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How do I start to invest in cryptocurrency?

by Brad Fein
invest in cryptocurrency

Whether you are a novice or experienced trader, there are several reasons to invest in cryptocurrencies. This relatively new market is full of opportunities and offers several different paths to successful trades.

Reasons to Invest in Cryptocurrencies

Bitcoin investments have proven to provide sustained returns to savvy investors. Traditional markets, such as commodities and forex, are nowadays properly understood, and it can be difficult for novice traders to compete successfully against experienced ones. The cryptocurrency market is different. Bitcoin has only existed for just over 12 years, and other coins are even younger. This means that the market is still highly competitive, and even novice users can participate profitably from Bitcoin investments.

Other reasons for trading cryptocurrencies include:

  • Investment simplicity – The best cryptocurrency exchanges offer you the option to buy Bitcoin or Altcoins in a few simple steps. Even if you’ve never bought cryptocurrencies before, you can open an account, deposit funds, and make your first trade quickly. You can check the list of the best cryptocurrency exchanges here on Cryptimi.
  • Invest in the future – Just like commodities and forex, cryptocurrencies have found their place in the open markets. Analysts are confident that this asset class will continue to be traded for decades to come. By making your first Bitcoin investments today, you are adding yourself amongst earlier investors, allowing you to gain experience and knowledge before others.
  • Control your funds – Unlike certain other investment opportunities, by buying and selling Bitcoin you retain the control to liquidate your investment at any time. The best cryptocurrency exchanges let you trade Bitcoin 24 hours a day, with no holidays or shutdown periods.
  • No minimum deposit – You can start investing in Bitcoin and other cryptocurrencies with as little as $1, although this won’t result in any significant profits. However, this means that the cryptocurrency markets are open and accessible to anyone with an Internet connection. Since competition amongst exchanges is fierce, and cryptocurrencies have no central authority to control them, this market is truly liberalised and democratic.

Familiarize Yourself with the Risks

When investing in cryptocurrencies, you have a choice of financial instruments. Each instrument comes with various opportunities and risks. You should be aware of these risks before proceeding with any Bitcoin investment.

Investing in Bitcoin coins

Buying and selling Bitcoin is one of the earliest and most common forms of Bitcoin investment. The majority of the best cryptocurrency exchanges support the purchase and sale of coins. All you need to start trading is an account which is funded by either fiat currency or other cryptocurrencies.

When investing in Bitcoin coins directly you need to be aware of two primary risks:

  1. Market volatility – Cryptocurrencies are well-known for being highly volatile. Whilst this presents exciting opportunities for day traders and serial investors, it also represents a risk of instability in market prices. Within a few hours, the price of Bitcoin can rise and fall dramatically.
  2. Secure storage – When you buy coins you need to store them securely in a wallet. Most cryptocurrency exchanges offer free wallets, but you shouldn’t store large amount of coins there. The safest wallets are hardware ones, but these can cost $50 and over.

Investing in Bitcoin derivatives

Bitcoin derivatives are an alternative way to invest in Bitcoin without actually owning the coins. The most popular type is the Contract for Difference (CFD) and is available in some of the best cryptocurrency exchanges. When investing in derivatives, high volatility might result in the loss of a significant portion of your investment. Since you do not own any coins, if the price changes dramatically the platform might automatically close your position.

Another important risk to consider is linked to leverage. By trading on margin you are able to open larger positions which you would otherwise be able to, but by using leverage even smaller prices changes might result in losses.

Decide on the Best Investment Approach

Choosing which investment approach is best for you depends on your investment strategy. The following is an explanation of how some of the best cryptocurrency exchanges can help you based on your approach.

eToro

eToro is a regulated trading platform which offers a variety of markets and financial instruments. The platform is suitable for traders wishing to buy Bitcoin, as well as those planning to invest in Bitcoin CFDs. eToro fees are really easy to understand, you can have a look at them here. With eToro you can get access to a wide variety of coins, and you can fund your account using several convenient methods, including cards, eWallets, PayPal, and bank transfers.

Binance

Binance is one of the largest cryptocurrency exchanges in the world and is well known for offering over 450 different coins and tokens. Originally, the platform would only support cryptocurrencies but is progressively developing additional products and services. Today, you can buy and sell Bitcoin and other coins using cards, and the platform is also offering a limited range of CFDs.

Plus500

Plus500 is a regulated CFD trading platform which was amongst the first to include cryptocurrencies in its portfolio. Available around the world, with the notable exception of the USA, Plus500 gives you access to a good selection of coins, whilst also making it possible to invest in commodities and foreign currency. The platform offers competitive fees and provides you with educational resources to help you learn how to invest in Bitcoin.

Bitcoin and Other Coins

Bitcoin is the world’s largest and best-known cryptocurrency. The world’s first cryptocurrency has a current market cap which exceeds $176 billion. Next on the list are Ethereum and XRP, oftentimes referred to as Ripple. These two currencies combined have a market cap of $30 billion, far below that of Bitcoin.

When investing in cryptocurrencies, traders tend to prefer these coins, since they are a safer option and unlikely to disappear. However, those looking to take bigger risks in the hope of greater returns also invest some of their capital into smaller, less popular coins, such as IOTA, Zcash, and Dash. Sometimes, it is sufficient for an influencer to suggest purchasing such coins for their price to skyrocket. On other occasions, it is announcements of collaborations or developments which creates renewed interest, and therefore trading, of these lesser-known coins.

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