The rise of digital currencies like Bitcoin and Ethereum has hit the headlines and drawn investors under its spell, while many early adopters have gotten very, very rich. However, just as many people have lost money, especially given the fact that the price of Bitcoin rose to just under $ 20,000 in late 2017 and fell below $ 4,000 a year later.
A single bitcoin is worth more than $ 50,000 as of this writing, but who knows where the price of bitcoin and other digital currencies will go from here.
You may be wondering if you missed the cryptocurrency boat entirely, or if there is still time to invest at a profit. Although some say digital currencies will fade at some point, others say they are still in their early stages and there are still plenty of opportunities for profit. Some economists and investment experts say Bitcoin in particular could be worth $ 200,000 to $ 300,000 by the end of 2022.
Before investing in cryptocurrency, you need to compare all the platforms that you can buy, sell and trade cryptocurrencies on. You should also decide how much of your portfolio to invest, taking into account the volatility cryptocurrencies have shown so far.
Why invest in cryptocurrency?
A decade ago, investing part of your portfolio in cryptocurrency would have been unnecessarily risky. However, ignoring digital currencies these days carries just as great – if not greater – risk to your short-term and long-term investment goals.
With many investment professionals predicting an upcoming bear market that could take years, cryptocurrencies are often viewed as a better alternative – or at least one that you can use to hedge your bets.
After all, investing in the stock market has made huge gains over the past decade, even after considering the temporary downturn due to COVID-19. Some say the gains we saw in the Dow Jones Industrial Average and the S&P 500 cannot last and that investing in cryptocurrency will help investors continue to build wealth during uncertain economic times.
Should you invest in cryptocurrency? Below is a table with the main advantages and disadvantages that you should be aware of.
How to invest in cryptocurrency
Investments in cryptocurrency are easy to make online and from the comfort of your home. All you have to do to get started is research the different types of cryptocurrency. From there, you will find a platform that will allow you to make your purchases with minimal hassle or fees. One platform we recommend is eToro.
Here are some of the top digital currencies you should know whether your goal is to diversify your portfolio, sell for a profit, or park your crypto investment for the short term.
Bitcoin (BTC) was released as open source software in 2009 and is the largest and most famous cryptocurrency available today.
The basic characteristics of Bitcoin are that it only exists on the internet, is not issued by any government or central bank, and is limited to only 21 million units. However, each of these units can be divided into 100 million satoshi.
The total amount of Satoshi that can possibly be produced is – if you get this – 2.1 zillion – If you can think of such a large number.
While Bitcoin is the most popular of all cryptocurrencies, extreme volatility has been the be-all and end-all so far. If you want to invest in Bitcoin, you can consider BlockFi, Coinbase, Kraken and Gemini, among others.
Ethereum is the second largest cryptocurrency available today. This cryptocurrency was introduced in Switzerland in 2015, but has now split into two separate blockchains. As a result, we now have Ethereum (ETH) and Ethereum Classic (ETC), which will continue as the original.
Ethereum has nowhere near achieved investor acceptance or interest as Bitcoin, but that doesn’t make it any less important. The entire phenomenon of cryptocurrency is still in its infancy and is happening in real time.
Some experts believe that Ethereum or even other cryptocurrencies can still overtake Bitcoin and become the dominant cryptocurrency.
Like Bitcoin, Ethereum has seen a lot of volatility so far. Prices rose to over $ 1,400 in January 2018 and fell below $ 100 by the end of the year. As of this writing, Ethereum is currently worth $ 1,832.
If you’re interested in getting started with Ethereum, you can invest on the same platforms as Bitcoin, including BlockFi and Coinbase.
Litecoin is another popular digital currency based on blockchain technology and designed as a peer-to-peer currency for instant and inexpensive payments to users around the world. Like other cryptos, Litecoin is completely decentralized, which means it is not monitored by governments, banks or central authorities.
According to reports, the Litecoin blockchain can handle a higher volume of transactions than Bitcoin. This could mean that merchants who accept Litecoin as currency will get faster confirmation times and become more efficient in the future.
Ultimately, the Litecoin network is ready to produce 84 million Litecoins, which is four times as many currency units as Bitcoin.
If you decide to invest in Litecoin, you can start with Coinbase or Kraken, to name a few options.
Tether is another cryptocurrency. It is viewed as a stable currency, which means that cash is converted into digital currency to peg the value to the price of the USD. Each tether token is also fully secured by reserves.
Like other cryptocurrencies, Tether uses blockchain technology that is protected with world-class security features. Proponents of Tether say it is best to convert currencies and payments across a variety of digital platforms and wallets because it is a traditional 1-to-1 currency. Tether is also widely used as a place to park your cryptocurrency while waiting for market volatility.
Invest in Tether with platforms like Phemex or Kraken.
Founded by Charles Hoskins, one of the co-founders of Ethereum, Cardano is an open source blockchain proof of stake technology that was developed in 2017. With the symbol ADA, Cardano currently has the fourth largest market capitalization of all time cryptocurrency.
According to CoinMarketCap.com, there are currently around 31 billion ADAs in circulation, with a maximum supply of 45 billion. Cardano was developed through experimentation and peer-reviewed research and claims to be a blockchain platform for “change makers, innovators and visionaries”.
Its technology aims to bring about global change through the use of Ouroboros’ proof-of-stake protocol – a protocol that is scalable and secure while also being four million times more energy efficient than Bitcoin.
Cardano’s digital currency is available to users around the world. The currency can be used to securely exchange value between parties, while the Cardano blockchain permanently records every transaction.
There are currently several cryptocurrency exchanges that allow buying and selling Cardano for other cryptocurrencies. Some of the most popular exchanges include Binance, Huobi Global, HBTC, and ZG.com.
Contact the investment advisor
If you are worried about starting out with cryptocurrency, know that it is perfectly normal to be careful. After all, cryptocurrencies have only emerged in the last decade, so there isn’t a long history of performance to turn to for a guide. Additionally, cryptocurrencies have reported some very serious security concerns and numerous millions of dollars in digital currencies have been hacked over the years.
Before investing in any cryptocurrency, it can be helpful to speak to a financial advisor who is knowledgeable about digital currencies and how they can be used to diversify your portfolio. And if your current advisor isn’t interested in helping you get started in cryptocurrency, it may be time to find a new one.
The bottom line
Should you invest in cryptocurrency? Ultimately, only you can decide whether you’re ready to invest in crypto and try something new – or whether you just want to stay the course and invest in stocks, bonds, and other popular investment options.
If you choose cryptocurrency, you should spend some time learning about the types of digital currencies, how they work, and the risks involved. There is no “right” or “wrong” way to invest in cryptocurrencies like Bitcoin and Ethereum, but you should make sure that every decision you make is an informed one.
Continue reading: “Can a Crypto Savings Account Beat the Bank?”