Ways to invest in crypto
Here are the most popular ways to invest in crypto.
- Buying and storing coins. You can buy popular coins like bitcoin or Ethereum, or you can buy lesser-known coins. For example, Dogecoin, Solana, and others. In the long term, there is a chance that their price will rise. But there are also risks that some crypto may disappear, which means you will lose money.
- Invest in cryptocurrency companies. These are companies that are partly or fully focused on cryptocurrency. For example, they are engaged in mining, that is, they mine crypto, produce equipment for mining, have large amounts of cryptocurrency on their balance sheets, and so on. Such companies include MicroStrategy Incorporated, Robinhood Markets, and PayPal Holdings.
- Invest in cryptocurrency-focused funds. If you don’t want to choose among individual cryptocurrency companies, you can invest in funds. They manage investors’ money so that they get a return on their deposits greater than the rate of bank deposits. This return must also exceed inflation. Crypto-focused funds can invest in cryptocurrency, cryptocurrency companies.
- Become a cryptocurrency miner or validator is someone who validates blockchain transactions and gets rewarded for it. This is how you will get rewarded in cryptocurrency. You can keep it as an investment.
- Lend the coins or put them into a liquidity pool. A liquidity pool is a cryptocurrency vault where a trader can quickly exchange one currency for another. You will receive interest or transaction fees for doing so.
How to choose a cryptocurrency to invest in
You can evaluate a cryptocurrency for investment through technical and fundamental analysis. Here’s how they differ.
Fundamental analysis
In fundamental analysis, you need to dive deep into the topic. That is, you need to consider all available information about the asset to understand how it works. For example, research the financials of the cryptocurrency, the user community. You can also study a technical document that contains the technology and plans of the project.
With fundamental analysis, you can understand if an asset is overvalued or undervalued. Take Ethereum, for example. Most decentralized finance programs run on its blockchain. If you assume that DeFi will grow, you can assume that Ethereum’s value will rise in the future.
Technical Analysis
Technical analysis examines how an asset’s value and trading size have changed over time. Is crypto rising or falling? Are people investing or taking away money? What events affect price fluctuations and so on.
Technical analysis is focused on numbers. It assumes: the market has already incorporated all known information into the cryptocurrency’s current price and sales volumes. Since current prices show supply and demand, the price of the asset should give you an idea of how the public feels about it now. This is how traders predict trends and make investment decisions.
Conclusion
Investing in cryptocurrency is quite risky. This is due to the fact that the price of coins is determined only by supply and demand and only in some cases backed by real assets. For example, fiat currency, gold or oil.
But such investments can bring good profits. For example, you can invest a few hundred dollars in coins that grow in value and become a millionaire in a few years. This is what happened to crypto investor Cooper Tarly.
In addition to investing in crypto, you can invest in cryptocurrency companies. They may produce real items or provide services, but they have cryptocurrency on their balance sheet. If the price of crypto goes up, the stock will go up, too.
If you want to buy coins, you have to understand how blockchain works, transactions, and so on. You also have to understand what is going on in the market. For example, if money is being invested in it, the price of a certain cryptocurrency is likely to rise.
