Cryptocurrency Investment
Cryptocurrencies started as a fun investment but have taken the world by storm. Cryptocurrency has been around for over decade now. It has already received global recognition and acceptance. However, Bitcoin and other cryptocurrencies see wild fluctuations in price. Today knowing Bitcoin and talking about it in social circles is a fashion. There are big risks and big opportunities in the game. If you plan to get into the jargon of investing in cryptocurrency, you are at the right place and continue reading. If you wish to know, whether cryptocurrency is a good or a bad investment, then this is for you.
With the price of Bitcoin going above USD68,000 this year, cryptocurrencies have become hype. It is one of the highest appreciating assets.
For some, cryptocurrency is the money of the future. For others, it is an extremely risky asset and a common person like you and me should remain away from it. Cryptocurrency has become popular and the Internet is also one of the reasons for its popularity.
Cryptocurrency Investment: Things to Know
If your mind tinkles and you think, is investing in cryptocurrency safe with your hard-earned money, then this article is for you. But you should have a well-defined cryptocurrency investment strategy.
I will suggest to you, what I did before my cryptocurrency investment. Make a list of questions to ask before investing in cryptocurrencies and get their answers.
If you have a strong conviction in cryptocurrencies, have the guts to take a calculated risk, and consider that cryptocurrencies will outperform in the future also, you should learn about crypto trading and invest in Bitcoin, Ethereum, or other cryptocurrencies.
Investors who invested early and waited patiently have got better yields as compared to others. People who adopted Bitcoin early have seen their investments grow multi-fold.
More and more people today ask, is investing in cryptocurrency safe? Not only this, they have lots of questions to ask before investing in cryptocurrency. I suggest you ask as many questions as you can and get their answers before you get into the world of cryptocurrency.
Internet is the place for you where to learn about cryptocurrency. I suggest read cryptocurrency blogs to learn cryptocurrency investment if you are a first-timer. Questions to ask before investing in cryptocurrency will be answered here. You should get answers to all secrets to know before you invest in cryptocurrencies.
Cryptocurrencies are geography agnostic. They can be sold or bought, 24X7, all through the year. You need an account on any of the crypto exchanges and there you go! Cryptocurrencies led by Bitcoin have proved that they cannot be ignored.
Imagine the price of Bitcoin when it started by its transaction, where a pizza was sold for 10,000BTC.
In the year 2017, it rallied from USD1,000 to approximately USD20,000. Later it came down to USD3,500 in 2019. Then, again in 2021, it peaked close to USD69,000. So, with cryptocurrencies, volatility is the name of the game. You will find lots of stories where knowing Bitcoin investors fared from Bentley buying to losing all in their Bitcoin or other cryptocurrency investments.
No expert can foretell the price of Bitcoin for the future. Experts speculate to be around USD100,000 to USD 250,000 for the immediate future. But these are all guesses. What the future holds, we do not know.
Bitcoin and other cryptocurrencies have come a long way since 2009 when it started. It started as a tech buzzword among the techies. Today, it has become a crises asset for safeguarding investments in various countries with high inflation rates like Nigeria, Turkey, and Venezuela to name a few. The growth and adoption of Bitcoin have a tremendous effect on the price. Today, we see a mere tweet from the industry can take the price up or down. So, knowing Bitcoin is important.
Companies like Tesla, Facebook, Visa, Mastercard, Paypal, JP Morgan are associated with cryptocurrencies in some way or the other. Today, institutional investors, hedge fund managers, and family offices have shown interest in cryptocurrencies.
Timing to invest in bitcoin and other cryptocurrencies hold the key. There can be a hoard of opportunities, but you need to find them out and make use of them.
There are cryptocurrency exchanges and crypto trading platforms where you can start your crypto journey. For a new and non-technical person, the process is still complex as compared to acquiring a traditional asset or a currency.
Before you begin your journey into the world of cryptocurrencies, you should have a digital wallet to store your cryptocurrency. Cryptocurrency exchanges allow people to buy and sell crypto. These exchanges allow you to deal in currencies like Bitcoin and Ethereum with a debit card. Once you have Bitcoin or Ethereum you can use them to buy other altcoins like Litecoin, Dogecoin, and many other cryptocurrencies. As a rule, you cannot buy altcoins with fiat (or traditional) currency.
I am not advertising digital wallets, but some of the best known are Coinbase, Ledger Nano, Trezor, Mycelium, Robinhood. There are many more.
For details on the digital wallets, type of digital wallets, please read the following article:
Digital Wallet – Hot and Cold Storage
One of the use cases of cryptocurrencies, which can also take it to new heights is Defi or Decentralised Finance. For more details on Defi, please read the following article.
DeFi – Beginner’s Guide
For new investors, I wish to write that you can invest any amount in cryptocurrency. It can be as low as USD1 to buy crypto. Initial investors should stick to the top cryptocurrencies like Bitcoin and Ethereum only. You should invest with a horizon of a minimum of 3 to 5 years. Your allocation for cryptocurrency should depend on your risk appetite.
There is another term quite often used in the world of cryptocurrencies – FOMO. It is “Fear Of Missing Out”. Most of the new investors flock around crypto and invest when it is moving up due to FOMO.
I have been discussing crypto and technology associated with crypto for a long. The underlying technology behind crypto is blockchain.
Before getting into the interesting world of cryptocurrency, you should know the following:
- What is cryptocurrency?
- Different types of cryptocurrency
- Regulations around cryptocurrency
- How can you buy and sell cryptocurrency?
- How other investors are dealing with cryptocurrency?
What is cryptocurrency?
Researching cryptocurrencies before investing in cryptocurrencies may be difficult for a new person. Well, cryptocurrency is digital money. Its name comes from cryptography and currency. It has no physical relevance. Crypto is not tied to any physical asset. This is also one of the reasons why its price fluctuates so much. There are instances when the price of Bitcoin fluctuates 5-10% in a day. Cryptocurrencies are not like real estate, physical assets, stocks bonds, or precious metals. They have no use outside of possession.
People call Bitcoin to be Digital Gold, because of its price and limited availability which will make it scarce in the long run. But, gold has other utility apart from it being an asset. Bitcoin and other cryptocurrencies can have a utility due to some other underlying utility. But otherwise, their utility is minuscule.
Currencies are generally controlled by a central authority. In the case of cryptocurrency, it is decentralized. It cannot be controlled by anyone person or authority or a country.
There are no chances of double spending in cryptocurrency.
The underlying technology behind Bitcoin, which was the first cryptocurrency, is blockchain technology. Blockchain technology solves both the problems of controlling the currency by a decentralized authority and double-spending. Blockchain technology uses encryption called SHA-256 to solve these issues.
As mentioned above, cryptocurrency uses blockchain technology which works on the principles of:
Decentralization, Peer-to-Peer networking, and cryptography. Hence, these all become intrinsic features of cryptocurrency.
Different Types of Cryptocurrencies
There are different cryptocurrencies called coins and tokens. As of today, there are close to 3000 cryptocurrencies developed in the market. Bitcoin is the first cryptocurrency that has been acclaimed and recognized. Once bitcoin became popular alternatives of Bitcoin were tried to be developed. These alternative coins are called ALT Coins. For more details on this topic, please refer to:
Altcoin Basics
Ethereum, Litecoin Dogecoin, Ripple are the most famous altcoins from the list of cryptocurrencies created.
As a new investor, I will suggest you invest only in the 1st two popular cryptocurrencies. These are Bitcoin and Ethereum.
Cryptocurrency Regulations
As I mentioned, cryptocurrencies are geography agnostics, decentralized, and not governed by any one country. Since it is decentralized and not governed, most of the governments across the world are apprehensive about it. Most of the governments, specifically China and India promote the underlying technology behind cryptocurrency, but these countries and their governments have been unfriendly towards cryptocurrency.
In the case of China, the Chinese government is against the use and transaction of Bitcoin and other cryptocurrencies, but they are creating their own digital yuan.
In fact, there are lots of countries that plan to come up with their own cryptocurrencies. But these cryptocurrencies or Central Bank Digital Currencies (CBDC), what the governments like to call them, will be centralized and controlled by the respective government agencies.
To sum up, the governments are apprehensive about Bitcoin and other cryptocurrencies in the present form because they cannot control them and think of them as a potential threat to the present monetary system. However, they are interested in creating cryptocurrencies, which they prefer to call digital currency, which can be controlled by them. Apart from this, all countries recognize the blockchain technology which is behind cryptocurrencies.
Malta and Switzerland have been at the forefront in creating regulations and statutes for crypto. Lots of other countries are following suit in recognizing the use of Bitcoin and making the Bitcoin transactions legitimate.
If you are new to the cryptocurrency world, it is important for you to know that the regulatory climate around cryptocurrency is in a constant state of flux. Some details could even change tomorrow. Few of the important and largest decisions are still to come.
How much should I invest in Bitcoin or any other cryptocurrency?
Your investment in cryptocurrency should depend on your risk appetite. You should invest only to the extent you can take a risk for. Points to know before you invest in crypto and how to build a cryptocurrency portfolio depend on your research in the subject and your investment horizon. You should also keep in mind what to do when cryptocurrencies crash?
Ideally, it is always said to invest only 2% of your total investments in cryptocurrencies. Secondly, for new investors, it is always better to invest in the top currencies like Bitcoin, Ethereum, etc. Never put all your eggs in one box, as it increases the risk. 2% is enough to take the risk.
How can you go in for cryptocurrency investment in your country?
As I mentioned, you should have a wallet to store your currency and look for crypto exchange, before you go in for cryptocurrency investment.
There are lots of international and local crypto exchanges in all countries. You will be asked to do KYC when you register with any of the crypto exchanges.