Contents of this article:
Cryptocurrency is becoming one of the most popular assets for investment. Money is invested in digital assets in most countries of the world, there are different ways to invest and earn money on them. Are you also planning to invest in crypto? We will talk about potential risks and how to choose the right asset.
Cryptocurrency investment risks
There are about 10 thousand coins in the cryptocurrency market. This is a volatile and unstable industry, where speculation is the main tool for making money. The rates of even the most popular assets are rapidly falling in a matter of hours, the reason for this can be economic and political crises, manipulations of large market players.
The first and main risk of investing in crypto is the high volatility and unpredictability of the market. You can never be 100% sure that the purchased asset will be profitable for you. That is why you should not get hung up on one coin, it is worth compiling an investment portfolio from different assets.
Another risk to be aware of is the lack of clear cryptocurrency regulation. All countries approach the regulation of digital assets in different ways, which is why there are no rules and laws that can secure the investor and protect his interests to the fullest. For example, if a cryptocurrency wallet account is hacked, it is not possible to return the embellished cryptocurrency.
How to invest: popular ways
There are several ways to invest in cryptocurrency. The simplest and most common is to buy and hold coins for the purpose of subsequent resale. For long-term investments, it is worth choosing well-known and popular coins with high capitalization. To invest profitably and sell an asset on time, you need to follow the market and quotes.
You can invest not only in the coins themselves, but also in cryptocurrency companies, more precisely in their shares. These can be mining companies, producing equipment for mining cryptocurrencies, having large amounts of cryptocurrencies on their balance sheets – any business closely related to cryptocurrencies.
Equally popular are investments in funds that work with cryptocurrency. Such funds are created to manage the funds of investors. By investing in such funds, you can earn interest – this is a convenient and safe passive way to make money on crypto.
Having bought a cryptocurrency, you can rent it or borrow it. Staking and landing are two popular ways to make passive income with crypto. Staking is offered by large cryptocurrency exchanges, it is created by analogy with bank deposits, it helps crypto sites maintain a high level of popularity and security, as well as the liquidity of coins. You can hand over coins to the landing page to cryptocurrency traders or exchanges. Both staking and landing bring interest to owners of digital assets.
Selection of an asset for investment
To invest profitably and not lose your own money, you need to learn the principles of diversification. You should not buy any one asset; the diversity of the investment portfolio is the protection of the deposit. Having assets with different capitalization and dynamics, you can compensate for losses if the rate of one of the purchased coins drops sharply.
Experts advise most of the funds, about 80-85%, to be invested in high-cap cryptocurrencies. The rest of the budget should be split between mid-cap and low-cap crypto. It is also worth choosing assets from different segments:
- cryptocurrency of decentralized blockchain projects;
- coins issued into circulation by centralized or decentralized cryptocurrency exchanges;
- tokens of popular DeFi projects;
- stablecoins, coins whose exchange rate is pegged to the dollar or other fiat currency.
Having formed a portfolio, it is important to regularly monitor the dynamics of purchased assets, monitor quotes and market trends in order to make a timely decision on the sale of an unprofitable asset and the redistribution of funds.
Learn cryptocurrency with community members Crypto Crew and take our training course. Studying with us, you will learn everything about promising assets and investment rules, learn how to earn on cryptocurrency without draining the deposit.