What are the ways in which I can invest in cryptocurrency? Are there safe approaches to investing in cryptos, so that I do not end up losing my money all at once? Are there any guarantees when it comes to crypto investments? If you have been asking yourself the above questions, then you are in the right place because, in today’s post, I will be providing the answers you need. Read on till the end of the article to find out more.
Investing in Cryptocurrencies
Cryptocurrencies can be very rewarding investments but are not a good choice for every investor. For starters, cryptos are famous for their price volatility, with their prices fluctuating wildly daily. As it has come to the knowledge of even the most seasoned investors, even the seemingly stable cryptocurrencies present their significant downturns.
This, however, does not mean that cryptocurrencies are to be viewed as bad investments. We can view them as risky investments. Some investors have established unique ways to invest in these cryptos despite them being quite risky, and have ended up amassing massive fortunes.
As a beginner in the world of crypto investments, you can pick up a few ways through which you can invest in cryptos without exposing yourself to more risk than you can stomach, or excessive risks. The strategies I will lay out for you can enable you to maximize your earnings while keeping your risk as low as possible.
How to invest in cryptocurrencies safely
Invest a small amount of money in well-known cryptocurrencies
As a beginner, it can be quite tempting to sink huge amounts of money into the next big cryptos, driven by the hype to become the next crypto millionaire. Unfortunately, making investment decisions on pure speculation may not always work (it does not work in most cases), and may only lead to you losing a lot of money and getting frustrated.
A safer option would, as such, be to invest a small amount of money in cryptocurrencies that have a higher probability of growing over time. This can, in itself, be risky, as cryptocurrencies are also highly speculative, and it is not possible to determine their outlook in a decade or so. This, however, is the case with many other types of investments, but we can always use historical data to determine which ones are worth trying out.
Some cryptocurrencies are more established and stronger than others and come with the promise of gradual growth over the long-term horizon.
No matter where you invest, however, you should know that there are no guarantees, so you should only invest money that you can afford to lose. The rest of your investment portfolio should also be strong, to ensure that your position as an investor is not affected by any major fluctuations.
You should also be prepared to stomach short-term volatility, as you aim at reaping the long-term gains.
Invest in cryptocurrency stocks
Another option through which you can gain exposure to the crypto industry is through investing in cryptocurrency stocks.
Crypto stocks are offered by companies that are in one way or another involved in the cryptocurrency sector. It could be a company such as Nvidia, that has invested heavily in the technology used to build the computers that are used to mine cryptos. It could also be in companies such as Square, that make it possible for merchants to accept payments in certain cryptos.
If cryptos end up becoming widely adopted, then any of such stocks could benefit greatly and increase in value. Even if this option does not work out very well, your stocks could end up becoming viable long-term investments.
Before you invest using this approach, however, you should be aware that the underlying company’s involvement with the crypto industry is just one element of the state of their stocks. You should, as such, research the company as a whole, before purchasing any stocks. For starters, the stocks should offer the promise of significant returns over the long-term horizon, and if the cryptos involved also show the promise of excellent returns in the future, then that’s an added bonus for you.
Investing in Bitcoin ETFs
Bitcoin-linked ETFs have not been around for long, but have been a go-to option for investors who have dealt with ETF investments. Exchange-Traded Funds essentially enable an investor to gain exposure to an asset without purchasing it directly.
You can for instance try out the ProShares Bitcoin ETF which does not invest directly in Bitcoin, but in Bitcoin futures contracts (there are derivatives of Bitcoin). Like any other ETFs, the performance of these ETFs may not necessarily align with the performance of Bitcoin in the market, because they are not directly backed by Bitcoin. In general, however, as the value of Bitcoin increases, so does the value of the ETF.
One thing about investing in ETFs is that they come with significant risks, which everyone should be aware of before whipping out their checkbook. If, however, you are more concerned about the direction that Bitcoin prices will take in the future, you can purchase Bitcoin ETFs to gain exposure to this cryptocurrency. You only need to ensure that the rest of your portfolio is well-diversified, and you are parting with an amount of money that you can afford, owing to the fact that Bitcoin ETFs carry similar risks to cryptos.
Note that cryptos are very volatile investments, and even these safe options that we have discussed today may always be ‘very safe’. If you are eager to invest in cryptos, however, there are ways through which you can minimize risks, by being strategic. You can also opt to open a cryptocurrency IRA, which helps you save a lot of money in taxes since IRAs have tax advantages by design. Below are some top-recommended crypto IRAs worth considering.
Also read: 16 Cryptos to have in your IRA
That will be all for this post in which we have responded to the question “What are the ways in which I can invest in cryptocurrency?”. I hope that you found it helpful and that you will now move forward with an idea of how you can get started with crypto investments. If you have any questions with regards to this topic, kindly let me know by dropping them in the comments section – I will get back to you ASAP.
I wish you well,
Eric, Investor and Team Member at Gold Retired!