Ways to invest in digital currencies 2023
Who among us does not remember Aladdin’s magic lamp, that lamp capable of making everyone who carries it rich and fulfill all his wishes. Well, in this article we will refer to that cryptocurrency lamp, as it does exactly the same thing. Effective methods of investing in cryptocurrencies, in addition to some patience, can help you achieve gains that make you rich in the long run. Bitcoin is a concrete example to prove it.
What happened with investors in Bitcoin is very rare, although the investment fell by about 75-80%, but it has risen by 300% or more after a break of three years. Many people, including investors, businessmen, and individuals, have shown interest in various ways of investing in digital currencies since then.
This article will inform you about the meaning of digital currencies as well as the best ways to invest in them to avoid risks and maximize profits.
Investing in digital currencies in 2023
Digital currencies are a decentralized payment method that you can trade online. There are a large number of different digital currencies such as Bitcoin, Ethereum, Litecoin, etc. These coins are processed on the blockchain network of thousands of machines.
Despite the payment feature offered by digital currencies, it is more an investment than a method of payment. With Exchange or bitcoin wallet apps, digital currency holders can rely on market volatility and value increase to earn profits, just like stocks.
Cryptocurrencies gain more value when big companies announce that they will accept them as payment, or when demand is high and supply is limited, and can sometimes increase when a celebrity promotes them. But they lose value if companies no longer accept them as a form of payment or if supply exceeds demand.
Here are some outlines to better understand the ways to invest in cryptocurrencies:
Storing coins in your digital wallet is somewhat similar to storing coins in a physical wallet, it is always open and waiting for you to use it.
Putting your digital currency into a savings protocol is equivalent to depositing your money into a savings account.
Stockpiling your cryptocurrency and then borrowing from yourself is equivalent to putting your money into a retirement account and getting a loan from it.
Trading tokens on a cryptocurrency exchange is quite similar to trading shares on an exchange.
Do not forget the importance of obtaining a digital wallet that combines both purchasing, trading and storage, whether it is hot, i.e. connected to the Internet, or cold, i.e. offline. Hot wallets are easy to recover if you lose your phone, but you won’t be able to recover your crypto assets if you lose your cold wallet.
It is easier to trade cryptocurrencies from your hot wallet since it is connected to the internet, but it is vulnerable to attacks that could lead to theft of funds. On the other hand, cold wallets provide very high levels of security, but, as mentioned earlier, they are at risk of loss or theft.
The easiest way to start buying and trading cryptocurrencies is to set up your account on one of the Coinbase and Coinmarketcap exchange apps by following these steps:
- Download the application you prefer
- Create your account
- Get quick verification
- Transfer your funds from the bank account to your digital wallet
How to invest in digital currencies safely
The concept of investing has always been associated with risk, and experts confirm this by saying that cryptocurrency is one of the riskier investment options in the market. But this does not mean that it should be avoided, as it is also considered one of the most important assets that you can own.
The global market capitalization of cryptocurrencies is currently trillion and is expected to rise flawlessly in the coming years. If you are ready to invest in cryptocurrency, keep the following list of expert tips in mind:
Research exchanges: You should arm yourself with sufficient knowledge about this field before investing in it. There are over 500 exchanges and over 8,000 different cryptocurrencies to choose from, so you are required to do enough research to make the right move for you.
How to store assets: Storing your cryptocurrency assets should be your first priority after you purchase them. There are several types of portfolios, each with its advantages and technical and security requirements, so we focus once again on the importance of research before taking any decision regarding your investment.
Portfolio Diversification: Diversification is the core of any effective investment strategy. Make sure you don’t invest all your money in the Bitcoin network just because it’s popular, there are thousands of other options you can choose from, and it’s best to divide your investment into multiple cryptocurrencies.
Prepare for market fluctuations: The cryptocurrency market is a volatile market, so you must be prepared for all the ups and downs that the price will pass through.
7 ways to make money investing in cryptocurrency
Lending / Borrowing
You can earn extra money investing in cryptocurrencies by lending them. This process includes the participation of borrowers and lenders and the establishment of agreements between them. There are several cryptocurrency exchanges that support lending and borrowing, including Nexo, SALT Lending, BlockFi, Oasis, and Celsius.
You should know that this process is not without risks, plus finding platforms that connect potential borrowers with lenders can take some time. But if you are looking for a way to earn more income from your cryptocurrency assets, then lending them is one of the most effective ways to do so.
traditional buying and selling
This method is ideal for people who are willing to take risks. You will have to buy the cryptocurrencies you like when their prices drop, and then sell them after a few months or years for a large total profit.
Established digital currencies such as Bitcoin, Ethereum, and Litecoin see daily fluctuations, but generally maintain an upward trend throughout the year. New cryptocurrencies may appear at a higher price, but they may lose value quickly or they may disappear altogether. Therefore, it is necessary to read the white paper of any currency before investing in it, to get a comprehensive idea of it, the purpose it serves, and other information.
Investing is a long-term venture, unlike trading which takes advantage of short-term opportunities. The cryptocurrency market is difficult to predict, so you need to acquire high technical and analytical skills in order to become a successful trader. Here are some ways you may enhance your trading strategy:
Diversify your trading: Combining a range of cryptocurrencies will help you minimize the risks involved in this area.
Minimize the cost of trading: You have to choose a trustworthy exchange with low fees to reduce the cost of trading.
Watch the trading time: You have to set a time that matches your trading schedule.
Follow Cryptocurrency News: You need to be on top of the latest cryptocurrency news and stories to stay ahead of the market.
Using technical analysis: You have to take into account technical indicators to justify all your trades.
Due to the high levels of energy required to run a PoW blockchain, Proof of Stake (PoS) algorithms have been developed that force users to block their tokens for cryptographic verification.
Mining is the act of blocking digital assets that acts as a validator in a decentralized crypto network to ensure the network’s integrity, security, and continuity. Validators secure their assets to act as validation nodes and blocks, and are paid with the newly created cryptocurrency.
Auditing is a low-cost way to make money from cryptocurrencies, but they also suffer from price volatility, so you have to be prepared for any turn of events.
Airdrops are a high-risk way to get free cryptocurrency. Developers implement this technology with the goal of supporting and promoting new digital currencies. You can join one of the Airdrops featured on social media and cryptocurrency news platforms.
It is necessary to be careful if you intend to join one of the Airdrops projects, as there are many fake projects that hackers use. Make do with popular cryptocurrencies such as Bitcoin and Ethereum, especially if you are a beginner.
One of the oldest ways to make money with cryptocurrencies is mining, a process that verifies transactions and secures a secure proof-of-work network. Miners receive new coins in the form of block rewards.
Starting a master node is also profitable when it comes to network maintenance. The master node is a wallet that hosts a copy of the entire network. Both of these methods require a large initial investment, as specialized mining hardware can be a bit pricey.
If you are used to investing in stocks or bonds, you are probably at least familiar with what dividends are. Dividends are small cash payments made to shareholders.
Although this method is effective in terms of making money from the cryptocurrency you own, you need to do some research to find out which cryptocurrencies pay dividends and whether the profits are worth it.
Cryptocurrency dividends differ from stock dividends in that they pay additional tokens instead of cash.
Long and short term investment
What is a long term investment?
A long-term investment is a passive investment where the investor holds his assets for more than one year. Long-term investing usually includes assets that increase in value such as stocks and cryptocurrencies and is a set-and-forget approach.
Long term investment strategies:
Value investing: A strategy in which an investor attempts to buy a digital currency for less than its real value.
Growth Investing: This is a strategy that urges you to invest in companies that you believe will exceed the total market capitalization.
Dividend Investing: A strategy based on investing in dividend paying companies.
What is short term investment?
A short-term investment is an investment that does not exceed a few months, and short-term investors are usually referred to as speculators or active investors, and they seek to make a quick profit that is repeated several times a year, several times a month, or even a day.
Short Term Investment Strategies:
Spot trading: buying and selling immediately in one day or several times in the same day.
Day trading: which is to achieve those small profits that may turn into wealth later.
Swing trading: which is investing for a few days, weeks or even a few months.
How to choose the perfect digital currency
Fundamental Analysis: You need to know the best cryptocurrencies for each specific investment strategy.
Quarterly Fundamental Growth Analysis: As a speculator or day trader, you need to understand support and resistance levels.
After reading this article, you must have got a comprehensive idea about the ways to make money by investing in cryptocurrencies. We advise you to get a Twitter account, as it is one of the best sources that you can rely on to get the latest updates about the cryptocurrency industry.
It is necessary to build a comprehensive knowledge on the various cryptocurrencies before starting your journey, and monitor the past and present performance of the cryptocurrency you wish to trade in order to ensure that you get the largest number of profits and avoid the risks and consequences of volatility as much as possible.
Disclaimer: The content of this article is for informational purposes only. The information provided should absolutely not be considered as investment advice or a recommendation. No warranty is made, express or implied, as to the accuracy of the information or data contained herein. Users of this article agree that Money Secrets does not accept responsibility for any of their investment decisions. Not every investment or trading strategy is suitable for anyone. See the risk warning statement.