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September 21, 2022

Guide: Investing in Cryptocurrency

Since the market reached an all-time high in November 2021, cryptocurrencies have been going through a brutal bear market. The total value of the once-surging asset class has dropped by around two-thirds in a little under a year. It fell from over $3 trillion in November of last year to less than $1 trillion as of the time this article was written (September 19th, 2022).

Nevertheless, in spite of this, the sector remains a highly promising industry in terms of investment opportunities. The cryptocurrency market is a very volatile one; hence, just as it is now in a bear market, it will ultimately transition into a bull market just as it has done in the past. That is the natural flow of things. However, there should be no question in anyone’s mind that the cryptocurrency sector is a good potential investment in the long run.

What to Do When You’re Investing in Cryptocurrencies

Before putting money into anything, you should know precisely what it is. Since there are thousands of currencies, each of which performs a somewhat different purpose and new ones are minted every day, prospective crypto investors would be wise to complete extensive due diligence before making any purchases. Each transaction requires that you comprehend the investing case COMPLETELY.

Supply and demand are the only two factors that affect the value of a cryptocurrency. There will be a rise in price if demand exceeds the available supply. Price increases when supply decreases and vice versa. As a result, the most crucial factors to consider when assessing a cryptocurrency are the means by which its supply grows and the forces that will boost its demand.

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At the end of the day, you shouldn’t invest any money in cryptocurrency that you can’t afford to lose. The same holds true for other market-based assets like equities and ETFs; if you can’t afford to lose it all, you shouldn’t invest in a risky asset like cryptocurrencies.

How to Invest In Crypto

You may make a direct investment in Bitcoin by using one of the main cryptocurrency exchanges, such as Coinbase or Binance. This will allow you to buy Bitcoin directly. Other alternatives include FTX, Gemini, and eToro, in addition to more recent brokers like Robinhood that enable cryptocurrency trading.

If you’re looking to exclusively invest in the world’s largest cryptocurrency Bitcoin, buying shares of a firm that has considerable exposure to the king crypto. Such as a Bitcoin mining company, is another option to obtain investing exposure to the cryptocurrency Bitcoin. Investing in a fund that focuses on Bitcoin, such as an exchange-traded fund (ETF), offers a third alternative.

Cryptocurrencies Beginners Can Invest in Right Now

Bitcoin (BTC)

Bitcoin is the finest Proof-of-Work coin and is what sparked the crypto craze. The OG crypto. The king. Market players invest in Bitcoin despite other projects’ more ‘exciting’ application cases because of its first-mover prominence. Instead of buying a whole Bitcoin (BTC), you have the option of purchasing portions of Bitcoin (BTC). At the time of this writing BTC is valued at precisely $19,038 apiece. You can even get a 0.0001BTC if you wish, although that’d bring you nothing seeing as it is only $2. 

Ethereum (ETH)

Ethereum (ETH), the world’s second-largest cryptocurrency, is also a good bet. The cryptocurrency recently underwent a major event known as the Merge upgrade. Ethereum shifted from a Proof-of-Work (PoW) consensus mechanism to a Proof-of-Stake (PoS) one. The goal of the Merge is to alleviate the cost of GAS for Ethereum users by making the network more scalable. If this update does what it’s supposed to, Ethereum would go on to do amazing things.

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Cardano (ADA)

Cardano (ADA) is a cryptocurrency that was developed by a team of researchers comprised of engineers, mathematicians, and cryptography specialists. It is an “Ouroboros proof-of-stake” cryptocurrency. Cardano is developing Ethereum-like DeFi products and addressing issues like chain interoperability, voter fraud, and legal contract tracking. The network plans to become the de facto global financial operating system. At the time of writing, the market size of Cardano is $15.4 billion. This makes it the eighth biggest cryptocurrency by market cap, and one ADA coin was trading at around $0.45.

Solana (SOL)

Solana is another popular cryptocurrency coin for beginners. The network has a high degree of scalability offered by the blockchain. Solana emerged as the cryptocurrency with the most rapid rate of growth in 2021. Many developers of decentralized applications (dApps) have chosen to build their platforms on the Solana network. This is instead of Ethereum because of its issues with high GAS fees and sluggish throughput.

Several sources claim that Solana is capable of processing 65,000 transactions per second (TPS). This has an average cost of $0.00025 per transaction. The blockchain is able to do this via the use of a one-of-a-kind consensus called “Proof-of-History.” This is enabling Solana to continue to be totally decentralized while also providing significant scalability.

Ripple (XRP)

For the XRP Ledger, a digital currency developed by Ripple in 2012, XRP serves as the native token. Neither proof-of-work nor proof-of-stake is used in the XRP Ledger Consensus Protocol, which XRP is using for consensus and validation. Transactions are instead signed and sent from client apps to the blockchain servers. When the servers do their comparison, they decide whether or not the transactions should be added to the ledger.

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The servers then forward the potential transactions to the validators. They verify the accuracy of the data and update the ledger accordingly. So far, XRP has amassed a market worth of $19 billion and is currently trading at roughly $0.38.

Final Thoughts

It’s true that blockchain, the technology behind cryptocurrencies like Bitcoin and Ethereum, seems complicated at first. Nonetheless, purchasing bitcoin is quite similar to purchasing equities.

For the most part, when you put your money into a cryptocurrency, you’re banking on the token’s value going up so that you may sell it for a profit. Yes, that’s the rub.

For investors wanting to put their money into cryptocurrency, be prepared for the crazy trip and know what you’re doing. The predicted returns are larger than those of most other asset types. So if you can pull it off, it may be worthwhile.

For those interested in learning how to invest in cryptocurrency for beginners CLICK HERE to watch a 5-part mini-series and learn about ways to invest in crypto.