- Marco Fisher
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- Published: October 10, 2018
- Modified: January 13, 2021
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In this article, we’re going to show you how to invest in cryptocurrency, your possibilities for earning a living, and how to stay safe while doing it.
Not only is it pretty easy, it’s also fun and potentially very rewarding!
But, Did I Miss My Opportunity?
So many people looking at investing in cryptocurrency and digital coins may think that they missed their opportunity to make money. True, Bitcoin had a massive spike and then came down, but who’s to say how many more peaks it has ahead of it?
Also, Bitcoin is just one of hundreds of cryptocurrencies out there! Perhaps you’ve heard of Ethereum, Litecoin and Ripple? These are just a few examples of the most popular of the cryptocurrencies on the market and you’d be wise to keep an eye on them because they’re sure to go places!
Many cryptocurrencies are built by companies or individuals who are also building and improving on the blockchain technology Bitcoin started with back in 2009.
This means that there are most likely ‘undiscovered’ cryptocurrencies with excellent potential to outperform Ethereum, Ripple, Litecoin and maybe even Bitcoin in the future!
Despite a lot of the negative attitudes towards cryptocurrencies (often by frightened governments and established financial establishments), they have changed how financial markets and technology can develop together in the future.
This is why so many investors, while they may be wary of its buzzing trend and volatility, are still excited for the future of cryptocurrency.
So, did you miss your opportunity to invest in cryptocurrency and make money with veteran coins like Bitcoin and Litecoin? Absolutely not!
So, Should I Get Started Right Away?
By using cryptography and blockchain technology, cryptocurrency has changed how we see digital security, decentralized systems and information ownership.
As exciting as it is to just take chances on different cryptocurrencies and cross your fingers hoping for the best, you will get the most profit out of your investment if you put a little bit of leg work and learn how to invest wisely.
Not to worry, we’ve got you covered.
How to Invest in Cryptocurrency: An Overview for Getting Started
Here are the steps you’ll go through when looking at how to invest in cryptocurrency:
Look over the history of the cryptocurrency you’re considering to invest in: Who started it, when, and how was it created?
Read over white paper reports on the specific currency as well
Study the price history and fluctuations to determine trends, or how the cryptocurrency seems to be doing overall
Always remember to diversify your investments (you shouldn’t put 100% of your available funds into one currency)
Begin with more common and trustworthy coins, such as: Bitcoin, Litecoin, Ethereum, and Ripple
Set up a cryptocurrency wallet for any currency you want to invest in
Select an exchange method where you will purchase your coins. There are three options: a trading platform, direct trading, or a cryptocurrency broker
Choose your overall strategy: long-term or short-term investing
We’re now going to look at every point in detail so you’ll have a step-by-step guide of what to do.
How to Research Cryptocurrencies to Invest In
History
Look into who created the cryptocurrency:
- Is it a hotshot individual who thinks he or she developed the next breakthrough in blockchain technology
- Is it a group of people who are geeking out over how much fun it is to develop their own cryptocurrency?
- Is it a company who wants to use a cryptocurrency as another option for their investors?
Be thorough at this stage to make sure that what you are looking at is reputable and reliable. Find their LinkedIn page to check credentials if you feel like that’s necessary ! Part of learning how to invest in cryptocurrency is knowing who is behind it and if they have what it takes to earn your trust.
White Paper Reports
All good and reputable cryptocurrencies will have a white paper report laying out what their cryptocurrency is, its purpose, strategy and goals. In other words, it is a business plan. Make sure a cryptocurrency you are interested in has published its white paper report, and more importantly, READ IT CAREFULLY.
In their report, they should have a clear purpose, a defined strategy and tangible goals they want to reach by a certain date.
Why?
Because that gives the company credibility, legitimacy and, most importantly, accountability to its buyers. It also can give you a better idea of what to expect if you invest in one cryptocurrency as opposed to another.
If this white paper report is lacking or doesn’t look professional to you, then don’t bother investing your time or energy into the cryptocurrency.
Cryptocurrency Price History
Once you have verified that you have found a cryptocurrency that you want to invest in, look at its price history. Cryptocurrency price histories and stock prices seem to follow a similar pattern of market trends.
This doesn’t mean that prices will rise and fall at the same time, but rather that you can apply stock investment strategies to cryptocurrency price markers.
How can this help you? Cryptocurrency price cycles do rise and fall at a faster rate and more dramatically compared to stock markets. But seeing a cryptocurrency’s price history can give you an insight into how it is performing and if it is showing signs of a possible increase or decrease in value.
And so, by following these steps, you can make educated decisions about when to buy (or sell) a cryptocurrency.
Tips from the Pros on Investing in Cryptocurrency: Learn from the Best
Diversify, Diversify, Diversify
Any experienced investor will tell you to “diversify your portfolio”, and not buy into just one stock or venture. Why? Well, if the stock or venture you put all of your money into falls in value or fails, you’ve just lost all of your money!
For that reason, most savvy investors will put smaller amounts of their investment money into different stocks, bonds and ventures. That way, even if one investment falls, the others can still succeed enough for you to grow your portfolio.
The same rule applies for investing in cryptocurrency: diversification is key!
Imagine if you invested money into Bitcoin when it was at its highest value of $20,000 in December 2017. It has steadily dropped to $6,000 now, so you would’ve lost at around 70% of your initial investment.
But had you invested in Bitcoin, Ethereum, Ripple, Litecoin and maybe a few other cryptocurrencies, the loss from Bitcoin could be balanced by the possible gains made from the others.
By spreading the risk around to other cryptocurrencies, you are ultimately reducing the risk of losing all of your investment in one go.
So make sure you have a good spread of carefully selected cryptocurrencies in your investment portfolio!
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Cryptocurrencies to Start Your Investing Adventures With
If you are just learning how to invest in cryptocurrency, it is recommended that you get started on the most popular ones. Despite their market prices being higher, there is a lot of information available about them. A less well-known cryptocurrency might be cheaper but harder to work with.
Here’s a little bit of information on the most popular cryptocurrencies we think you should start with:
Bitcoin
Probably the first and most popular choice for many would be Bitcoin. As a little bit of background, Bitcoin was the first cryptocurrency to be released to the market back in 2009. Today, its popularity has exploded with its value fluctuating like crazy.
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Should you buy Bitcoin?
Despite the huge inflations and falls of Bitcoin in 2017, there is still a lot of room for it to grow. Bitcoin has not reached its coin limit cap of 21 million BTC yet. Moreover, the benefits of Bitcoin being the most popular cryptocurrency means that there is a lot of effort being put in to make it a success, and not just a passing fad.
So, should you buy it?
Absolutely!
If you’re a first time cryptocurrency buyer, Bitcoin is a great start for getting your feet wet. Yes, its market value is a bit high averaging at $6,000 to 1 BTC. But, there is also a lot of information out there so you can follow and learn the major cryptocurrency trends and markers.
It’s even possible to mine Bitcoin, if you’re more interested in trying to make money that way.
It is not only just for beginners but also investors excited about the cryptocurrency world! So if you want a cautious starting point of just buying and selling with a cryptocurrency as opposed to taking advanced risks like with day trading, Bitcoin can fit all of those needs!
Ethereum
Ethereum is almost as popular as Bitcoin, but it functions a bit differently. While Bitcoin itself was created to be a digital currency, Ethereum was built to do this and more. Ethereum is also to create and run decentralized apps which helps monetize different forms of work.
Now if you’re comparing Bitcoin versus Ethereum, you might be asking why its market value isn’t as high as Bitcoin’s…
There is a higher market demand for Bitcoin compared to Ethereum. While Ethereum’s growth might not be accelerating as fast as Bitcoin’s, that could change in the future as developers continue to build on to Ethereum’s code to create more apps.
So, is buying Ethereum as a beginner a good idea?
Yes! It might not be the best fit for day trading just yet, but this is a great option for long term investment. Or, if you’re wanting to build an app yourself, Ethereum’s blockchain technology could help you launch something awesome!
Litecoin
Litecoin is also one of the big 4 cryptocurrencies. Improving on Bitcoin’s shortcomings, Litecoin was created as an improved version of Bitcoin for faster, but still safe, online transactions.
In terms of market demand it stays consistently in the top cryptocurrencies and it is still growing. Some speculate that since it is designed to address some of the issues that have arisen from Bitcoin’s technology that it has the potential to grow past Bitcoin’s capabilities.
So, if you’re asking how to invest cryptocurrency, Litecoin is definitely worth adding to your list.
Ripple
The fourth of the most popular cryptocurrencies on the market is Ripple. While it is a cryptocurrency, it’s more known for its unique digital payment built on a consensus protocol designed to prevent double spending.
Its structure is built to accomplish 3 things:
So far this setup has succeeded making it easy to conduct Ripple transactions cross-borders.
Because of this structure, it’s worth investing in Ripple especially if you would like to use it as form of international payment!
How To Buy Cryptocurrency
Obviously, if you are learning how to invest in cryptocurrency, you will need to know how to buy cryptocurrency first. For that, there are two things to set up:
- A cryptocurrency wallet
- A cryptocurrency exchange of your choice
Let’s review what each are:
Cryptocurrency Wallet
The first thing you will need before you get started is a cryptocurrency wallet. It is exactly what it sounds like: a place to store your cryptocurrency just as you would need for your regular currency in a pocket wallet.
You’ll need it so you can store some of your cryptocurrency as you buy, sell and trade.
There are different types of wallets out there but most people start with an online wallet as it is the first thing you’ll sign up for and attach to an exchange. They’re perfect to buy, sell and exchange small amounts of currency.
However, if you are going to invest more capital into your cryptocurrency portfolio, you can purchase a more secure wallet that is less likely to be hacked.
Start accepting cryptocurrency as payment with one of these wallets:
There is a software wallet that will be directly installed on your computer and can be used to store cryptocurrency offline. If you are looking for a wallet that takes your cryptocurrency completely offline, there are also hardware wallets and paper wallets. These will store your cryptocurrencies completely offline so the possibility of being hacked is reduced to a minimum.
Deciding what type of cryptocurrency wallet is right for you can be tricky, especially if you want to buy the most secure wallet that will suit your needs. Luckily, we’ve prepared a guide to picking which wallet will keep your investments secure.
Choosing an Exchange
The next thing you need to do is choosing a cryptocurrency exchange: A place where you can actually buy and sell cryptocurrency, and exchange fiat currency into a cryptocurrency.
This is also where you can get a play-by-play idea of how much the market prices of cryptocurrencies are increasing or decreasing.
There are three types of exchanges: a trading platform, direct trading or cryptocurrency brokers.
Trading Platform
This is like an open marketplace for buying and exchanging. Here, buyers and sellers will post how much they are looking to sell and at what rate.
Each exchange platform will have a transaction fee, usually expressed in cryptocurrency.
You’ll need to make sure that the transaction fee isn’t too high, as they could charge you a seemingly nominal amount of cryptocurrency…which might be worth hundreds of dollars!
Once you place your bid and there is someone else who matches your bid, your exchange will be complete!
Direct Trading
Also called peer-to-peer trading or lending, this is where you buy directly from someone or a friend without the use of a trading platform or broker. While there is no transaction fee for direct trading, whoever your seller is will have the liberty to sell to you at their desired exchange rate.
For some investors who may be confronted with country restrictions but want to know how to invest in cryptocurrency, this may be the best option.
Cryptocurrency Broker
Very similar to a trading platform, most cryptocurrency broker platforms will look like a trading platform. But the difference is that the broker sets the price to buy and sell, not the individuals.
The benefit of this is that if you are looking to take the confusion out of looking for the best buy and sell prices, brokers will streamline that system for you. They will also require a premium commission, so make sure the price they are asking for works for you.
If you want to read more about exchanges, you can read our guide on buying cryptocurrency. You can also jump straight into buying a specific cryptocurrency with the following articles:
Cryptocurrency Investment Strategies: Long Term Trading Versus Day Trading
As volatile as the cryptocurrency market is, does long term or short term trading work? Are both strategies equally suitable for investing in cryptocurrency?
Yes. Both can work just like stock investments, depending on what your needs and expectations are for making money online.
As mentioned earlier, the cryptocurrency market cycles are similar to stock markets except that they are more volatile and also shorter. Both long term and day trading interactions are shorter as well.
If you are just starting out learning how to invest in cryptocurrency, you may want to take it slowly and do long term trading. This is the best way to learn the ropes of the cryptocurrency industry,and define what your prefered investment strategy for cryptocurrency trading is going to be.
However, once you learn more about cryptocurrency, gain more experience in long-term trading, or if you already have a bit of experience with day trading: trying out short term day trading in the cryptocurrency market might be a good fit for you.
If you’re not sure whether or not you want to do long term trading or day trading, here are a few questions to ask yourself:
Have you decided on a certain profit you want, or a certain date when you’ll sell your cryptocurrency?
If you haven’t set goals and boundaries for yourself yet we recommend you think hard about this before you start investing seriously.
Yes, you might have sellers remorse if you sell and the next day its value doubles, but you also can save yourself from losses in case it does the opposite. By doing this you can ensure a steady increase to your portfolio in an industry where trends aren’t predictable.
Emotional and impulsive buying have been the downfall of many eager investors. Be strict and disciplined with your investing and you’ll have a much higher chance of being successful.
What’s the time span of long term and day trading?
Long term trading can last anywhere between a week to a month to maybe even a year depending on the cryptocurrency you choose to invest in. It might even be until you retire!
Day trading can last a few hours or even just a few minutes. While this may be similar to stock day trading, cryptocurrency day trading can run at a faster pace, so keep this in mind.
Project or profit?
Most investors who are interested in long term trading in cryptocurrency also really believe in the project and goals of that cryptocurrency.
Usually, information gathered from the cryptocurrency’s white paper report can help investors determine whether or not they want to do a long term trade.
While profit is the ultimate goal of investing in cryptocurrency, with long term trading you will have to take the project’s overall goal as a full consideration. Keep doing your research to make sure what you’re investing in is reputable and worth your time!
Cryptocurrency Mining: Is it Worth It?
Depending on where you are, it can be worth adding mining as an option in how to invest in cryptocurrency. Cryptocurrency mining for profit can be done by joining a pool of other miners to contribute resources like processing power, storage, a warehouse and/or electricity costs to ensure the conformations of transactions and security of a blockchain.
It can also be done solo, but the thing about cryptocurrency mining is that sometimes the overhead costs of managing a mining centre might not be worth it in the end. If you’re working as a freelancer in the context of mining, there is a huge need for reliable (preferably cheap) electricity, and high performance computers are paramount.
If you can’t or don’t want to go that far, you might consider Cloud mining. This is using a dedicated mining data center and renting their mining equipment. Software and hardware are already set up, so you just have to pay your cloud mining contract fee.
Final Thoughts
For many, learning how to invest in cryptocurrency can be intimidating and it is definitely an adventure. The technology is reshaping how we move forward in to the future! The cryptocurrency market is a lot more volatile than regular stock markets, and you’ll need to do research to find out which type of investment and strategy work for you. But, is cryptocurrency worth investing in? Absolutely! And it isn’t too late to start now.
