Despite the well-known volatility of cryptos, the cryptocurrency market continues to be an attractive investment option for many investors. Are you wondering how much money is currently invested in cryptocurrency? Well, over $1.27 trillion has been invested in cryptos since the first digital currency hit the market, according to data from Coinmarketcap.
Experienced investors know how to strategize before choosing the ideal crypto asset to invest in. This guide takes you through everything you need to know about the best way to invest in cryptocurrencies as well as digital wallets, crypto exchanges, and the latest NFT craze. Read further to learn more.
Investing or Trading in Cryptos
We often use the terms trading and investing in cryptocurrencies interchangeably, but the two terms actually differ. If you’re new in this industry, discerning the difference between the two goes a long way in developing a successful strategy.
Cryptocurrency invest usually takes longer than one year and is ideal for those of us who do not want to engage in daily crypto activities.
On the other hand, trading in cryptocurrencies looks at the short-term gains of owning a crypto asset. In trading cryptos, you purchase the coins and then sell them after a short while, usually after a few hours, days, weeks, or even months.
Cryptocurrency trading is quite involving and takes time to get used to — it is often preferred by experienced traders who are adept at research and analysis.
As a non-starter in cryptocurrency investment, you may choose to stick to long-term investment options as you learn the ropes of how trading in cryptos works. Selecting a solid crypto project should help protect you against unnecessary loss of funds.
Why You Need to Invest in Cryptos
With all the news of cryptocurrency volatility, why would anyone wish to put their funds into such projects? Let us find out why even the likes of Tesla and Microsoft are investing billions into cryptocurrencies with the hope of long-term financial gains.
A wide variety of crypto assets to choose from
Investors like options, and the crypto industry is full of them. Just like stock options, there are thousands of cryptocurrency assets you can invest in. If you’ve invested in NASDAQ or NYSE stocks before, you know how it feels to have a range of options. And just like stocks, you’re likely never going to miss something that suits your cryptocurrency investment goals.
For instance, if your goal is simply to have a taste of the action, you may prefer to go for the most established cryptos such as Bitcoin, Ethereum, Ripple, BNB, or stable coins like Tether. These tokens are less volatile, albeit the upside potential is more limited.
You can also opt for lower cap tokens whose price projections may appeal to investors with a high-risk tolerance.
Cryptocurrencies Hit Record Stock Market Gains
Although viewed as riskier than traditional stocks, cryptocurrencies continue to generate massive gains and hit record prices.
In perspective, consider that the S&P 500 recorded a 94% increase in value in the past five years. In the same time frame, Bitcoin increased in value by over 3600%, and that’s nothing compared to BNB’s 10,000% gain. Other crypto assets such as Ethereum (7000% gain) have also recorded similar gains in 5 years.
If you explore further into altcoins, you will be impressed to find how gainful these tokens can be. Metaverse coins, such as Decentraland’s MANA token, have gained over 25,000% of their value since launching a few years back.
Such massive gains are some of the reasons no one wants to miss out when the next crypto boom hits.
Large Corporations are Investing Billions in Cryptocurrency
Whether due to FOMO or simply a smart investment decision, hundreds of established companies are now investing in crypto assets. For instance, with a market cap of more than $1 trillion, Tesla invested over $1.5 billion in Bitcoin in 2020. Other corporations that have followed its footsteps include Microsoft, PayPal, Overstock, and Starbucks.
What’s more, these companies have also included cryptocurrency payment options for their goods and services. This goes to prove that cryptocurrency assets are here to stay.
What Do You Need to Start Investment in Cryptocurrency
At this point, if you’re convinced that cryptocurrency can be a successful investment option for you, then this section is an important one. Before you dive into the nitty-gritty of investing in cryptocurrencies, there are basic things you will need to facilitate your investment journey.
- Cryptocurrency exchange platform
- Crypto wallets
Cryptocurrency exchange platforms are marketplaces that act as a bridge between crypto sellers and buyers. Choosing the right exchange platform will help you save on transaction costs and enjoy faster transaction processing securely. We’ll look at crypto exchanges in detail later in this article.
For now, let’s talk about crypto wallets. What are they, and how can you get one?
Crypto wallets are storage options for digital coins, complete with security measures to protect your assets against theft. There are several cryptocurrency storage options, but they all belong in two main categories; cold and hot storage.
Cold storage, also known as hardware crypto wallets, are devices that provide you with secure space to keep your digital coins in an offline mode. However, there are special cold storage wallets that can be connected to the internet to allow you to perform certain functions.
Cold storage options include paper wallets and hardware wallets. Cold storage is ideal because it provides better security away from the prying hackers on the internet.
Some of the cold storage options in the market include:
Hot storage, on the other hand, refers to software wallets that are connected to the internet and hence less secure. However, they come with a host of benefits, such as the ability to transact on the go. They are highly user-friendly primarily due to their accessibility and flexibility options. There are also several types of hot storage options, including:
- Desktop wallets.
- Web wallet.
- Mobile wallets.
These wallets still offer great security compared to the non-custodial option provided by exchanges. Some of the notable hot storage wallets for your cryptos include:
Having a cryptocurrency storage wallet is an essential piece of the puzzle when looking to invest in cryptos. Holding huge amounts of crypto assets requires safe, reliable, and secure storage that protects you from losing your hard-earned funds.
The wallets highlighted in this section should only give you an idea of what to look for in a crypto wallet. Ensure you do your research before choosing your ideal hot or cold storage wallet.
Which Cryptos Should You Invest In
Choosing which cryptocurrency to invest in boils down to your investment goals. While there are thousands of options to choose from, identifying one perfectly suited to your goals can be cumbersome.
If you simply wish to earn digital currencies and hope to sell them later when prices hike, going for solid projects is a safer bet. However, if you want to venture into the metaverse of non-fungible tokens, you need to look for tokens primarily used in NFT marketplaces.
That said, let us look at some of the cryptocurrencies that provide a safer investment option for investors.
Bitcoin was established in 2009 and still holds the top spot as the most traded and invested digital currency. It is the first-ever cryptocurrency — hence it offers plenty of data to back your investment choice.
Not only does Bitcoin share the largest trading volume but also tops with the highest market capitalization of $582.71b, making it less volatile compared to the other cryptos.
Ethereum was launched in 2015 and continues to give Bitcoin a run for its money. Since launching, ETH, its native token, has grown by over 28,000%. This crypto project is backed up by the Ethereum blockchain, which has become a primary platform for the development and deployment of decentralized applications.
Projects such as Axie Infinity, Maker, Uniswap, and Basic Attention Token are also part of the Ethereum ecosystem. Therefore, owning an ETH token will earn you direct income and give you access to lots of other cryptocurrency ecosystems.
With this single token, you will be able to participate in the Axie Infinity NFT marketplace, where you’ll have a chance to buy and sell axies ( non-fungible tokens).
Ethereum will see strong resistance to price fluctuations since it operates as a coin as well as being used in smart contracts by the likes of VISA. The digital coin comes in second with a market cap of $229.15B.
Binance’s BNB token was recently founded in 2017 but is considered one of the best cryptocurrencies to invest in by most experts. Backed by the world’s largest exchange, Binance, BNB has grown in value by over 10,000% since launching. It has a market cap of $51.54B and an average daily trading volume of $1.63B.
Binance is the largest exchange platform by trading volume and has launched a series of functionalities to boost its ecosystem. The Binance network now includes; the Binance Smart Chain, Trust Wallet, Binance Academy, and Binance Chain. Investors who own BNB will have access to the entire ecosystem and thus expand their investment options.
Where to Invest in Cryptos
Starting your cryptocurrency journey requires lots of research, but the most important one involves finding the best cryptocurrency exchange platform. If you’re new in this industry, here are the most highly rated exchanges you can consider.
Binance is attractive due to its low processing fees. It is the largest crypto exchange globally, with an estimated 600 plus cryptocurrencies listed. You will also be happy to know that funding your account via wire transfer attracts zero transaction fees.
The trading tools provided by Binance allow investors to analyze the market with a high degree of accuracy. After a successful investment, Binance offers the Trust Wallet, where you can store your crypto assets.
Coinbase is a popular exchange platform that allows you to invest in various digital currencies, both low and high caps. First-time investors will find the bear-bones service quite appealing, with a step-by-step illustration to guide you through the platform.
Currently listed on NASDAQ, Coinbase is highly regulated, making it trustworthy and reliable. The platform stores investors’ funds in cold storage, although there is also the Coinbase wallet for those looking for a hot storage option. For enhanced security, Coinbase accounts are protected by 2-factor authentication making it one of the safest exchanges in the industry.
However, you might want to watch out for the fees on this platform as they are somehow among the highest in the market. For instance, it charges a standard commission of 1.49%, which is also charged when you close a trading position.
Gemini should be among your top options if you’re looking for a safe and regulated exchange to invest in cryptocurrencies. The user interface on this platform is easy to navigate, making it ideal for new investors.
The exchange is licensed by the New York Stock Department of Financial Services, which should ease any fears you may have concerning its safety and legality. The downside to using Gemini is its flat-rate commission of 1.49% for investments above $200. That said, wire transfers are free, but debit and credit card deposits attract a transaction fee of 3.49%.
Gemini may not offer as many cryptos for exchange as Binance or Coinbase, but you still have a decent 75-plus cryptos to transact in.
For beginners, this platform has an ideal learning tool that enables you to grow your knowledge in investing in cryptocurrency. Remember, the best way to invest in cryptocurrency is always through a legal and safe crypto exchange.
How to Invest in Cryptocurrency
At this point, you could be considering an investment in cryptocurrency and may be wondering how to go about the whole process. In this section, we look at how to invest in the cryptocurrency of your choice without much hassle.
Taking the first steps to invest in crypto is the hardest part, but once you learn the ropes, everything shall fall easily into place. If you are a first-time investor, just follow the steps below to start your cryptocurrency investment.
- Step 1: Create a crypto wallet from any of the above-mentioned providers.
- Step 2: Choose a cryptocurrency exchange platform of your choice.
- Step 3: Register an account on your preferred exchange and link to your wallet.
- Step 4: Deposit funds into your exchange account using any of the supported payment methods.
- Step 5: Browse through the cryptocurrencies listed on the marketplace to see if your choice is among them, and click on it to buy.
- Step 6: Enter the amount you wish to spend based on how many coins you want to own.
After buying the coins, you can withdraw the tokens into your crypto wallet and store them as you wait for them to gain value. You can then sell it through the exchange at the appropriate time.
Risks of Investing in Cryptocurrency?
While it’s good to focus on the benefits of successful crypto investment, it is also prudent to consider the risks involved. Seasoned traders always put the risks into perspective when coming up with an investment strategy, and we recommend you do the same. But to do that, you need to know these risks first.
Highlighted below are the risks associated with different cryptocurrency asset classes.
- Cryptocurrency investment is speculative: Although you need to consider long-term goals, most investments in cryptocurrencies are speculative as the overarching focus is placed on the short-term increase in the value of an asset class.
- Rug pulls: If you’re looking at how to invest in cryptocurrency, be wary of rug pulls. These are crypto projects specifically created to scam investors. A good example is Squid Coin.
- Volatility: Due to its speculative nature, the cryptocurrency market is highly volatile. Projects with small market caps are the most volatile and can shed or gain high percentages of their value in a very short time.
- Hackers: Rug pulls aside, cryptocurrency has attracted skilled hackers who go to great extents to defraud investors of their coins.
To mitigate some of these risks, you need to carry out in-depth research into existing projects or stick to the well-established ones. Relying on hardware storage and diversifying your crypto investment portfolio has far-reaching benefits against the above-listed risks.
Is Cryptocurrency a Good Investment?
Investing in cryptocurrency is as simple as buying stocks — there is a chance for massive gains if you plan your strategy well. For the past few years, numerous projects have brought investors massive profits, making it an appealing investment option.
To highlight just a few, let us look at an investor who invested in ETH in 2017 when it was priced at only $390. Anyone who bought the tokens and decided to sell them now when their price is $1917 has a profit of 391%.
BNB is just one of the many success stories where crypto investors have reaped huge. Dogecoin is another crypto that has performed exceptionally well. According to Coinmarketcap, the value of this meme coin has grown massively — it is estimated to have an ROI of 15,084%, making it a potentially profitable investment option for the long term.