spent more time below $10,000 in these past two and a bit years. 

This leads many people wondering if they have missed the boat on cryptocurrencies and if there is any point left in investing seeing as that spike is over. Well, the short answer is that it is not too late to invest in cryptocurrencies in 2020, and there are a number of reasons. 

The cryptocurrency market is still very young, and new, it is still growing and looking to mature and find its feet. What this means for investors in 2020 is that the $20,000 spike seen in 2017 is probably only the first of its kind with plenty more to come. 

This is further backed up by the fact that previous spikes in the early years of Bitcoin were also viewed in hindsight by investors as the chance they missed. For example, in 2013, the price of Bitocin sat at around $13 dollars, but later that year it reached as high as $220. This is a massive increase for any asset in the space of a year, but many who were not invested thought they had missed out. 

It is very likely that, in a number of years time, people will look at the $20,000 mark for the price of Bitcoin and wish that they had invested in it when it was at such a low price. Bitcoin’s whole design is made to be deflationary, and to become scarce and thus drive demand which drives price. This has been happening for 10 years, and is expected to keep happening at an exponential rate going forward. 

How To Invest In Cryptocurrency: #1 Get A Wallet, Join An Exchange

The most popular way to make money by investing in cryptocurrency is to of course get your hands on Bitcoin or any other such cryptocurrency. And, in order to get Bitcoin, you need a place to store the digital asset, which is most often in a wallet. 

A Bitcoin wallet is a digital storage for your digital coins and can either be a software wallet, or a hardware wallet with a software wallet being a more viable solution to keep you investing in Bitcoin and other cryptocurrencies. A software walet is often linked to a bank account so you can use your cash to buy more Bitocin, and it is then often also linked to a Bitcoin exchange where you can trade and exchange your cryptocurrencies. 

A Bitcoin wallet can also be seen as your bank account for your cryptocurrencies and thus it is important to get one that suits you, and has the functionality that you need. Having a wallet that is linked to an exchange, or trading service, as well as one that is linked to your bank account offers the most ease in investing in cryptocurrency. 

Of course, choosing an exchange is important, but figureing out where to invest in cryptocurrency can be rather difficult as there is a lot to consider including safety, security, offerings, and even the cryptocurrencies that you can choose from. There are a number of different options you will want to invest in but not many exchanges allow you to buy every available option, and you will also have to consider the fees for buying and selling on exchanges which is a big part of the consideration when looking at simply buying Bitcoin as part of your investment strategy. 

How To Invest In Cryptocurrency: #2 Using Traditional Brokers

Because cryptocurrencies have grown in their popularity so much in the past few years, they have become more than just a niche investment and have expanded to even be a part of major investment houses and funds — there is even the Greyscale Funds which is a digital currency asset manager that allows major institutions to invest in Bitcoin. 

However, for more ways to invest in cryptocurrencies which offer a little more regulation and traditional control that many may not see in the general cryptocurrency exchanges, there are the traditional brokers. 

There are a number of emerging traditional brokers and financial institutions that are now allowing investors to buy Bitcoin, such as Robinhood, Circle, Square and Revolut. You will also notice that many of these traditional financial institutions are a lot more technological advanced and focused on fintech which encompass cryptocurrencies. 

However, buying cryptocurrencies through these means might be even simpler than through a crypto exchange as the fiat link in these apps are already present, and some accept credit card, but they are often more expensive and very limited in what can and cannot be done within them. 

How To Invest In Cryptocurrency: #3 Cryptocurrency Trading

While the most simple way of investing in Bitcoin is buying it and holding on to it — and this requires either using an exchange or a traditional broker — there are a lot of other ways to get your hands on cryptocurrency to invest in it, such as trading. 

Trading cryptocurrencies allows you to both invest, and hold, cryptocurrency, but to also have a lot more control on your profits and potential to make money. Cryptocurrency is renowned for its volatility, so, while it has been likened to gold which is great to just hold onto, it is even better to have the chance to quickly buy and sell cryptocurrency through trading when there is a chance to profit. 

To add to this, there are a number of cryptocurrency trading platforms which offer wallet services, the potential to link to a bank account, and then the option to easily trade cryptocurrencies in order to invest in. What is also important to consider is that there are cryptocurrency trading platforms that offer low fees — Cybrox Pros is one such platform known to have some of the lowest fees, as well as other assets to invest in  — as well as the functionality to have a lot more freedom in investing.

Cryptocurrency trading platforms also offer you a lot more options when it comes to investing in different coins as it is quite easy to trade one cryptocurrency for another. So, if you want to invest and profit in a certain cryptocurrency that you can see is on the rise, you have the opportunity to switch from Litecoin to Ethereum, for example. This is a lot easier than on an exchange where you would have to sell your Litecoin for cash — get charged a fee — and then buy Ethereum, also getting charged a fee. 

Risk Management For Cryptocurrency Trading

Part of the reason that investing in cryptocurrency has become so enticing for new investors as well as traditional investors is because of the volatility. The volatility in cryptocurrency means that it becomes a high reward investment, but that reward often comes with high risks as well. 

However, risk is not absolute, and it often needs to be considered how risks can be managed and mitigated. If this is done effectively then suddenly the reward becomes that much more attainable. Managing risks does however mean creating a strategy.

This risk management strategization really comes into play when investing in cryptocurrencies and trading them too. There are a few strategies for those who are simply happy to buy and hold, but for traders looking to maximize profits, there are better ways to manage the risks.

Some well known, and effective risk management strategies include position sizing, which can then be broken down into an option like enter amount vs risk amount,

Position sizing dictates how many coins cryptocurrency a trader is willing to buy. The probability of realizing great profits in crypto trading tempts traders to invest 30 percent, 50 percent or even 100 percent of their trading capital. However, this is a disruptive move that puts you at serious financial risk. The golden rule is: never put all your eggs in one basket. 

Enter Amount vs Risk Amount is a position sizing approach which considers two different amounts. The first involves money you are willing to invest in every single deal. It is advised traders  look at this amount as the size of each new order they take, regardless of its type. The second involves money at risk, i.e. the money that you stand to lose in case the trading fails.

Getting this balance right means you can take on risks that are not going to hurt you too badly. 

Then there is the risk reward ratio that compares the actual level of risk with the potential returns. In trading, the riskier a position, the more profitable it can get. Understanding the risk /reward ratio enables you to know when to enter a trade and when it is unprofitable. 

Top Expert Tips 

As it can be seen, there are a number of different ways to invest in cryptocurrencies, but these different methods also come with some hints and tips that can make them a lot better and more profitable. A lot of these tips do however have to do with understanding the cryptocurrency market.

Tip #1 Do Your Homework

Because there are so many different options when it comes to trading and investing in cryptocurrencies, it is important to do your research on the different coins — including the most famous one: Bitcoin. A lot of people will think they know all there is about Bitcoin before investing, but becoming a bitcoin investor is a very different thing. 

The Bitcoin market is very volatile and reactive, and if you are going to invest in it, it is worth understanding what makes it tick. Not everyone has an answer for what Bitcoin does and why it moves when it does, but with some research you can start to understand a little more what impacts it. 

Tip #2 Don’t Invest On Hype

Another part of the cryptocurrency market is its hype. Because it is still very much nascent and new, there is a lot of uncertainty. But that uncertainty can go both ways and when bitcoin, or other cryptocurrencies are rising, there can be a lot of hype and excitement about how far it will climb. 

But, investing on hype alone is dangerous because with the volatility it can move both ways. Often when Bitcoin has climbed to new heights, it has quickly fallen after that and that has left a lot of hype investors in a lot of trouble. 

Tip #3 Know What You Are Willing To Lose

As mentioned, there is a lot of risk involved in the investing and trading of cryptocurrency — but that can be mitigated with a good strategy But part of your strategy has to do with just how much money you’re willing to use. 

If taking risk makes you nervous, crypto will make you nervous if you are not prepared. There are many other investment opportunities out there that aren’t as volatile. However, if you’re a risk-taker, invest only a portion you’re willing to lose, in case things go down.

Top Cryptocurrencies To Invest In 

Bitcoin 

Of course, Bitcoin is one of the first, and often the last, cryptocurrency that investors will come to. It is the oldest, it has the strongest network, and is the most popular. Bitcoin has also become more of a store of value than a currency like it was first designed to be and as things go on, it becomes a better investment.

In fact, Bitcoin over the last 10 years has been crowned the best investment in the entire world with the highest returns. This is one of the reasons why it is so popular, but also, despite the volatility, it is one of the more stable cryptocurrencies. 

Litecoin

Litecoin is also one of the older cryptcureencies and has been called the ‘Silver to Bitcoin’s Gold’ This means it is still a good investment, as is silver, but the coin has been more likened to a usable currency as it focuses on being fast with its transaction times.

Ethereum

As a cryptocurrency Ethereum is a very interesting one as it is seen as the second generation of blockchains and cryptocurrency because it encompasses smart contracts and is part of the genus of programmable blockchains. 

Because this space is still evolving, there is a big possibility that Ethereum will become very important, and very valuable, as the growth of this technology keeps moving forward. 

Ripple

Ripple, or as the token is known as, XRP, is an interesting investment opportunity as it is entirely run by its parent company — Ripple. This coin is being marketed to banks and other financial institutions to help with interbank transfers and the success of the coin rests on the success of the company.

EOS

EOS is another form of programmable blockchains and is often seen as the more advanced version of Ethereum which was the original. EOS has a lot of potential as a technology and again, if it can find a good use case, the value of the cryptocurrency will most likely balloon with it. 

Top Investing Tip

Of course, investing in cryptocurrency is one thing, but it is only the basic way to try and make money off of the space. Because crypto is so volatile, there are other more profitable ways to enter into the space and make money. Of course, trading is such a method that is very popular and a good way to invest in the market for profitability, but you can also start leverage trading. 

Leverage trading is a fairly simple concept, it is when instead of putting up the full market value of an asset such as Bitcoin, the trader operates on a margin, such as  – 25:1 leverage (or 25x). This means that  for every dollar the trader stakes in equity, they can trade $25.

To understand it better, it means that if there is a 25x leverage on offer, the trader can multiply their trades 25x more than the money they have to trade. This instantly leads to multiples of profitability on successful trades. 

Conclusion

The world of cryptocurrency investment and cryptocurrency investing is very broad, and it is very exciting. This space has evolved to allow almost anyone the chance to make money off the new and fast moving space. It is not hard to get your hands on any of the multiple coins around to invest in, and once you own cryptocurrency, there is every chance to make more money and profit with a few trading tricks. 

Trading currency remains one of the best and most profitable investment strategies, because it also allows for additional options like leverage trading. Of course, to get the best out of this, it is important to find a platform that best suits you. Cybrox Pros is a platform that has won awards for its usability and trading tools, but it also offers bank-grade security and a brillant user interface, as well as high levels of leverage trading. To get started in under 10 minutes, sign up here.