Crypto coins such as Bitcoin, Ethereum, Cardano, and so on gives the opportunity to earn big via investment.
Investing in cryptocurrency is no doubt the riskiest form of investment. If you must go into it, you need to make your research before putting your hard-earned money. You need to understand that as you can make a fortune in this investment so also is a return on investment is not guaranteed.
In this post, we’ll look at what to consider before investing in cryptocurrency. For the sake of beginners, let’s learn about cryptocurrency.
What is Cryptocurrency?
Cryptocurrency is a digitally encrypted, decentralized currency that is not linked to or regulated by any government or central bank.
It is based on blockchain technology, which is a distributed ledger framework. Blockchain is a distributed ledger that is managed by a network of computers. It maintains an exact copy of the database and updates its records by consensus based on pure mathematics.
Bitcoin is the first cryptocurrency created which has led to the creation of others alike known as altcoins.
Cryptos are categorized as virtual or digital currencies. They were originally developed to provide an alternative mode of payment for online transactions.
However, cryptocurrencies have not yet been generally adopted or legalized by many nations and are actually too unreliable to be used as payment methods.
How to Invest in Cryptocurrency
1. Buy Cryptocurrency Directly
You can invest in cryptocurrency by buying one or multiple cryptocurrencies. The number one crypto today is Bitcoin which can be invested for profit. Other altcoins such as Ethereum, Dogecoin, Solana, etc. are also options when diversifying the portfolio.
You can buy these cryptocurrencies on major crypto exchanges such as Binance, Kraken, Coinbase, etc.
2. Invest in Cryptocurrency Companies
You can invest in companies with a partial or total focus on cryptocurrency. These could be cryptocurrency mining companies, mining hardware makers, and companies that support crypto.
Some of these companies are PayPal Holdings, Robinhood Market, MicroStrategy Incorporated, and so on. You can make a fortune through this option.
3. Invest in Cryptocurrency Focused Funds
There are companies that give funds for crypto projects, launchpads, and others. You can invest in them rather than individual cryptocurrency companies.
You have a choice of exchange-traded funds (ETFs), such as index funds and futures funds. Some crypto-focused funds invest in cryptocurrency directly, while others invest in crypto-focused companies.
4. Invest in a Cryptocurrency IRA
There are benefits to choosing this means of crypto investment. Here, you can garner the tax advantages afforded by an individual retirement account (IRA). Another advantage is that you invest in a cryptocurrency IRA.
Using the services of a crypto IRA provider can also facilitate more secure storage for your cryptocurrency holdings.
5. Become a Crypto Miner or Validator
This is another direct option for investing in cryptocurrency. You can mine it or act as a validator in a crypto network.
Crypto miners and validators earn rewards in crypto, which they can either hold as investments or exchange for another currency. Many became an overnight millionaires when Bitcoin started some years ago. Miners and validators are still using this option today to make a profit through cryptocurrency.
How to Research Crypto Coins Before Investing
If you are taking the route of investing in coins or tokens to make a profit in crypto investment then you should take this into consideration before starting.
You might have heard a lot of hype about a crypto project whether on social media, from a friend, or what have you? You need to make some research before putting your money into it.
Below are what you should do before investing in crypto coins.
1. Find the purpose
Many crypto projects are created to serve a purpose. Bitcoin, the first and most popular cryptocurrency was created as a solution to the financial crisis of 28 as a decentralized system. Several other coins have a purpose. Their purpose is to solve a problem. You need to find this before investing in them.
Take the opportunity to find out new project and their purposes. If you really, really, really don’t want to pass up what sounds like an amazing opportunity to buy up a brand new coin, get familiar with another crypto investment mantra: don’t invest more than you can afford to lose.
2. Make a research on the Whitepaper
The crypto shouldn’t only promise to solve some problem. It should promise to solve that problem in a way that makes sense.
This can be found in the project’s roadmap which is the whitepaper. Blockchain projects are typically laid out in a whitepaper—a publicly available document detailing the blockchain’s mission and how it works.
Having a whitepaper isn’t enough. The whitepaper has to be good. Even the anonymously published Bitcoin has a well-written Whitepaper-so should it be for the crypto coin you are investing in.
3. Find out where you buy and use the cryptocurrency
Making research on the exchange/platform to buy the crypto coin of your choice is as important as the coin/token. You’ll need an exchange that is secured, easy to trade on, has acceptable fees, good market rates, and so on.
Exchanges allow you to buy and sell cryptocurrencies, and while different exchanges require coins to jump through different hoops to get listed, you’ll be safer sticking to these exchanges.
4. Make a research about the founders of the project
You need to find out who makes the coin you are about to invest in. You don’t have to know the names of all of the board members, but you should at least recognize the names of the companies enabling or using the blockchain.
Even if you don’t, you should be able to research those individuals and organizations to find out whether they are real and really involved. Knowing these people would go a long way to help you from crypto scams and fraudsters in this space.
Timing is very important in everything including crypto trading/investment. It is important because choosing the best time to invest can impact your return on investment. The volatile nature of cryptocurrency requires that you know the right time to invest in tokens.
In a time like this, where the prices of crypto coins are bearish, it is advisable not to invest in crypto except for averse-risk takers. If you must invest, you could try out coins that have real-time users like Bitcoin and Ethereum. Small-cap altcoins shouldn’t be an option in a time like this.
The Bottom Line
It is a fact that there are thousands of crypto tokens to invest in out of which are fake ones that can make you go bankrupt. It is therefore important to have these tips listed above to be on the safe side.
Crypto investment is the riskiest form of investment. If you must invest in a crypto asset, you must put what you can afford to lose even when you have these tips at the back of your mind.