Investing in cryptocurrencies – how to invest in cryptocurrencies?
Cryptocurrencies such as Bitcoin (BTC) or Ethereum (ETH) are more than just alternative means of payment. You can make a lot of money on them. Check out how to invest in cryptocurrencies to make profit. It’s truly worth it!
A profitable investment?
The cryptocurrency market has been growing rapidly for more than ten years now. Virtual currencies still constitute a fringe phenomenon: although the number of sales and service points where one can pay with them keeps growing (especially in the USA), the majority of stores doesn’t accept payments with Bitcoin, let alone other, less known cryptocurrencies. Still, digital cryptocurrency systems based on the blockchain technology, such as Bitcoin, Ethereum, IOTA or Stellar, generate an increasing interest from the media, as well as from people seeking alternative means of payment. A separate group of users are investors, who buy digital assets and sell them when the exchange rate changes. As it turns out, one can make quite a lot of money this way. The price of cryptocurrencies is more unstable than the exchange rate of any traditional currency, as it is subject to different circumstances. The value of cryptocurrencies is to a much lesser degree influenced by macroeconomic factors. A much more important role is played by reports in the media, and by comments from experts.
If you wish to learn more about the factors determining the price value of cryptocurrencies, we encourage you to read an adequate article on our website. Below we will touch upon the topic of investing in cryptocurrencies. We will hint on where to start, how to invest in cryptocurrencies, as well as how to avoid basic errors that may cause you to lose all your savings.
Is investing in BTC worth it?
The large price fluctuations of Bitcoin and other digital currencies are the reason why New investors just keep coming on the market. If statistical data is to be believed, most users of Bitcoin treat it as an investment. A relatively small number of people makes payments using cryptocurrencies, although that number keeps growing year by year (mainly thanks to the media). It might seem absurd, as the most famous cryptocurrency in the world was created exactly to replace traditional money. Taking the above mentioned price fluctuations into account, however, it is no wonder that Bitcoin is commonly treated as a subject of investments. Traditional currencies, the value of which is controlled by government institutions, don’t create such big opportunities for speculators and all kinds of investors.
Bitcoin exchange rate: why is it so volatile?
As we have already mentioned, digital currencies are characterized by bigger price volatility than the traditional ones. The independence from government and banking institutions results in more dynamic formation of the exchange rate. This applies to all cryptocurrencies, not just Bitcoin. Sudden rises and drops in the value of digital assets are nothing extraordinary. That’s why it is very easy to make money on an investment, but one can also lose a lot. Every investment is a huge risk.
The price of a cryptocurrency mainly depends on the number of its active users, which means also on the social interest in a particular currency. A large role in spreading knowledge on cryptocurrencies is played by the media: both the mainstream ones and the industry ones, which target a narrower audience. It is thanks to those media that the interest in cryptocurrencies reached its peak by the end of 2017: the exchanges couldn’t keep up with verifying new users, the whole process was taking weeks, or even months. That was also when the exchange rates grew significantly; especially Bitcoin, the most famous cryptocurrency on the market, increased in value. Once the enthusiasm in the media subsided, the exchange rates started crashing down.
This constant alteration between ups and downs determines the price cycle of cryptocurrencies. Their value goes up until bad news spread around the exchange community or the number of buyers stops growing. After a period of strong activity comes recession, the owners of digital assets are seeking opportunities to sell or waiting for better days. During the downtrend period it is obviously difficult to sell Bitcoin or any other cryptocurrency with a profit. The investors who have no patience and don’t want to wait for the exchange rate to rise try to break even or Minimize the losses as much as possible. The value of a cryptocurrency might drop by as much as a few dozen percent. A wave of stagnation comes that will last for at least a few months. The latest years have shown how much volatile the exchange rate of a cryptocurrency can be: Bitcoin
How to invest in cryptocurrencies?
Investing in cryptocurrencies on an exchange
There are three ways to invest in cryptocurrencies.
The simplest and most popular method is using a cryptocurrency exchange. It’s a place where you can buy and sell virtual money. In order to make a transaction, you just need to register an account. On many websites it comes with the necessity of providing personal data. Then you just have to pick one of the offers and wire the equivalence of the capital purchased to the seller.
Note: it’s not a good idea to put all eggs in one basket! The risk of losing the invested funds is too high to allow yourself to invest a lot of money (like 20,000 dollars, for example). It particularly applies to retail investors. It is definitely better to buy a smaller amount of coins and then gradually multiply the capital. In order to avoid unpleasant situations, use the services of reliable companies that have already solidified their position on the market.
Investments on an exchange only yield profits in case of a price increase – that’s something to keep in mind.
Investing in cryptocurrencies: CFDs
The dynamic development of the cryptocurrency market has lead to creation of new forms of investments, such as CFDs. These are contracts for difference in exchange rate (that’s what the CFD acronym stands for). Under the contract, both parties are obligated to settle the amount equal to the difference between a position’s opening price and closing price. That’s why a CFD is also described as a contract for difference in exchange rates.
What are the characteristics of CFDs? Unlike the simplest form of investing, which consists of buying currencies and selling them at a higher price, they allow to also make money when the price drops. On top of that, they make it possible to invest with a leverage, which is several times lower than for other financial instruments. That way investing in CFDs might be much more profitable, although it comes with a higher risk.
Investing in cryptocurrencies: Binary options
Another form of investing are Binary options. One should only bet on the direction of price changes for a particular cryptocurrency within a strictly defined time frame. The exchange rate might go either up or down – you only have two options to choose from. All you have to do is choose one of them, as well as the time when you expect the value to change.
So as you can see, cryptocurrency systems based on the blockchain technology are more than just an alternative to traditional payment methods, they’re also a potential source of income. You don’t need special tools or a million dollar in your wallet to start investing – all you need is Internet connection, that’s all. If you decide to open an account on an exchange, the verification may take a few days – in the meantime it’s a good idea to check out other materials on our website. They will help you understand the rules that the cryptocurrency market operates under. It is also worth keeping in mind that Bitcoin isn’t the only available cryptocurrency, although on the other hand one cannot deny that investments in BTC generate huge profits.