Despite being around for a while, cryptocurrency has already disturbed the exchange markets and banking systems worldwide. What started as an effort to decentralize money became a global, convoluted phenomenon that many still struggle to understand.
Popular cryptocurrencies, like bitcoin (BTC) and ether (ETH), have achieved incredible price fluctuations, reaching several tens of thousands of dollars. Cryptocurrency is a lucrative investment opportunity for excellent returns.
However, where there are significant gains, there’s also a high risk. Thankfully, modern-day crypto traders and investors have multiple trading platforms, such as Robinhood and Coinbase, to handle the transactions and mitigate risks.
These digital platforms made the investment process as safe and easy as possible. Today, you can invest in various cryptocurrencies with a few taps on your touchscreen. We’ll shed some light on the best ways to invest in cryptocurrency to help you accomplish your crypto investment goals.
Things to know before investing in cryptocurrency
Your crypto investing journey starts with finding a trustworthy and reputable trading platform to buy, sell, and store your crypto. Cryptocurrency trading platforms such as Immediate Edge are the most popular options for purchasing crypto.
Investors can buy currencies like Ethereum and Bitcoin with a debit card on various digital trading platforms. The platforms provide an option to purchase fractions of the most popular coins.
In other words, you don’t need lots of money to start trading. You can use your Bitcoin or Ethereum coin fractions to invest in altcoins, as trading platforms prevent investors from buying altcoins with fiat currency.
Trading platforms earn their profits by charging exchange fees for conducting trades. You can also find other trading websites where you can trade directly with other crypto investors looking to sell or buy.
However, this trading option bears more risk as you don’t have the means to verify the currency on the exchange. For people new to crypto investments, it’s best to use an exchange platform.
Steps to invest in cryptocurrency
Here are some crucial things you should consider before investing in crypto.
1. Understand how cryptocurrencies work
Before you invest your hard-earned money, you should understand how crypto investments work. As you would for any traditional investment, you need to know how different cryptocurrencies work, their features, functions, etc.
There are many cryptocurrencies, each with a unique investment case for each trade. Bitcoin, for example, involves traders willing to sell their coins for more than they paid for their assets.
Many cryptocurrencies form a price based on market fluctuations, which makes them unpredictable. You should determine one or more coins to invest in and research their advantages and disadvantages before investing.
It’s also vital to know that cryptocurrencies don’t rely on cash flow or hard assets. Instead, they exclusively rely on the prices formed by traders worldwide.
2. Cope with the trends
Initially, Bitcoin used to be worth a mere few dollars, but today, it’s worth tens of thousands of dollars. The trick is to predict its growth in the future.
However, this prediction will require you to investigate what drives future returns and the driving factors that change the price.
Staying on top of the latest crypto investment trends allows you to discover the most lucrative opportunities before other traders.
3. Monitor the volatility
Probably the biggest problem with cryptocurrency is the price. As assets, cryptocurrencies are so volatile that they change in mere seconds. The price could go up or drop quickly in a heartbeat. While these price fluctuations are ideal for avid investors, newbies might find it difficult to cope.
You must be ready to act quickly and conduct rapid trades to cope with the current market events. That would require you to understand the market’s fundamentals with all the ongoing trends, events, fluctuations, etc. This knowledge could help you buy top crypto at low prices and sell high.
4. Risk management
Risk management is critical to any type of investment. Many avid investors diversify their portfolios using several asset classes to mitigate the associated risks. In other words, you should consider investing in several cryptocurrencies instead of just one.
The best way is to start slow by making simple investments. You should incrementally diversify your investment portfolio by adding new cryptocurrencies as time passes. Any type of investment requires you to manage risks, especially when you’re dealing with assets as volatile as cryptocurrencies. Risk management involves developing a loss mitigation process.
While the process varies from investor to investor, some things stay the same such as:
- Long-term risk management – long-term traders prefer to stick with the position and never move their assets, regardless of the price. However, this is a risk as the price might drop at some point.
- Short-term risk management – short-term investments can be riskier than long-term due to frequent price fluctuations. You can protect your investment by deciding the best moment to sell based on the increase or decrease in the price.
Fresh investors new to crypto investments should consider investing only a portion of trading money. When the price changes against them, they’ll still have the funds for investing later.
Cryptocurrency is still uncharted territory. Many professional investors avoid it and consider it a highly risky market area. However, crypto trading can be a lucrative opportunity to reap excellent ROI if you know what you’re doing.
Even if you don’t have any previous investing experience, crypto exchanges can simplify the trading process and make crypto investing as straightforward as possible. It’s best to start small by investing what you can afford to lose to earn some experience.