July 19, 2021, | AtoZ Markets – Cryptocurrencies are booming as more and more people around the world are starting crypto trading. You have probably noticed that the newspapers, social media, and other media outlets are sometimes full of messages about Bitcoin and other cryptocurrencies. That is why it is best to start investing in cryptocurrencies as soon as possible. But are you wondering how to invest online?
In this investment guide, we explain everything you need to know on how to invest in cryptocurrency, and how you can then start trading crypto yourself step by step. Eventually, you will find that investing in crypto is not at all as difficult as it always seemed to be. Are you ready for it?
What exactly are cryptocurrencies?
Before you start investing in cryptocurrencies, it is important to understand exactly what they are. That is the major reason why AtoZ Markets wrote this guide on how to invest in cryptocurrency.
Cryptocurrency stands for encrypted money. You can see it as a digital form of payment where there is no central party that manages the currency. Cryptocurrencies can therefore outweigh the drawbacks of traditional money because they are traded entirely over the internet. It is not possible to receive physical crypto coins or notes.
The uniqueness behind cryptocurrencies is their special functionality. Bitcoin, for example, is a completely decentralized currency. This means that no bank is involved in a transaction. When you transfer money to another person, it will be transferred directly to the other person. Because no third party is needed for transactions, they can be executed faster and cheaper.
Some advantages of cryptocurrencies
- Cryptocurrencies are completely decentralized
- Transactions are faster and cheaper
- Transactions are often difficult or impossible to trace
- Cryptocurrencies are increasingly a valid means of payment
Why is investing in cryptocurrencies interesting?
Investing in cryptocurrencies can be very interesting due to the high volatility. Below you can see a graph of the Bitcoin price development.
As you can see, the number of Bitcoin users (and therefore the number of transactions) has seen enormous growth in recent years.
Does this mean that the number of users will only increase in the future?
Although we can predict that, thanks in part to the crypto boom in the first quarter, the number of BTC transactions will also increase exponentially this year. However, no one has a crystal ball to predict where the virtual currency will be in 5 to 10 years.
But according to many, the future looks bright. For example, forecasts are regularly made that speak of a bitcoin of $100,000, $500,000 or sometimes even $1 million each. Is this feasible? Who knows…
This price trend will deter many long-term investors. This can be interesting for investors who are willing to take a little more risk. After all, if you buy and sell regularly, you can achieve returns of tens of percentages.
Investing in cryptocurrencies is not suitable for everyone. You must be willing to trade a security with high volatility. You have to be able to control your emotions in case of significant losses. Chances are that you will lose tens of percent on a position at some point.
Do you think you can handle this? Then investing in cryptocurrencies can be very interesting and profitable!
Watch the video below to see 15 more reasons for you to invest in cryptos.
How to invest in cryptocurrency?
When you want to invest in cryptocurrencies, it is important that you know how to do it. Cryptocurrencies can be traded on crypto exchanges. These are exchanges where, just like stock exchanges, you can buy and sell various cryptocurrencies.
Buying cryptocurrency from a crypto exchange is very easy.
First, create an account with the exchange, then choose the cryptocurrency you want to invest in and click on “buy”. After this, you make a deposit and you will receive the value of the cryptocurrency in exchange. Save this cryptocurrency in your wallet, and you are now the official owner of cryptocurrency.
The second form of investing in cryptocurrency involves speculating on a rise or fall in the price of the currency. Cryptocurrencies are volatile trading instruments. This means that the price fluctuates continuously. As an investor, you can benefit from these price changes.
If you want to speculate on cryptocurrency, you can go to an online broker. Brokers offer trading platforms where you can invest in dozens of different financial products. Their offer ranges from currencies and commodities to energy and cryptocurrencies. A good online broker must be reliable and have a wide range. The broker also has to take a lot of measures to offer a safe trading platform.
How do you speculate on cryptocurrency? Create an account with an online broker of your choice and deposit money into your account. Decide if you are speculating on a rise or fall of a cryptocurrency and open a position. You do this by clicking on “buy” or “buy”. When you are ready to close your position, click on “sell” or “sell”. Hopefully, after closing your position, you have made a profit and successfully invested in cryptocurrency.
That said, let's explain the techniques and strategies for trading cryptocurrencies. As you read on, we will also mention what the most popular cryptos are at the moment.
Cryptocurrency trading strategies
In general, there are two strategies you could adopt when investing in crypto coins.
Buy and hold strategies (long term)
These strategies aim to make you invest in crypto for the long term, hoping to profit from major price movements. To implement this, it is best to use a crypto exchange where you buy your crypto coins and then store them in a cold wallet. This makes it a lot easier not to be influenced by what the market is doing.
So when you hold onto your coins instead of selling them quickly after purchase, you are engaged in the "buy and hold" strategy.
Scalping and day trading strategies (short term)
Among the most active and aggressive strategies, scalping and day trading are the most popular. These are the short-term strategies.
Both methods are mainly based on technical analysis and use small price fluctuations over a few minutes to a few hours, the movements of which can be amplified by using leveraged products (increasing your bet without actually betting the amount). When you are just starting to invest in crypto, it is wise to stay away from leveraged products.
Invest successfully in cryptocurrencies
Do you want to achieve good results with your investment in crypto coins? With these tips, you will ensure that you achieve better results than the masses.
Do enough research
In the past, many people have gotten into crypto coins without doing research. The postman, the milkman, and the butcher who took the rumors about the revolutionary Bitcoin a little too seriously. Many of those people got on top and subsequently lost thousands of euros.
Avoid losing a lot of money with your investment in crypto coins and use your common sense. When you invest in shares, you do not buy up random companies. Therefore, when you start investing in cryptocurrencies, do sufficient research. Take a look at the benefits of the coin and investigate how the trends in the cryptocurrency markets come about.
Especially when you want to know how to invest in cryptocurrency in the long term, it is important to conduct thorough research.
Go along in hypes
Hypes can be your best friend! Many people have entered blindly and have randomly bought up different cryptocurrencies. This is of course unwise. Still, you can take advantage of the hype surrounding cryptocurrencies.
If you want to invest successfully in cryptocurrencies, you can do research into the sentiment of the masses. Many people who invest in crypto coins have little understanding of investing. They, therefore, act a lot on emotion.
This means that the price of a crypto coin can react strongly to news reports. Often the price reacts excessively strongly to adverse news. It is precisely at times like this that you can look for an interesting buying moment. Successful crypto traders realize they need to understand the masses to get good results.
Spreading your investments
Every investor understands that by spreading your investments you reduce your risks. Strangely enough, this principle is sometimes forgotten when investing in cryptocurrencies. Many people buy one or two crypto coins and leave it at that. However, it is smarter to do good research into the different crypto coins and to buy several interesting coins
That way you prevent losing all your money because a crypto coin goes to order. Moreover, you increase the chance that you will buy an unexpected pearl. In the past, you could achieve returns of thousands of percent with some crypto coins. Of course, it would be nice if you bought one of those cryptocurrencies.
Understand the premise of scarcity
The price or value of a crypto coin does not say much. More important is the market capitalization of the currency. Market capitalization is the total value of all outstanding cryptocurrencies. The Ripple is a coin that is only worth around twenty cents. However, the market capitalization is more than eight billion dollars, making it one of the largest crypto coins in existence.
Many crypto coins are scarce. For example, Bitcoin is known to never exceed 21 million. When demand increases and no new bitcoins are added, it is not unlikely that the price will rise further. Therefore, research for each crypto coin how it is on the supply side. That way you can estimate how the cryptocurrency can develop in the future.
Determine what you can lose
Before investing in cryptocurrencies, it is important to consider what you are willing to lose. Cryptocurrencies are extremely volatile and you need to have nerves of steel to get good results from them. It is therefore important to determine for yourself how much money you are willing to lose. This is the only way to prevent a fiasco.
In which cryptocurrencies can you invest?
At AtoZ Markets, you can find information about all major cryptocurrencies. In this investment guide, you can read briefly about the top 5 cryptocurrencies of 2021 that can generate real income:
1. Bitcoin (BTC)
The topmost promising digital currencies for 2021 start with the orange king of the crypto market, Bitcoin.
Bitcoin is one of the most lucrative assets in history today. In terms of profitability, he left big names like Amazon, VISA, Microsoft, and JP Morgan far behind.
Why is the price of bitcoin surging? Simply put, investment giants such as MicroStrategy, 3iQ, or CoinShares are investing in BTC. In addition, it recently became known that Guggenheim Partners and MassMutual have also recently invested in cryptocurrency.
This is the first cycle that the rally is driven by institutional interest. Bitcoin holders have been waiting for this for years, and now the new trend can bring them unprecedented profits, proving once again that Bitcoin is a cryptocurrency for long-term investments.
2. Ethereum (ETH)
When listing the most promising cryptocurrencies, one cannot but recall Ethereum. This year promises to be successful for the second-largest crypto project.
Unlike Bitcoin, the Ethereum blockchain is a decentralized system that provides a platform for many other cryptocurrencies and smart contracts.
Many institutional investors have already joined Ethereum through the Grayscale Fund (ETHE). Canadian company 3iQ, which also intends to launch an ETH fund for its clients, followed Grayscale's example.
According to the latest reports, CME Group, the world's largest financial derivatives exchange, has launched ETH futures contracts.
Judging by this news, the interest of institutional investors in cryptocurrencies will not be limited to bitcoin.
On Wednesday, May 12, the price of Ethereum reached $4,350, updating its all-time high. At the time of writing, however, the digital asset is trading above $3,700, capitalization is $500 billion. There is still room for improvement in the currency, which means that the potential return on ETH could be much higher.
3. Binance Coin (BNB)
Binance Coin (BNB), which is likely to be a great investment choice in 2021. The cryptocurrency of the Binance exchange emerged a few days after the exchange was launched in 2017, but it made itself known at the beginning of 2021. Today it is the fourth-largest cryptocurrency in the world after Bitcoin and Ethereum and is the symbol of Binance's success in the world.
In June 2019, the token reached an all-time high of $39.57. During the March crisis, it fell to $6.41 but has since recovered above $560 as of May 2021.
The advantage of owning BNB is lower or zero trading fees on Binance and the ability to use it to buy other tokens in periodic sales.
According to the prediction of LongForecast.com, by the end of the year, the token can reach $750.
4. Cardano (ADA)
Cardano is another ambitious project. The native token of the ADA project has existed for three years. At the dawn of its existence, at the end of 2017, it demonstrated parabolic growth, which pushed the price up to $1.33.
This was followed by a sharp decline in ADA, and as a result, the token stabilized below the $0.10 mark, where it was traded for over two years. Subsequently, he managed to recover above $0.10 and move more confidently to new highs of $1.91 at the time of writing.
The dynamics of ADA give the token every reason to confidently rank among projects with high market capitalization and the highest return on investment (ROI). Overall, Cardano can indeed deliver exceptional results this year - not only in terms of technology but also in terms of investment.
5. Dogecoin (DOGE)
If you thought that nothing would impress you more than the amazing dynamics of Bitcoin, then pay attention to what is happening with Dogecoin.
Lately, Dogecoin has been one of the best coins to invest in, showing incredible performance. After grabbing the attention of famous people, including Elon Musk, Gene Simmons, and Snoop Dogg, Dogecoin is expected to go up to $1 towards the end of 2021.
The meme cryptocurrency started the year at $0.050 and skyrocketed to its recent high of $0.0838 on February 7, 2021, showing a significant 67% increase. Sources vary, but Dogecoin appears to be accepted by 48 to about 1,200 companies worldwide. Dogecoin is also included in over 1800 crypto ATMs throughout the US.
The growth of Dogecoin's reputation is a fact: not bad for a cryptocurrency that was born as a joke.
How can you store cryptocurrency?
Cryptocurrencies are stored in so-called crypto wallets. Every digital currency has its own wallet that is part of the blockchain. You are in fact your own bank and only you can access your digital coins with your access code.
Each wallet has its own address, just like with a bank account. A Bitcoin Wallet can only receive Bitcoin. For example, if you send a Litecoin to a Bitcoin address, you run the risk that it will disappear and cannot be retrieved. This also applies to entering an incorrect address. Once the transaction has been included in the blockchain, it is final. A transaction can therefore never be recovered.
How to invest in cryptocurrency - Conclusion
When you decide on how to invest in cryptocurrency, it is important to stay sharp. Do not completely go along with the hype and do not buy up all kinds of coins, because the masses do this. In the long run, some coins are likely to lose, and it's annoying to lose a lot of money in a crash. Therefore, do enough research on the different coins before you buy cryptocurrency and only invest with money that you can really miss.
That way, investing in cryptocurrencies can not only be profitable but also a lot of fun! Do not forget that investments in cryptocurrencies are speculative. You can lose your entire stake with an investment in a cryptocurrency!