How many times have you heard stories of people who got rich overnight thanks to crypto-currencies? Followed by stories that show the other side: People who had to accept bitter losses or even ruin through their investment in crypto-currencies?
The question of whether one should invest in crypto-currencies or not is quite common. But how exactly does one actually invest in crypto-currencies? Then the question arises, which of these digital currencies are worth an investment. We give an overview.
How to trade crypto currencies?
The way to invest in crypto currencies is manifold. Which strategy is the right one for you depends on your expectations, your skills and how much time and money you are willing to invest. Usually you will make a profit by increasing the exchange rate.
There is no interest and investors have to do without dividends. Crypto currencies are still not a classic investment product. That has its advantages, so for instance the entrance is quite simple also for newcomers.
First it applies to become clear about the strategy. There are short-term investment strategies, which are designed for success within a short period, or long-term strategies. For this one needs much patience, but the effort is much smaller. Also consider how much you are willing to invest.
Crypto-currencies allow you to start with small amounts, but depending on the type of action, it is not necessarily possible to achieve high profits. The risk also plays an important role.
Risky investment strategies are often connected with high profits, but you should also take into account the potential losses. In the same way it is possible to invest in a safe way in crypto currencies, whereby a certain risk always remains. Finally it concerns an unregulated, young market.
The most secure platforms to invest in cryptocurrencies
First of all you have to decide for yourself whether you want to trade actively or buy a crypto currency and hold it for months or even years. For trading it is recommended to use a CFD, because you do not have to deal with the matter of crypto currencies.
On the other hand, many would like to physically own the crypto currency and either transfer it to their own wallet or leave it on the platform to sell at a higher rate.
In the last six years, I have tested almost all platforms and now I only use one: eToro.
eToro offers a lot of advantages because the platform is regulated by law, controlled by authorities, has deposit protection, offers dozens of different payment methods (PayPal, SEPA, credit card, instant bank transfer, Skrill, Netteller, and more), has a lot of features (trader copy, eToro Club, portfolios), you can buy real cryptocurrencies but also trade a CFD.
It is the all-in-one solution for crypto investors. Besides the biggest and most promising cryptocurrencies like Bitcoin, Ethereum, Ripple, Iota, Tezos, Neo, EOS, Litecoin, Bitcoin Cash, Stellar, Dash, Cardano, Tron, you can also invest in stocks, ETFs, commodities (gold, silver, etc.) without having to change the platform.
With your own eToro wallet, you can also transfer purchased cryptocurrencies to your hardware wallet.
67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Invest crypto currencies: Buy, hold and sell
Holding cryptocurrencies, also called “HODLn”, is the simplest way to invest in crypto. With this strategy, you buy one or more cryptocurrencies, preferably at a low price, and then wait for a price increase. This may take some time until a sale is really worthwhile. The motto is “buy low, sell high”.
To buy Bitcoin and other cryptocurrencies, you need to register on an exchange or stock market. Find out about reputable providers. There are a lot of them because in the last years trading with crypto currencies has become very professional. There are many exchanges and exchanges which are concerned about the security and user-friendliness of the customers. Others are aimed at professional traders, who practice the trade with crypto currencies as constant sideline or main occupation.
Whichever platform you choose, the registration process involves some intermediate steps. Regulated trading platforms require proof of identity. This takes time and effort, but it means that you are a serious provider.
To hold crypto currencies, you need a wallet, the electronic wallet of coins and tokens. Some Exchanges and brokers offer their own wallet service. If you buy the crypto-currencies here, they will automatically be placed on the wallet of the exchange.
Here they are not necessarily safe, should you want to keep them longer. Good Exchanges and brokers are concerned about the security of their customers’ credit balances, but hackers are targeting pure crypto exchanges because there is more to get here, as the following table of crypto exchange hacks shows
Therefore it is even more important that you use a regulated and secure platform where your capital is protected by a deposit guarantee.
You are responsible to protect your capital. So use a trusted provider that hasn’t been hacked, is regulated by authorities, and has deposit protection. eToro is our absolute test winner, which I actively use myself.
Invest in cryptocurrencies: The Trading
Much riskier and also more profitable is the active trading with cryptocurrencies. Crypto derivatives, also known as CFDs (Contract-for-Difference), can be traded on so-called brokers. Derivatives are highly speculative financial products, where the investor bets on how a price will behave within a period of time. He can speculate on both rising and falling prices. This is an advantage over holding, where the investor is dependent on rising prices.
Trading crypto derivatives is popular with professional traders precisely because high profits can be made thanks to the volatile prices of cryptocurrencies. Especially if a lever is used.
With leverage or margin trading, traders can trade with multiples of the invested amount. With leverage of 1:10, it would be like using ten times the amount invested. For this, they have to deposit security, the margin. Profits would then increase tenfold for this trade, and the same applies to losses.
The trade with CFDs wants to be learned and is only something for experienced traders who know the matter. Advantageous, however, is that you would not have to buy a wallet, because you never really own the cryptocurrency. You only speculate on price development.
Invest in stocks of cryptocurrencies
Crypto-shares are a relatively young investment product. For a long time, it was only possible in the area of shares to invest in companies that deal with blockchain and crypto currencies. Meanwhile, futures, certificates, EFTs on the basis of crypto-currencies are available. Also with these financial products you do not have to own the cryptos, instead, you profit from the prices.
Shares are regulated and therefore considered safe. The risk is much lower, but the possible profits are not so enormous. Crypto shares can be traded on regulated, traditional stock exchanges.
The Crypto-Mining - The alternative instead of investing in crypto currencies
Mining or prospecting for crypto-currencies is one way to build a passive income. Proof-of-work mining involves verifying transactions and generating new blocks. For this, the miners – rather their hardware – have to solve complex mathematical tasks.
The miners are rewarded with the Block Reward for providing this “proof of work”. These are some of the crypto currencies of the mined block chain. In addition, the miners can charge fees for the transactions.
Mining requires a certain technical understanding and an investment in hardware. Depending on the crypto currency, different requirements are set. With Bitcoin, it only pays off if an expensive ASIC chip is used for mining.
In addition, electricity costs must be taken into account and the hardware must run around the clock. Before you start mining, you should calculate exactly whether it is worthwhile at all.
Mining has become very difficult for individuals. Therefore many people join together to form mining pools. Here they combine their computing power and distribute the profits among themselves. Cloud mining is an alternative.
With cloud mining you only buy a share of the mining hardware, but you don’t have to own it yourself. In return, you receive a regular share of the block reward.
Read all about Crypto-Mining here.
Invest in Bitcoin - A must in every crypto-porfoltio
Bitcoin (BTC) is and remains the largest and most important of all cryptocurrencies, at least for the foreseeable future. It is also the first real cryptocurrency and the breakthrough in blockchain technology. Bitcoin was developed as an alternative payment network and as an alternative currency to the fiat currencies, and is still the best-known cryptocurrency today.
Bitcoin continues to lead the market with the largest market capitalization and trading volume. At present, the market capitalization of Bitcoin amounts to 143.000.000.000 US dollars. Bitcoin is the lead currency of the cryptocurrencies: If Bitcoin is doing well, the entire market is in a positive mood. If the Bitcoin rate goes downhill, all other cryptocurrencies will soon follow suit.
Bitcoin is considered for investors as the safest plant. The cryptocurrency will be at least relevant still many years and very probably further defend the first place. In the opinion of many traders, Bitcoin belongs to each Portfolio. Who can invest only in a cryptocurrency, is well advised with a Bitcoin Investment.
Should one invest in Ethereum?
Ethereum (ETH) is the second most important crypto currency on the market for many years. Ethereum is not only a digital currency, but also an own innovative platform. It is also known as Blockchain 2.0 because it introduced new concepts: Smart Contracts and the Tokens.
Smart Contracts are digital contracts with great potential in the fields of e-commerce, administration, finance, logistics and much more. In addition, Ethereum can be used to create its own crypto currencies, most of which are ERC20 tokens.
In fact, many crypto projects in recent years were based on Ethereum’s ERC20 token. This led to an explosion of new crypto currencies, especially during the wave of ICOs in 2017.
The token from Ethereum is called “Ether”. ETH is also considered to be a secure system along with Bitcoin. So far, there are no signs that similar block chain projects will overtake Ethereum. Ethereum has a market capitalization of 21,000,000,000 dollars. Ethereum definitely still has a promising future ahead of it.
IOTA - The smart money for the Internet of Things
If you call Bitcoin the first generation blockchain and Ethereum the second-generation block chain, then IOTA is the third generation block chain. IOTA (MIOTA) builds on the advanced tangle, a different type of block chain designed to handle the vast amount of data on the Internet of Things.
In the Internet of Things, computers, devices and machines are networked and constantly exchange data with each other. IOTA is supposed to enable micro transactions of the own crypto currency MIOTA and the data exchange in this network.
The Internet of Things is one of the most important topics of the future. Therefore IOTA is also an interesting system. The IOTA foundation already cooperates with Volkswagen AG, with BOSCH, with the financial group DnB, Fujitsu and other big players from the economy.
It will be a while before we herald the Internet of Things era, but until then an investment in IOTA could be worthwhile. The crypto currency from Germany has not been considered an insider tip for a long time. At the moment, IOTA has a market capitalization of 555,000,000 US dollars and is ranked 24th in CoinMarketCap.
Ripple - The bank coin
Ripple (XRP) is often called the block chain of banks. The company behind the crypto currency is building an alternative payment network to make it easier for banks and companies to carry out transactions.
The main focus here is on payments across national borders. These are associated with additional hurdles and costs for banks and companies. In Ripple’s payment network, the crypto-currency XRP serves as a promissory bill that can be sent as desired and then exchanged into the desired currency.
Due to its proximity to the institutionalized financial world and the lack of decentralization, Ripple is often criticized in the crypto scene. However, this does not make Ripple a bad investment. On the contrary: Those who find the decentralized crypto currencies too insecure will find a safe haven in Ripple and its strong ties to traditional institutions.
Ripple gives it since 2012 and could secure itself with the time the third place of the crypto currencies after CoinMarketCap. At the moment the market capitalization is 9,000,000,000 US dollars.
Litecoin - The silver of digital currencies
If Bitcoin is gold, then Litecoin is silver. Litecoin (LTC) was formed in 2011 from a hard fork of Bitcoin. This makes Litecoin very similar to the top dog among crypto currencies. Both are alternative means of payment based on blockchain.
However, Litecoin is more advanced in some respects. The transactions take on average 2.5 minutes instead of 10 minutes. Technologies such as Segregated Witness (SegWit) and the Lightning Network were implemented at Litecoin before they were used at Bitcoin.
Litecoin is considered by investors as a good alternative to Bitcoin and has secured a firm place among the top 10 crypto currencies according to CoinMarketCap. Litecoin currently has a market capitalization of over 3,000,000,000 US dollars.
Tezos - Strong performance in recent months
What is behind Tezos (XTZ), the so-called “Ethereum Killer”? It is not the first block chain platform with a focus on smart contracts that has been called that. At the ICO, the project still managed to raise $232 million within two weeks, but then there were some teething problems. In the meantime these problems have been overcome. But what exactly is Tezos?
Like Ethereum, Tezos is a block chain for smart contracts. The difference to the competitor lies in the architecture of Tezos. To verify transactions, Tezos uses proof-of-stake. This means that anyone who wants to get involved with Tezos must hold a “stake” in XTZ and thus has the right to participate in the development of the block chain.
As a reward for the stake, the user receives a Block Reward. Stake holders can thus have a say in the development of the platform right from the start. Tezos was developed specifically for the democratic integration of the community.
In 2019, Tezos was able to increase its market capitalization from USD 261,000,000 to USD 2,300,000,000. This remarkable growth is based on an increasing interest of investors. Today, Tezos belongs to the top 10 crypto currencies according to CoinMarketCap and has a market capitalization of 1,800,000,000 US dollars. Tezos is on everyone’s lips and could turn out to be a promising investment.
Bitcoin Cash - Strong performance in early 2020
Bitcoin Cash (BCH) is currently the largest copy of Bitcoin. It has a market capitalization of just under 5,000,000,000 US dollars and ranks fourth in CoinMarketCap. The hard fork was created as a result of a dispute within the Bitcoin community. While Bitcoin’s network activity grew strongly in 2017, it became apparent that the limited space in Bitcoin’s blocks could lead to transaction bottlenecks.
Some in the community were in favor of implementing SegWit, others wanted to increase the block size. The latter eventually became Bitcoin Cash. Initially, the block size was 8 MB instead of 1 MB of Bitcoin, later it was increased to 32 MB.
Bitcoin Cash is therefore inherently more scalable, while Bitcoin depends on tools such as SegWit. For traders, Bitcoin Cash is an alternative to Bitcoin or a way to expand their portfolio without having to resort to exotic crypto currencies.
How do I invest correctly in crypto currencies?
There are a few tips when investing in crypto-currencies, which always apply, no matter which investment strategy you follow or in which crypto-currency you invest. In general, you should be aware of the risks involved in the crypto-market.
It is still a largely unregulated market, with extremely volatile prices, and a young technology that is maturing. Even the best investors have to take losses now and then.
Write off investments already in your mind
It is best to always count your investments as expenses. Money that you have already spent and that is gone. This way you emotionally distance yourself from your investments and can make rational decisions.
You become more willing to take risks where it is appropriate and more cautious when necessary. You also separate the money you invested from the money you use to pay bills and reduce the risk of going bankrupt in the worst case. Which brings us to the next point.
Invest only as much as you are willing to lose
Draw a line at trading, no matter how tempting or promising some investments may seem. Think about how much you need to live and set the upper limit here. In any case, keep this limit knitted in. Trading with crypto currencies can result in a total loss. Even if you lose your investments, you still need to be able to pay your bills.
Learn about crypto currencies
Never invest in a product that you do not understand. Find out beforehand about the purpose of the crypto-currency, how it was created, which people developed it and how the courses have developed so far. Keep up to date by regularly reading the news about crypto-currencies and taking a look at the market rates. It can also be worthwhile to follow important personalities from the crypto scene on their social channels.
Keep calm
The investor’s two worst enemies are called “FUD” and “FOMO”. “FUD” stands for “fear, uncertainty and doubt”. It is these doubts and fears, which entice investors to panic sales, if it goes with the courses times again downhill. Experienced traders know that the prices of the crypto currencies are constantly moving and they will most likely not only recover but also climb to new heights. Besides losses are realized only if the Coins are really sold. Therefore, it is better to use “HODLn” instead of selling.
“FOMO” stands for “fear of missing out”. This fear drives investors into the arms of orchestrated pumps and dumps or to buy hyped and aggressively advertised crypto currencies that turn out to be worthless on closer inspection. When prices just rise, they invest for fear of missing high profits. In the next moment the courses can purzeln again.
Diversify the portfolio
Some swear on Bitcoin as the largest and most important crypto currency, but only few investors invest only in an asset. A well diversified portfolio reduces the risk of a total loss and holds the potential of surprisingly high profits. It can happen that the Altcoins outperform the Bitcoin on the market and bring substantially higher yields.
Therefore it can be worthwhile itself to add to the Portfolio a few unknown, but promising crypto currencies. With them it can be entered at much lower prices. If the crypto currency should not have the hoped for success, then the losses are rather small. But it should start off correctly, then high net yields can be obtained.
Is it worthwhile to invest in crypto currencies in 2020?
2017 was the year when the crypto currencies broke all records and Bitcoin reached its previous all-time high. After that, prices collapsed and the long crypto winter followed. Apart from a few runaways to the top, the crypto courses went downhill. Many investors took off at this time.
The bubble had burst, but were crypto currencies dead? Not by a long shot. After such a violent rally, the crash had to follow inevitably, that is one of the laws of the market. By the time Bitcoin reached its all-time high of over 19,000 US dollars per coin, rational trading had long ceased.
“FOMO” began to appear, with investors entering the market who only wanted a piece of the pie because they saw how others were making big profits. A classic bubble formed and sooner or later they had to burst.
The following crypto-winter can be seen as a necessary correction, in which the market consolidated and sifted out all those investors who had only followed the lure of huge returns and were otherwise not interested in crypto-currencies at all.
In 2019, prices improved noticeably and so did the mood on the markets. The favorable time to enter the market has thus passed. Is it still worthwhile investing now? More investors are flocking to the market, especially as trading in crypto currencies is becoming more professional and more traditional financial products in the crypto sector are developing. But what are the arguments for and against an investment in crypto currencies?
67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Advantages of an investment in crypto currencies
Crypto currencies are an innovative, breakthrough technology with the potential to transform our entire financial system. The block chain technology opens up new possibilities and can be used to optimize existing processes or make them more transparent and secure.
The digital currencies can be sent peer-to-peer in the shortest possible time and at comparably low costs, as an intermediary is not necessary. They are based on a decentralized network and therefore cannot effectively be prohibited.
The block chain technology is already being tested by large companies, for example in logistics. With the help of block chain, information can be stored in a forgery-proof manner and distributed across the globe. After all, crypto currencies are only information. Ethereum and comparable platforms offer a wide range of applications thanks to the Smart Contracts and the tokenization of assets.
The crypto market is open to everyone. Basically, one only needs Internet access to trade crypto currencies. This results in an enormous growth potential. Those, to which the traditional stock markets remain closed, can buy and sell crypto currencies on the Exchanges and stock exchanges. And that already with small financial means. The crypto-market is therefore especially interesting for small investors.
At the same time the crypto currencies meet strengthened the interest of traditional investors and stock exchanges. Crypto shares and futures are the result. Thus the crypto-market opens up to an even larger mass of investors and their enormous capital.
The crypto-currencies gain in seriousness and in popularity, not only among Internet- and computer-affine nerds. Meanwhile, a new asset class is emerging with STOs (Security Token Offerings), which combine the advantages of ICOs with the protection provided by financial supervisory authorities.
The crypto currencies have also produced a whole range of new start-ups or enabled them to finance themselves thanks to the ICOs. Such start-ups are increasingly attracting the interest of major investors from the business, financial and IT sectors.
Disadvantages of an investment in crypto currencies
But there are not only rosy sides. Thus numerous swindlers romp around on the market. Especially the ICOs became famous for the many scams where useless tokens were thrown on the market. The investors, often victims of FOMOS, pounced on these tokens and then got stuck with a worthless crypto currency.
Trading crypto-currencies themselves involves some dangers: One’s own wallet can be cracked and the cryptos it contains stolen. Also Exchanges become now and then victims of hacks. That’s why it’s so important that you use a secure and regulated provider like eToro.
67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
In general, the crypto market lacks supervision and regulation, which brings with it further uncertainties and risks. There is also the danger that the crypto currencies will be overregulated in the future. For example, in an attempt by states to eliminate alternative means of payment as competition to their own fiat currencies.
Where is the crypto market heading?
After the bursting of the bubble in 2017/2018, some spoke not only of a crash, but even of the death of the crypto currencies. But Bitcoin and Co. were declared dead more often in the past and each time the coins and tokens came out stronger than ever before. Fact is: Even after the crash, Bitcoin’s prices held above average before the bubble burst.
And after each crash, the price rises exceeded the previous all-time highs. If a major Bitcoin rally were to take place again, it can be assumed that the previous all-time high of just under 20,000 US dollars would still be surpassed. By how much, that can only be speculated. And when it will happen, that is also open. Will it happen as early as 2020 or will we have to be patient for even longer?
The crash of 2017/2018 may remind us of the bursting of the dotcom bubble. But this crash of 2000 was not the end of the Internet. Most companies went under, but some grew into companies worth billions, such as Amazon. It is conceivable that the crypto market will do the same. Already, many of the old coins created in the ICO hype of 2017 are practically extinct.
The crypto-market is growing, becoming more serious and opening up to an increasing number of investors. More and more people have heard of Bitcoin, and the crypto currency is moving into everyday consciousness. Bitcoin vending machines are created and merchants accept crypto currencies. At the same time, the block chain technology gains in importance.
Is it therefore worthwhile to enter crypto currencies in 2020? Certainly in 2018, when the markets were on the ground after the crash, the best point of entry to buy cheaply was in 2018. But even if you enter the market later, that doesn’t mean that you can’t make a profit. The only really bad entry point is when prices are at their peak and investors start to sell.
Then you buy for the highest price and it might take a long time until the prices rise enough to realize a profit. So do not fall for FOMO and FUD, follow your strategy and keep a cool head.
Conclusion invest in crypto currencies
Crypto currencies have come to stay. And the chances are good that they will achieve even higher rates in the next rally than they did in the last bubble. Until then, the technology continues to spread, the interest increases and the trade with crypto currencies becomes more professional. When the next large storm on the crypto currencies will begin, cannot be clearly said. But there is still enough time to enter the market.
Frequently asked questions about invest in digital currencies
Actually, there is hardly a bad time to enter the crypto business. Profits are always possible, in CFD trading even when prices are falling. It depends on the strategy. HODLers prefer to buy at low prices and sell at high prices, while CFD traders only rely on prices to keep moving. And this has not changed in the current year. Yes, even in 2020 it could be worthwhile to invest in crypto currencies.
Experts and traders constantly rack their brains over which digital currency will achieve the best profits in the foreseeable future. But we are dealing with an unpredictable market where anything is possible.
Who is interested in the trade with Kryptowährungen, which can buy the Coins on one of the many Exchanges and hold afterwards, until the correct time for selling came. Riskjoyful Day-Trader can trade crypto CFDs with levers. In addition, traditional forms of investments such as crypto stocks and futures are also developing.
Crypto currencies can be stored and held very well over a long period of time. It is very well possible that the crypto-currencies will gain acceptance and distribution in the coming years and that the exchange rates will continue to rise. Which crypto currencies are however still relevant in many years, that can be answered only very heavily.
Our Choice | Safer Crypto Trading | ||
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eToro is a multi-asset platform offering CFD and non-CFD products. 67% of individual investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. | |||
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