Cryptocurrency markets are bustling with activities, and despite the recent dip in performance, the market boasts a market cap well over $1.7 trillion as of February 9, 2022. The market is flooded with over 17,000 digital currencies, and each crypto trader is looking to invest in that token with the highest potential for mega returns. Arguably the most volatile product of its age, the crypto ecosystem has created billionaires and wiped out investments. Due to its volatile nature, crypto is quite risky yet potentially very profitable. So, is crypto a good investment?
Like any other form of investment, cryptocurrencies are not different considering the opportunities, potential risks, and returns. One significant contrast between crypto and traditional assets is that crypto has barely any government regulations. Like the Wild West, this unregulated system, powered by crypto’s distributed ledger technology, ensures there is no central point for governing crypto’s financial system.
As governments grapple with crypto market regulation, scammers and Ponzi schemes take center stage to defraud unsuspecting investors. In 2021 alone, at least $14 billion worth of crypto was lost to scammers. Additionally, this limited regulation adds to the volatility of cryptocurrencies as investors speculate on the possibility of government regulation in the future.
A successful investor’s golden rule is to maximize returns and mitigate risks in their trades. This article highlights ways to start or improve your cryptocurrency investment carefully. First, let’s examine how cryptocurrencies work.
Table of Contents
How Cryptocurrencies Work
A cryptocurrency is a digital currency operating on a decentralized network known as the blockchain and secured using cryptography. Crypto like Bitcoin (BTC) utilizes military-grade cryptography to secure, process, and validate financial transactions, in addition to regulating the generation of new tokens.
Cryptocurrencies run on blockchains – distributed ledgers that immutably record transactions. A blockchain decentralizes its network governance, keeping the platform transparent and secure for storing, moving, or transferring tokens. Each block on the blockchain holds a time-stamped series of indestructible records of data managed by the computers owned by different entities or users across the network. This way, the blockchain eliminates the intermediary in the financial system.
Distributed ledger technology (DLT) also ensures that decentralized transactions are safe from fraudulent or malicious intents by threat actors. Digital currencies are theoretically free of influence from traditional financial institutions, as they are not issued or governed by any central authority.
Investing in Cryptocurrency: Step by Step Guide
Although crypto is volatile, its value has risen significantly since 2009, when the first coin launched. Day-to-day fluctuations are still drastic, with most cryptocurrencies losing or gaining up to 20% in just 24 hours. Crypto adoption has increased in the past decade, and the gains through that period make cryptos look and feel like a good investment in the long term. Since crypto is still an emerging technology and hardly regulated, major financial institutions and central banks have given it a wide berth.
Crypto investment mainly involves trading and holding digital currency on crypto exchanges. Here are tips on how to safely invest in crypto!
1. Invest Only Amounts You Can Afford to Lose
Cryptocurrencies should account for a small portion of your overall investment portfolio. Before investing, decide how much of your portfolio you want to put into cryptocurrencies. Making such a decision may be difficult given the bearish and unpredictable markets for top and even smaller cryptocurrencies.
Two main factors rule an investment process – an appetite for more returns and fear for potential losses. So, while investing, you should stay alert on the latter consequence and only invest what you can afford to lose. This calculated investment style creates a buffer for the investor if a trade goes wrong and results in major losses. So, you can keep your appetite for more returns in check and reduce the impact of huge losses on your portfolio. Consider these key points:
- While you are the one to decide how much you spend on crypto, the investment should make up just a reasonable proportion of your overall portfolio. A modest proportion not exceeding 10% of your income is a good place to start.
- Main crypto investments earn gains for investors when the price of crypto they purchased rises. This is unlike traditional investment options like stocks which pay dividends and interests.
- Inherently, crypto is a medium of exchange and a way of transferring – not mainly an investment option. Since most digital currencies are characterized by limited supply, they are deflationary and a likely viable option to government-issued fiat currency. There’s growing adoption of crypto payments, but the technology hasn’t gone mainstream yet.
- While investing, note that cryptocurrencies’ value is solely established by the market, given their decentralized nature.
2. Select a Coin to Invest
There are nearly 20,000 cryptocurrencies in the market today. For a beginner, selecting a coin to invest in can be overwhelming. You need to invest in a reputable cryptocurrency, not one that will be gone before you know it.
BTC remains the most popular, dominant, and valuable cryptocurrency in the market today. As of February 9, 2022, BTC’s market dominance stands at 41%, exchanging at $43,600 and with a market cap exceeding $800 billion. Other top cryptocurrencies include ETH, BNB, Cardano (ADA), and XRP. BTC remains the most trusted coin and has become synonymous with crypto. The token is widely tracked by individuals on social and even mainstream media. Although BTC’s trend often dictates the trend in the crypto markets; some coins may outperform BTC during specific periods.
Bitcoin’s dominance and overall performance make it a top coin and a good buy for an amateur crypto trader. The other top coins are also safe to start your crypto investment. It is advisable to diversify your crypto assets as it helps to spread risks mitigate financial and security vulnerabilities while offering you multiple options to earn higher returns.
⭐️ Read more on: Best Cryptocurrency for Staking in 2022
3. Select a Trading Platform
Cryptocurrencies are traded mainly on crypto exchanges. There are at least 450 cryptocurrency exchanges in the market today, each offering unique services to meet the diverse market demands of crypto traders. Selecting the right exchange for you is also critical to a crypto investment and will contribute to higher returns.
Regardless of your experience as a crypto trader, you need to select a trading platform that is simple and convenient for your investment needs. Here are some top exchanges that will serve beginners and experienced traders well:
- Coinbase: Launched in 2012, Coinbase is one of the most popular exchanges worldwide, with 70 million users in over 100 countries. Its subsidiary, Coinbase Pro, is one of the best digital coin trading platforms for professional trader and institutional investors. The exchange has barely any security incidents with users’ crypto assets. Unlike many exchanges, Coinbase Pro is regulated and licensed to operate in almost all US states, Canada, and many European countries.
- Binance: Binance is the leading exchange by trading volume globally, offering the widest varieties of altcoins (400+ coins), low transaction fees, and peer-to-peer (P2P) trading. The exchange accepts deposits from 40+ fiat currencies, in addition to multiple payment options for purchasing crypto.
- eToro: eToro features some of the best resources for beginners and advanced traders. Among the features is copy-trading, which investors can deploy to replicate the trades of successful investors on the platform. This is especially important for investors with little-to-no experience in crypto trading.
- Crypto.com: Crypto.com exchange supports multiple crypto activities and products, including staking, trading, investing, wallets, and non-fungible tokens (NFTs). This exchange supports at least 160 different tokens, fair fees, and great discounts for holders of its native token, Crypto.com Coin (CRO).
Other top exchanges are Kraken, FTX, ByBit and Bitfinex.
4. Secure Your Crypto Assets
Losing cryptocurrencies presents a more complex situation – the underlying blockchain technology that is built for anonymity and immutability makes it practically impossible to identify wallet owners and reverse malicious transactions. So, an investor with a compromised crypto wallet may lose all their crypto assets, never to recover them.
The most common way to store BTC and other coins are in a cryptocurrency wallet – a piece of software that holds your private and public keys through which you can
connect to your blockchain and access your cryptocurrencies. These wallets may either be online or offline storages, commonly known as hot and cold wallets, respectively. Some common types are desktop, mobile, online, and hardware wallets. Here are some tips to secure your crypto:
- Use multiple wallets: You can choose to have both a hot and cold wallet, depending on your trading activity. If you trade often, a hot wallet will be convenient, and if your trading activity is low, you may choose to store much of your assets in offline storage.
- Deploy safe cybersecurity practices: Ensure your device is up-to-date with the latest security patches and that you execute maximum precaution to offer your crypto wallet utmost security. For instance, you may deploy multifactor authentication (MFA) to add a layer of security to your wallet.
❗️Remember: A wallet doesn’t keep your crypto. It allows you to access your crypto on the blockchain.
⭐️ Learn more about securing and growing your crypto assets.
HI.COM – A Crypto Wallet to Get You Started
hi offers convenient and reliable crypto trading, storing, staking, and exchange services. It uses hi wallet as its native crypto wallet, which is available on PC, mobile, and web apps. So, you can access your wallet and crypto whenever. In addition, Hi wallet has a staking feature that offers rewards in HI – hi’s native token – for users holding crypto in their wallets. The wallet supports all major cryptocurrencies, including Bitcoin, Litecoin, Ethereum, Dogecoin, USD Coin, Tether, Dai, Binance Coin, and HI.
hi wallet is one of the most secure crypto wallets. At Hi.com, you can get to earn daily reward when you open the app on your mobile device or web by answering a single question.
5. Be Ready for the Bumpy Ride
After buying and safely storing your crypto, be prepared for the huge price swings that lay ahead. Highly volatile crypto markets are marred by fear, uncertainty, and doubt, or FUD as commonly known in the crypto world. And to this, enthusiasts respond with HODL, a crypto slang that attempts to encourage the trader to hold their crypto assets as crypto markets stumble and prices slump. Despite the growing adoption of crypto, a considerable portion of the world’s population has not interacted with these tokens, and this is where much of the speculation stems.
Despite the volatility, crypto has been on an averagely upward trend, with the market cap well over $1.5 trillion. Successful crypto investment requires a critical balance of risks and potential returns. Going all-in to a crypto trade may be an ill-informed idea, given the uncertainties in the markets. Ensure you evaluate investment options and select those with the highest potential for good returns, putting in only an amount you can bear to lose. Pick the best coins and the most suitable trading platforms for your crypto portfolio and ensure you keep your assets secure.
There are more ways to invest in crypto. If holding cryptocurrencies on exchanges is a hassle, you can opt for crypto-based exchange-traded funds (ETFs). These are investment funds that track the price of Bitcoin or other cryptocurrencies and allow traditional investors to gain exposure to the coins without holding them.
Earning Crypto at Hi.com
By playing hi Play at Hi.com, you can earn tokens, which can be traded to cryptocurrencies such as Ethereum and Bitcoin.
It is easy to buy and trade HI, which allows you to earn passive crypto income by holding HI in the hi Wallet.
Below are the steps of creating a Hi wallet at Hi.com:
- You access hi through WhatsApp or Telegram app. Text “Hi” in the chat and a menu will appear allowing you to create an account. Follow the instructions given, sign up, and get your Hi wallet.
- You then proceed to transfer some amount of cryptocurrency to your wallet. Click on the Hi logo on the main screen, click menu, then select deposit.
- Proceed to choose the cryptocurrency you would like to deposit, you would like to deposit, copy the deposit address to your clipboard, and click on confirm.