How to Invest in Cryptocurrencies

How to Invest in Cryptocurrencies


Cryptocurrencies 2021

The year 2021 was a very rich year for cryptocurrency, many new favtorites appeared, and the total capitalization of cryptocurrency at one point exceeded $2.5 trillion, for example, in the US, 14 percent of the population keeps some of their savings exactly in cryptocurrency. And the year is still in full swing.

Cryptocurrency is an asset, and it is far from new. It is exchanged on the exchange for fiat money. BTC is the first cryptocurrency, and now it has the largest capitalization to date. BTC was created in 2009, and today there are over 7,700 altcoins in the world. Etherium, Ripple, or Dogecoin may be on your radar, they are now among the top 10 cryptocurrencies, but some were thought of as something of a joke.

Some investors see crypto as a way to save money and protect against inflation, others for speculative trading.

How to become an investor, should you buy cryptocurrency, what should you consider?

Nowadays, investing in cryptocurrency is massive, some brokers are quite conservative and prefer traditional assets.

Cryptocurrencies have a different creation algorithm and each coin solves its own problems.

To analyze the token’s behavior, you should understand it and everything related to it before investing. “The more you learn how to make money with a digital currency, the more profitable the process becomes,” Kuiper added.

He linked BTC to precious metals, particularly gold, and invented the moniker “gold 2.0,” implying that, like gold, investing in this digital currency, albeit in smaller amounts, protects fiat money against inflation. This does not, however, apply to cryptocurrencies such as Etherium.

Kuiper argues that cryptocurrencies are fundamentally the same asset as real estate or luxury items, are uncorrelated with other investment instruments, but are volatile, necessitating thorough news analysis to buy at a low price or sell at a high price. Following Elon Musk’s tweets is the latest craze, since the market reacts rapidly to his pronouncements.

Certainly Bitcoin has a return of more than 200 percent, but at the same time, trend reversals can be lightning fast. You have to be prepared for that if you plan to profit from it.”

Consider the dynamics of risk and reward

How to Invest in Cryptocurrencies

Because cryptocurrency is so volatile, not everyone is ready to invest in it, according to Matt Schwartz, a financial services consultant with Great Waters Financial. There must be adequate capital allocation; one asset should not hold the majority of your funds, and crypto volatility should not put your portfolio at risk,” he says.

“If you have up to five percent allocated to one asset class in your portfolio – it doesn’t affect, by and large, the entire portfolio,” Schwartz says, and adds that the percentage depends on each investor and one rule doesn’t work for everyone.

Experienced experts believe the safest tactic is price averaging, where you regularly invest in one cryptocurrency. Before you dive into this, learn the specifics of taxation in your country.

Think about how many decisions, including investment decisions, can affect your life outside of the market. “On the one hand, you shouldn’t take that risk to have nightmares at night,” Kuiper says. “But also on the other hand: if you’re worried about bitcoin’s growth and you’re not finding your seat, just buy it and calm down.”

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