Investing in Cryptocurrency is a relatively new concept. Cryptocurrencies such as Bitcoin were created to be decentralized and are not regulated by any government or institution, which can have their pros and cons.
There are risks, but cryptocurrencies can also reap huge rewards for those who make the right investment decisions. In this blog post, we will discuss how to invest in Cryptocurrency and what you need to know if you want to get involved!
Cryptocurrency is a digital currency that uses cryptography for security. These are decentralized currencies, meaning they can be traded or exchanged without government interference.
Cryptocurrencies also use blockchain technology to keep the transactions secure and updated in real-time on all network nodes so that no one person has control over it. The first Cryptocurrency was Bitcoin, created by Satoshi Nakamoto as an open-source protocol app released in 2009.
The supply of bitcoins will eventually stop due to predetermined parameters. At that point, new coins cannot be generated but only obtained through mining or exchanging with someone else who already owns them. In this way, bitcoin’s value comes from its utility and scarcity.
The crypto market has its own set of risks that do not exist in other areas. For instance, cryptocurrency exchanges have been vulnerable to hacking and scams that have resulted in significant losses for investors.
Fraud and scams are also rampant in the crypto industry.
There is currently hype around cryptocurrencies, with some traders promising investors sky-high yields not uncommon in the market. These promises are typically built on shaky ground, turning out to be fool’s gold rather than legitimate blockchain projects.
Investors who want to buy into these traps can suffer severe losses when these projects inevitably fail. Moreover, it is not as easy to store cryptocurrencies as it is to store stocks or bonds.
While exchanges such as Coinbase & Wealthsimple make it fairly easy to buy and sell cryptos such as Bitcoin (CRYPTO:BTC) and Ethereum (CRYPTO: ETH), many people fear holding their digital assets on exchanges due to the aforementioned risk of cyberattacks and theft. Instead, some prefer offline “cold storage” options such as a hardware wallet.
We must consider that cold storage comes with the risk of your private keys being lost, meaning you would never be able to access them as we have seen happen in many cases.
There’s also the risk that the “crypto project” you invest in will not succeed. There are thousands of blockchain projects, and competition is fierce.
Regulators could also crack down on the entire crypto industry if more governments begin to view cryptocurrencies as a threat rather than just innovative technology.
As you enter an emerging market such as cryptocurrencies, it’s important to understand the risks. Breaking into this cutting-edge technology may be a chance for growth; however, much of the cryptocurrency development is still in progress and is not yet tested in real-world scenarios.
Cryptocurrency is an emerging technology, and early-stage investors should expect similarly poor outcomes in which a majority of projects fail. It’s unclear if these successful ventures will be enough to offset losses incurred from these failures.
That said, the blockchain industry is steadily growing. Necessary financial infrastructure–such as institutional-grade custody services and futures markets–is being built, which provides legal and individual investors with the tools they need to manage and safeguard their crypto assets.
Financial giants such as PayPal and Square have made it easier for users to buy or sell Cryptocurrency on their popular platforms and we have a feeling more major institutions will follow in 2021.
Major corporations, including MicroStrategy and Square, have invested hundreds of millions in bitcoin and other cryptocurrencies. Tesla bought $1.5 billion worth of bitcoin in early 2021 and plans to accept them for its cars by 2024.
These companies are betting that now is a good time to invest given the Cryptocurrency’s predicted rate of return (due to it being able to replace traditional currency).
One must weigh out the risks and rewards of investing in the cryptocurrency market. Crypto assets come with a host of risks that can be mitigated through careful research and diversification of one’s portfolio. At the same time, these assets offer ample opportunity for massive gains if invested wisely.
Cryptocurrency is a good investment because direct exposure to the demand for the digital currency will generate potential gains.
However, if you would like a more focused investment in cryptocurrency or blockchain projects, investing in alternatives such as bitcoin will give you flexibility and greater financial return.
A popular place for purchasing bitcoin Bitcoin is on the cryptocurrency exchanges, you’ll need cryptocurrency wallet and a form of payment. You can use your credit card or bank account via an online exchange like Coinbase, which supports the purchase of most coins in circulation on the market through their app for iOS or Android.
Initially purchased for about $0.003 per bitcoin, it has shot up in value over time, so that one coin now is worth around $56,000 USD (at the time this post was written).
The price that people are willing to pay for a bitcoin will depend on how they view its prospects and how fast the adoption rate is.
To store your Cryptocurrency securely, you’ll need to download hardware wallets on the device that it will be stored. This way, you’re not holding funds with an exchange that could get hacked or go offline and then lose all of your coins.
The most popular digital wallet is Exodus (desktop only), while Hive OS offers a mobile app for Android users and Mycelium for iOS users.
When selecting how to invest in Cryptocurrency from these hardware wallets, make sure they are supported by the currency you want to purchase- some services such as Coinbase can’t support every type of crypto out there!
Make sure whichever one(s) you select offers robust security features because if someone gains access to your account, this will allow them to steal any funds stored there.
These are just a few things that I suggest everyone should know about cryptocurrencies before they invest. There are many scams out there, so please be very careful and do your research before investing in anything.
The 9 cryptocurrencies on top in January 2021 are:
USD Coin (USDC)
Wrapped Bitcoin (WBTC)
When you invest in Cryptocurrency, keep in mind that top competitors are constantly changing due to the volatile nature of the market.
Given its speculative nature, investing in Cryptocurrency is not advisable for many people because it is risky, and funds should only be used if they can afford to lose everything invested.
Programmers who use their computing resources and time to locate hidden coins are called bitcoin miners. Once they have found the new coin, they must complete complex mathematical equations before retaining it themselves.
When one of these miners finishes a task, it receives bitcoins.
So it might not make sense that as more eyeballs are watching them, the number of rewards decreases per group–but in fact, an increase in CPUs leads to increased difficulty and a greater need for hardware acceleration.
A successful miner “walks away” with the newly added coins in a system that requires confirmation. That is how we get to the name and technology known as blockchains. You might think of these miners as paid auditors.
Cryptocurrency prices are volatile, so prepare for both increasing and decreasing stock. If you’re not able to handle the stress, cryptocurrencies might not be worth investing in.
Cryptocurrency’s popularity makes it a compelling investment opportunity, but remember, it still has flaws and challenges that need to be addressed.
**Available in Canada at the time of this post
For those desiring an easier way to purchase bitcoin, ETF’s are available for easy access through an online broker at your financial institution. It can be purchased just like you would a stock and is subject to different tax implications in registered accounts than non‐registered brokerage accounts.
Popular Cryptocurrency ETF’s
The Ether Fund (QETH-U.TO)
The Bitcoin Fund (QBTC.TO)
Purpose Bitcoin ETF (BTCC-B.TO)
This is the safest and easiest way to invest in Cryptocurrency without all the hassle in our eyes.
Finding the right Cryptocurrency to invest in is difficult, but you can at least get well informed with a long list like this.
It would help if you did your research before making an investment decision as it’s always risky no matter what you are investing your money in.
Ideally, you should spend a significant amount of time researching the crypto before investing.
It helps if you understand how and why prices fluctuate (and they do a lot) for cryptocurrencies, and we all must deal with these fluctuations.
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Richmond Club Index
Led by Chartered Investment Manager, Greg Beckett and Scott Barber.