{"id":536213,"date":"2023-06-02T15:20:40","date_gmt":"2023-06-02T15:20:40","guid":{"rendered":"https:\/\/wncen.com\/?p=536213"},"modified":"2023-06-02T15:20:40","modified_gmt":"2023-06-02T15:20:40","slug":"how-to-invest-in-cryptocurrency","status":"publish","type":"post","link":"https:\/\/wncen.com\/learn\/how-to-invest-in-cryptocurrency\/","title":{"rendered":"How to Invest in Cryptocurrency for Beginners"},"content":{"rendered":"

What is cryptocurrency investment?<\/h2>\n

Cryptocurrency investment in its most basic form is the process of buying digital currencies and holding them in the hope that the market falls in your favour while your portfolio increases in value.<\/p>\n

The value of a cryptocurrency is determined by the principle of supply and demand. As demand for a cryptocurrency, coin or token rises, there becomes fewer of them in circulation \u2014 resulting in a boom in price action. If the supply of coins outpaces demand for them, their value typically falls.<\/p>\n

There are several indicators that might draw an investor towards a particular cryptocurrency. Some investors and traders choose which cryptocurrencies to invest in by conducting a technical analysis of a range of coins.<\/p>\n

An investor might have certain criteria that need to be met to invest. For example, cryptocurrencies that are in an overall uptrend, are showing positive signs of adoption and have a durable, scalable blockchain interface are more desirable than those that don\u2019t.<\/p>\n

Common types of crypto investing<\/h2>\n

There are many ways to invest in cryptocurrency, besides directly purchasing coins or tokens through an exchange.<\/p>\n

Some of the common types of crypto investing include:<\/p>\n

Investing in crypto-oriented or pro-crypto companies<\/strong> \u00ad\u2014 As the prices of cryptocurrencies soar, so does the stock price in companies that form their business around them. Companies that are able to integrate cryptocurrency blockchain networks into their service offering can prove profitable as cryptocurrency use becomes more widespread.<\/p>\n

Investing in crypto-heavy funds<\/strong> \u2014 Crypto funds typically carry less risks than committing capital to one specific cryptocurrency. As some cryptocurrencies bull and others bear (decrease or increase), fund holders can still benefit from having their losses hedged by their gains \u2014 making them attractive to more risk-averse investors.<\/p>\n

Buy crypto EFTs on a brokerage platform<\/strong> \u2014 Similar to crypto funds, EFTs can also be a great way diversify a portfolio without committing large amounts of capital. The price of an EFT is determined by the price action of a group of coins or tokens rather than just one \u2014 making it a safer option for novice investors.<\/p>\n

Incorporate cryptocurrency into your Roth IRA or 401K<\/strong> \u2014 More and more brokerages and investing platforms are allowing cryptocurrency allocations to be held in an IRA or 401K account. For example, Fidelity is unveiling plans to allow users to dedicate 20% of their 401k holding to cryptocurrencies \u2014 allowing investors to diversify their 401k.<\/p>\n

What do I need to know before investing in cryptocurrency?<\/h2>\n

Before plunging into the world of cryptocurrencies, there are a few things to consider:<\/p>\n

Cryptocurrencies are unregulated and decentralized<\/strong> \u2014 Despite being one of the allures that draw investors towards cryptocurrencies, their decentralization can make them potentially dangerous. The threat of scams and fraud can make it a risky asset to hold.<\/p>\n

They\u2019re known for huge fluctuations in price action<\/strong> \u2014 Bitcoin<\/a>, Ethereum<\/a> and many other altcoins are extremely volatile. Because their price is determined largely by hype and speculation from coin makers and blockchain developers, it\u2019s difficult for investors to gauge the long-term profitability of cryptocurrency investments.<\/p>\n

Exercise caution when dealing with ICOs<\/strong> \u2014 Similarly to how companies have an initial public offering (IPO) for their stock price when they first go public, emerging cryptocurrencies start out the same way \u2014 offering what\u2019s known as an initial coin offering (ICO). Investors must be wary of these as they\u2019re known for their limited transparency when it comes to development progress, user adoption and potential issues, so investors may risk buying into pump and dump schemes.<\/p>\n

Only invest amounts you\u2019re comfortable losing<\/strong> \u2014 Because of their inherent volatility \u2014 and lack of data to support consistent long-term growth potential \u2014 it\u2019s important investors only invest small portions of their portfolio into cryptocurrency when starting out.<\/p>\n

Protect your private key<\/strong> \u2014 If you\u2019re using a cold or hot wallet to store your cryptocurrency, you\u2019ll need a private key \u2013 an alphanumeric code that acts as a password. Protecting this key is paramount to guarding your investments as criminals can steal it and walk away with your assets.<\/p>\n

Choose the best coin exchange, broker or wallet to suit you<\/strong> \u2014 Whether you\u2019re a long-term or short-term investor \u2014 or even a day-trader \u2013 selecting a broker or exchange that works best for your needs is essential. Investors must consider the features of the site \u2014 like what currencies are available, what you can buy and sell and leverage options \u2014 as well as transactional costs that are more suited to their investment style.<\/p>\n

What do I need to invest in cryptocurrency?<\/h2>\n

Investing in crypto is simple and easy to do. All you need is some liquid capital \u2014 in the form of a fiat currency like dollars or pound sterling \u2014 and an account with a broker or crypto exchange.<\/p>\n

To get started, you need to:<\/p>\n