Despite the fact that cryptocurrency appeared a little more than ten years ago, this asset today enjoys increased popularity among investors. The first digital coin, known as Bitcoin (BTC) , was created in 2009. Over the almost 15-year history of its existence, this cryptocurrency was able to reach a price of several tens of thousands of dollars, and at its peak the Bitcoin rate reached 18 thousand dollars. In addition to BTC, there are over 200 cryptocurrencies on the world market, which are also available for investment. You can learn more about various coins from the cryptocurrency rating .
Investors who were the first to invest in digital coins have become dollar millionaires today, but investing in cryptocurrency now involves more risks than before.
Important nuances of investing in cryptocurrency
Regardless of the type of cryptocurrency, the following must be considered when investing in this asset:
- High volatility and, as a result, high risks, since the cryptocurrency rate changes rapidly. In this regard, investors on this asset can either quickly make or lose money. Therefore, it is recommended to invest a small part of your total capital in cryptocurrency.
- Cryptocurrencies are a virtual asset. Each crypto wallet is encrypted with a special key, without which it is impossible to access digital money. In this regard, when working with cryptocurrencies, it is necessary to consider security issues. In addition, it is recommended to store cryptocurrencies in “cold” wallets (third-party media).
- Every transaction with cryptocurrency is irrevocable. That is, having sent money to another wallet, the user cannot return it unless the recipient refuses to send it back.
Many investors who did not consider the risks above have lost their money when trading cryptocurrency.
Ways to invest in cryptocurrency
In the first years after the appearance of cryptocurrencies, anyone could mine it through mining, but today this method is not very popular, since this process requires very powerful computers. Therefore, at the moment, most mining farms belong to large companies, and investors mainly buy coins for fiat money in specialized exchangers or on exchanges.
Using online exchangers
The easiest way to buy or sell cryptocurrency is to use the services of online exchangers. This procedure takes about 15 minutes, and the duration of the process most often depends on the network load of a particular cryptocurrency. To search for an exchange office, experienced investors recommend using the BestChange service, which shows the best offers for buying/selling digital assets depending on the reliability of the site and other parameters.
The rate on such resources is usually less favorable than on cryptocurrency exchanges , but you can purchase coins there using any payment system. This option is suitable for purchasing your first cryptocurrency or exchanging small amounts. Similar operations are carried out through special telegram bots such as BTC banker.
The advantages of this exchange method include the following:
- simple and convenient interface that supports the Russian language;
- fast operations;
- the procedure is carried out without registration;
- Conflict situations and problems that arise can be resolved through the support service.
The disadvantages of online exchangers include the following:
- such exchange offices work only with popular cryptocurrencies;
- unfavorable exchange rate;
- There is a risk of deception, since many exchange offices operate unofficially.
Direct exchange
Services offering similar services (p2p or peer to peer) function similar to online exchangers. But there is a fundamental difference between such resources. When submitting an application, exchangers freeze the seller’s money until the buyer receives it. For this service, the services charge a certain commission and they also make money on the difference in rates.
With direct exchange there are no intermediaries. In this case, transactions are carried out directly between the seller and the buyer. Similar services, in particular, are offered by the LocalBitcoins service. After registering on this site, each user can find a seller of a specific currency. The service also allows you to search for people who are ready to transfer funds to a specific account (to an online wallet, bank card, and so on). For each ad submitted, LocalBitcoins charges 1% of the application amount.
Until recently, this service allowed such operations to be carried out in person, but now this option, as well as anonymous exchange, has been abolished. Now account verification is required to carry out exchange operations.
The advantages of such services include the following:
- no additional fees (except for those charged when registering an ad);
- you can choose the appropriate exchange rate and method.
The disadvantages of direct exchange include:
- operations are carried out only with Bitcoin;
- Account verification is required for exchange.
If you wish, you can save on the commission of direct exchange services. To do this, it is enough to find on message boards or other resources a person who is ready to buy or sell a specific cryptocurrency and agree on the operation. However, this option is considered the most risky, since the likelihood of funds being credited to the account directly depends on the reliability and integrity of the seller.
Exchange on a cryptocurrency exchange
An exchange is a professional platform where transactions for the purchase/sale of cryptocurrencies are carried out. This exchange option is suitable mainly for users who have previously worked with similar sites. This is explained by the confusing interface of exchanges, which are aimed at more professional traders who invest in cryptocurrency on an ongoing basis. In addition, many sites do not support the Russian language. But some of them (for example, EXMO or Binance ) have a Russified interface.
To carry out any operations on the stock exchange, you must:
- register a new account;
- verify your account (not always);
- top up your account.
After replenishing the balance, you need to place an order to buy or sell the selected cryptocurrency in the exchange’s trading terminal, and this can be either a pending order or a market order, since most exchanges offer several types of transactions available to users.
Working on the stock exchange is beneficial for the following reasons:
- you can exchange cryptocurrencies at an attractive rate;
- allows you to make a profit from trading cryptocurrencies;
- You can buy/sell little-known cryptocurrencies.
Among the disadvantages of working with the exchange are the following:
- Stock trading skills are required;
- Some exchanges do not support the Russian language;
- some exchanges do not support trading with real (fiat) money, but only with cryptocurrency;
- verification required (not applicable to all exchanges).
In addition, exchanges charge fees for almost all transactions, including withdrawals. It should also be taken into account that the exchange can be hacked by attackers to steal funds, and such cases have happened more than once in the entire history of the existence of exchanges.
Earning money from cloud mining
Mining refers to the process by which cryptocurrency is mined. Depending on the type of digital coin, its mining is carried out using the Proof of Work (PoW) or Proof of Stake (PoS) algorithms. Most cryptocurrencies (including Bitcoin) are included in the first group. The development of such coins today requires very powerful computers or special farms, as well as significant energy costs, so mining BTC and other popular cryptocurrencies is impossible on a home computer due to the increased hashrate. But despite the above, small investors can mine such digital coins by investing relatively small funds in cloud mining.
The essence of the technology comes down to the following: for a certain fee, the user buys part of the capacity at which cryptocurrency is mined. This mining method was especially popular in the period from 2016 to 2017, but later investors began to invest less and less in such pools, as earnings began to fall significantly, and many fraudulent services operating like a financial pyramid appeared on the network.
Which cryptocurrency should you invest in in 2024?
Today, as before, more than half of the transactions on the cryptocurrency market are carried out with Bitcoin, since in comparison with other digital coins, investments in this asset are considered the least risky. However, as is the case with other cryptocurrencies, the Bitcoin exchange rate is subject to significant fluctuations. Moreover, a number of experts are confident that the price of BTC has reached a certain threshold, so they advise focusing on investments not only in BTC, but also in other cryptocurrencies.
NEO
The Chinese cryptocurrency NEO has the same advantages as other digital coins: independence from the state, decentralization, cryptographic encryption methods, and more. But this asset is distinguished by several features that allowed it to enter the top ten most popular coins in the world.
The advantages of this cryptocurrency include low commissions for transactions, an energy-efficient PoS mining algorithm, and the cryptocurrency supports the most common programming languages, which opens up additional prospects for commercial use for its holders.
A significant role in the growth of NEO’s popularity was facilitated by the fact that the developers cooperate with the Chinese authorities and leading global corporations.
Cardano (ADA)
The Cardano cryptocurrency is a public blockchain with decentralized governance. This digital coin is based on powerful technologies that open up new opportunities for the consciousness of smart contracts and the development of a fundamentally different economy, also built on the basis of decentralization.
The system itself operates on a modified PoS algorithm. In addition, it uses the Ouroboros data transfer protocol, and the system was developed based on the Haskell programming language, which is considered one of the most secure today.
The Cardano coin also stands out because it is well adapted to the peculiarities of the cryptocurrency economy. Thanks to this, this asset can be considered as a tool for long-term investment.
Stellar (XLM)
The developers of Stellar said that the technologies that underlie the cryptocurrency are capable of rebuilding the financial infrastructure around the world for the better. This project is a consent platform with decentralized management and thanks to this resource, any person or company can conduct exchange transactions without the participation of third parties (intermediaries).
According to the developers, the Stellar platform will be popular because it ensures cooperation with individual organizations and investors. At the same time, banks do not take part in exchange operations, whereas in a classical economy such procedures are not carried out without them.
According to investors, investing in the Stellar cryptocurrency should be with an emphasis on the long term and it is believed that the coin will be able to bring good profits after a few years.
Monero (XMR)
The popularity of this coin is facilitated by the fact that it is considered one of the most anonymous and when carrying out transactions with Monero it is impossible to track either the sender or the recipient.
The price of this cryptocurrency changes less significantly, but investors consider Monero a promising digital coin.
This cryptocurrency is characterized by high capitalization with a relatively low level of emission, so during 2024 the Monero rate may rise sharply.
Cryptocurrency mining is carried out using a special CryptoNight algorithm, which does not support ASIC mining technology. This expands the ability to decentralize Monero development. The advantages of this coin include easy scalability and, unlike Bitcoin, the block size of Monero is unlimited.
IOTA (MIOTA)
The growing popularity of IOTA among investors is facilitated by the fact that transactions with this cryptocurrency are carried out without commission, and the coin is issued without mining. According to the developers, this system is capable of self-sustaining, while the cryptocurrency network is characterized by infinite scalability, where each transaction within the system is confirmed only by users.
Most cryptocurrencies are based on a blockchain, but IOTA is based on a unique Tangle consensus method. In addition, the coin itself is positioned as a payment instrument in the Internet of Things environment. These features, according to experts, will increase the number of connections within the IOTA system to a billion by 2024, which will ultimately make the cryptocurrency more popular.
EOS
During the initial placement on the exchange, the total capitalization of the EOS coin exceeded $1 billion. Such phenomenal growth is partly due to the statements of the developers, who said that they are ready to present a perfect ecosystem, devoid of the shortcomings of other cryptocurrency networks. They also said that the money of the future must have three important features: easy to use, ultra-fast and reliable.
It is these three specified characteristics that formed the basis of EOS, despite the fact that the platform on the basis of which this cryptocurrency was created has not yet been fully developed. But despite this circumstance, EOS is actively traded on many exchanges.
Tron (TRX)
The Tron cryptocurrency was created on the basis of a decentralized platform of the same name, designed like a social network.
In the future, Tron has every chance of replacing Google Play and the AppStore, since on this platform users can store and watch various entertainment content, and this platform also allows you to promote a variety of games and other applications.
The growth in demand for this cryptocurrency directly depends on the increasing popularity of entertainment resources, and this segment of the digital market, according to various estimates, is worth about one trillion dollars today, and it continues to develop and grow.
According to experts, at least 10% of all entertainment platforms will switch to using blockchain technology in the near future, which could lead to an increase in the Tron rate.
QTUM
QTUM is a hybrid platform that functions similar to the Ethereum cryptocurrency. That is, within the framework of this system, you can connect all block chains to a virtual machine, as well as create smart contracts and applications using the capabilities of blockchain.
QTUM is primarily intended for the development of smart contracts. But this system allows you to create reliable sources of storing information in the form of transactions represented in the blockchain. The Qtum developers intend to implement their platform in various spheres of life: in the financial sector, the gaming world and the Internet.
VeChain (VEN)
Based on blockchain technology, the VeChain platform is designed to digitize people, various objects or events. In particular, this system greatly simplifies the control and verification of goods sold through online stores.
To date, the VeChain platform operates several resources involved in the sale of food products, logistics, and agriculture. Each product registered in this system receives a unique identifier, which is stored in the blockchain. This code is also applied to the packaging in the form of a QR code or implemented using a special chip.
Using the specified identifier, the user can at any time find out the history of the purchased product (where it was produced, composition, and so on). Thanks to VeChain technology, the level of service is increased and favorable partnerships are created in different business sectors.
NEM (XEM)
The Japanese NEM platform was developed with the aim of introducing blockchain technology into various business processes that require a decentralized data management system. The cryptocurrency of the same name is mined using a modernized POI algorithm, in which the speed of block creation directly depends on the frequency of use of this coin. Moreover, it takes about 60 seconds to form, which is a record among all cryptocurrencies.
To date, the Mijin system has been created on the NEM platform, with which you can safely carry out transactions between banks, and this network has already been successfully tested. It showed that over two million transactions can be carried out within 24 hours within the NEM system.
This cryptocurrency is already used as a means of payment in Japan, and NEM developers plan to enter the Chinese and Malaysian markets. At the same time, experts have not yet agreed on whether it is worth investing in cryptocurrency for the long term.
Algorithm for investing in cryptocurrency
Investing in cryptocurrency can be divided into several steps, each of which requires compliance with certain conditions.
Investment method and strategy
First of all, you need to decide why you are buying cryptocurrency - as a tool for long-term investment or trading on the stock exchange. In addition, you need to choose a method for purchasing cryptocurrency.
Experts recommend that beginners use a long-term investing strategy that requires little to no involvement. It should be taken into account that the cost of cryptocurrency is subject to significant fluctuations, so investing in this asset for a week or month is unprofitable and it is better to buy cryptocurrency with the goal of selling it in a few years.
Choosing a place to store cryptocurrencies
You can store cryptocurrency in both hot and cold wallets, and in order to choose a wallet for storing cryptocurrencies , you need to decide on the amount, as well as the goals.
If you intend to store cryptocurrencies for a long time with the aim of making a profit in a few years, then you should definitely consider only cold storage, as this is the safest method. But if you plan to constantly carry out cryptocurrency transactions, then you can use hot wallets, which also include exchanges.
Buying crypto coins
When purchasing crypto coins on specialized exchangers, you must indicate the address of the wallet to which digital money will be credited for some time.
When performing transactions on the exchange, all funds go to the balance of the user registered on the platform. The wallet address will only be required if the trader wants to withdraw cryptocurrency.
Selling cryptocurrency
Before investing in cryptocurrency, you need to determine what price the coin needs to reach before selling it. In this regard, after purchasing an asset, you will have to periodically monitor changes in the rate and you need to take into account that the price of cryptocurrencies is subject to significant fluctuations, and at some point it may fall significantly below the original value.
Advantages and disadvantages of investing in cryptocurrency
Investing in cryptocurrency is attractive for the following reasons:
- Crypto coins allow you to get high profits in a relatively short period of time;
- investor participation in price growth is minimal;
- Anyone can invest in cryptocoins, even people who do not have the appropriate skills;
- entering the cryptocurrency market does not require large investments.
The main disadvantage of this investment method is that there is no guarantee that the trader will make a profit. You also need to take into account that this market is not regulated by law, and in the short term this investment direction often brings losses.
Risks
Investments in cryptocurrency are associated with various risks, and above all this concerns the inattention of the trader, who, due to his own mistakes, may lose or forget the secret key to the wallet, and, as a result, access to funds. Also, sharp price fluctuations can lead to losses depending on the amount of funds invested.
Also quite rare, but still possible, is the option of stealing cryptocurrency through a hacker attack.
Conclusion
Investments in cryptocurrency can bring high returns, but they are associated with many risks that do not depend on the will and behavior of the trader. In this regard, you can enter this sector of the market using only “extra” money, which you won’t be afraid to lose.
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