Cryptocurrency is not a digital version of the dollar or euro. It is a tool, which doesn't depend on national banks, and has no regulator or supervisor. It is not backed by anything tangible. In other words, cryptocurrency is a record, a unit for calculation, the information about which is stored in a digital blockchain.
A legitimate question arises as to why cryptocurrency exists and where it is used. It has two purposes:
- A means of payment.
- An instrument for investment.
So let's break down in detail why to invest in cryptocurrency, how to do it and determine the best way to invest in cryptocurrency.
Why invest in cryptocurrency
The reputation of the digital currency reaches newer heights, the trust of users is also growing. This is facilitated by:
- Increased use of cryptocurrency, including in the government sector.
- Some major online stores now accept bitcoin, allowing the currency to continue to grow at a rapid pace.
- The availability of digital currency is increasing with the installation of street ATMs.
- The development of cryptocurrency is also associated with the use of new tools for the storage of funds and the development of mining.
As experts predict, the value of cryptocurrencies will grow. It is worth considering the fact that long-term investments over a year bring great profits to the investor and almost never go bust, while short-term investments will not be profitable at all if the quotes go down temporarily. For these reasons search queries like best cryptocurrency to invest in 2022 become more and more popular.
Where to buy cryptocurrency
In recent years, the crypto market has grown manifold, the industry is attracting more and more users, so there are a lot of options to buy, for example, bitcoins today.
- P2P exchanges. This is a direct purchase and sale of cryptocurrency by users without the involvement of a third party or intermediary. You can choose the option with the rate that suits you and make the exchange. This is a quick way to exchange digital money for cash and vice versa.
- Exchanges. This is a kind of analogue of trading, such as Forex, for example. Each participant, investing real money, has the right to make transactions related to the analysis of bets, engage in selling and exchanging bitcoins and other popular types of currencies for real money.
- Cryptocurrency wallets. Some cryptocurrency wallets allow you to buy and withdraw funds. However, commissions for such transactions will also be impressive, so if you want to hold on to bitcoin until its rate goes up and then sell it the same way, earnings can be literally gobbled up by the charges for the use of the site.
- Apps. There are various services that offer to buy or sell cryptocurrency directly in a mobile app. Every service has its own commission for transactions, which should be accounted for when purchasing and trading digital activities. But it is better to select the most trusted option and overpay a little than to try to save money and lose everything.
How to invest in cryptocurrency
Today, when the popularity of major tokens in the world is breaking all records, there are many options for investing in crypto assets. Consider the best place to invest in cryptocurrency.
Buy and hold
The investment option, which is well known to stock market participants, involves buying an asset with a long-term perspective. The cryptocurrency market continues to grow despite the scepticism about its assets by some of the largest, well-known investors. Accordingly, such a purchase of tokens with the expectation that the rally will continue is justified. We discussed where to buy cryptocurrency in the previous paragraph.
Most often people mine bitcoins or Ethereum, which can be explained by their most serious demand and popularity on the market at the moment. The owner of a computer with special hardware (usually graphic cards), using its resources to operate a virtual payment system, collects and processes information about the cryptocurrency transactions taking place at the moment. For processing the information, the owner of the computer resource receives remuneration in the form of a commission assigned by the virtual money owner, or remuneration in the form of a portion of the cryptocurrency emitted during the process of mining.
Basically, similar to the usual, but not on the user's own equipment, but on the rented equipment from the owners of the project. As a rule, the contract is for a fixed time. Depending on the amount of investment, the user receives a part of the productivity. It determines the amount of remuneration.
Stacking is an alternative to mining, it allows you to earn coins simply by storing your coins in wallets connected to the Web. The larger your wallet balance, the more money you can earn. This is made possible by the introduction of the new Proof of Stake consensus mechanism. It works similar to a deposit or stock purchase, where holding funds involves earning bonuses.
Trading on cryptocurrencies
For an experienced investor, this method is the closest: a cryptocurrency exchange does not differ much from an ordinary exchange platform. To minimize risks, it is better to open an account on large reputable exchanges.
What to consider before investing in cryptocurrency
Many people are interested in the topic of cryptocurrencies mainly in terms of investments and earning opportunities. What should a novice crypto-investor keep in mind?
- Investing in cryptocurrencies sometimes involves a risk that an investor should consider. Exchange rates fluctuate from hundredths to hundreds of percent over the course of several months. For example, between October 2020 and February 2021, the price of Bitcoin rose over 340%, making it the best cryptocurrency to invest in today.
- You need an investment plan to invest in crypto. You need to be clear about how quickly you want to make a profit, how much you are willing to invest, and what asset to use. For example, if you want to invest in long term assets, you first need to determine the best cryptocurrency to invest in the long term.
- The most important rule for beginner investors is to invest only as much as you are ready to lose in case of failure of your investment project and to do research on the cryptocurrency market by yourself.
How to make money with cryptocurrency
Cryptocurrency exchange at different rates
The major-specific feature of the сrypto-currency market is volatility. If you want to understand, for example, how to invest in bitcoin stock, you will have to work on the principle of currency exchange. The only difference in the cryptocurrency market is that there are a lot of exchanges, and you can choose any service you want to work with. These kinds of platforms are safe, clear and reliable. Earnings are calculated on the basis of the difference in rates of floating.
Trading is one of the most popular and effective variants of income on the digital currency market. In this case, the main goal of the trader is to buy cheaper and sell dearer, which brings profit. But the problem is that it is almost completely impossible to foresee currency exchange rate fluctuations. So trading can be regarded as a risky way to make money. You have to be able to analyze the market and understand how to manage the risks.
What to know before investing in cryptocurrency
Surely you many times asked yourself the question - what is the best way to invest in bitcoin? We will give you some tips to help you start investing and dispel some doubts.
- Have a general level of knowledge about cryptocurrencies, mining, leading coins and the market situation in general.
- Decide on an investment amount and outline a strategy
- Choose the currency you want to invest in.
- Choose a trader or an advisor company that will accompany you in the initial stages - to analyze, minimize risks and determine the most profitable strategy.
How to invest in cryptocurrency using bots
And finally, the most interesting - the XXI century has given the opportunity to carry out productive crypto-trading in automatic mode through special crypto bots. A cryptocurrency robot is a specially created algorithm that uses various indicators and a software system that recognizes the best market entry points and makes trades on behalf of the user. Traders with coding skills and programming knowledge can create their own crypto bots or competently optimize the existing ones for efficient trading with digital coins. The robot can trade crypto assets on its own and bring income to its owner. If you want to try a free bot or immediately buy a professional assistant, first carefully study its strategy and settings.
Here's what you should keep in mind:
- Terms of service.
- The basics of the strategy.
- A number of different settings.
- The presence of restrictions on coins, trading platforms and the amount of the deposit.
However, it should be remembered that an automatic trading program does not always react correctly to sudden changes in the situation, and can leave without potential profit. The complete absence of emotions is not always a plus, so the trader should not relax either.