It’s no secret that cryptocurrencies have taken the world by storm. Not until very recently many people knew about cryptocurrencies. However, as the blockchain technology started getting mainstream and as global icons like Elon Musk took upon themselves to promote these cryptocurrency, the interest of common people in cryptocurrencies has soared and much more is their interest in investing in cryptocurrencies. Most people have opted cryptocurrency investing as their first investment option due to the multi-bagger result it fetches. However, like any other thing you do, investing in cryptocurrencies also require you to have sufficient knowledge about the topic. This ‘Ultimate Guide on Cryptocurrency Investment’ will get you ready for your investment journey in cryptocurrencies.
What is Cryptocurrency?
A cryptocurrency is a virtual currency which is protected through cryptography and is decentralized through the blockchain technology. This means that no single person, institution or country has control over it and it is not possible to counterfeit and cryptocurrency. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.
Cryptocurrencies are digital assets which can be used to settle transactions through crytpo tokens or crypto coins. There are a lot of cryptocurrencies out there. Bitcoin, created in 2008, by a software engineer famous with the pseudo-name Satoshi Nakamoto, was the first ever cryptocurrency. However, today there a lot of other alt-coins as well. Some of the most famous cryptocurrencies apart from Bitcoin are Ethereum, Litecoin, DodgeCoin, Cardano, etc.
4 Reasons Why You Should invest in Cryptocurrencies
Investment in cryptocurrencies is risky but so is any investment. Apart from this, the returns in case of cryptocurrencies are much higher than any other investments. Many people still see the cryptocurrency investment with caution. However, there are certain clear benefits of investing in cryptocurrencies.
1. Multi-Bagger Returns
This is the most noticeable and most striking advantage of investing in cryptocurrencies. The Crypto-market is quite recent but has managed to give incredible results to the investors. Unlike the stock markets where you o get results but it is not possible to become an overnight millionaire with small investment, the same to cryptocurrencies investment.
Even with a amount as small as $20 dollars you can make profits upto 2000x or much more depending upon in which cryptocurrency you put it in. A good example is that of Elon Musks’s investment in Bitcoin. Tesla, the Elon Musk company which invested in Bitcoin this year, was able to make a net profit of more than 750 million dollars just from this investment, as against the company’s last year overall profit of 720 million dollar.
But such high results are not always sure. However having a good cryptocurrency investment strategy can help you to ensure steady returns.
2. Security of Investment
Cryptocurrencies offer you a level of independence impossible with other means. When you keep your money in a bank, you are at the mercy of other people and organizations. At any moment, your access to the money that is rightfully yours can be limited or closed by the bank outside of governmental structures. The bank can be robbed or go bankrupt.
With cryptocurrencies, your money is yours only and stays yours forever. You do not rely on financial institutions for holding or transferring it. You do not have to pay their exorbitant fees. In the long run, it can become the basis of a truly open and decentralized economy. By investing now, you can be at the forefront of it all.
3. Positive Future Forecasts
Well, cryptocurrency has been the word of the town for a couple of years now and is believed to be the next big thing. Cryptocurrencies are here to stay and all the forecasts has been in their favor. Most of the experts believe that the cryptocurrencies will replace the existing monetary system.
Even many countries have started creating their own cryptocurrencies with China leading the way. All these facts indicate that the future is going to be bright for cryptocurrencies. Hence, if you invest now, you can get a huge share of this positive trend in the next 5 to 10 years.
4. High Liquidity
One of the key features that mark the value of any asset is its liquidity. Cryptocurrencies have a very high liquidity as compared to most other assets. Also, with the rise in investors interest in cryptocurrencies, the market capitalization for cryptos are rising rapidly. Furthermore this heightened interest is unlikely to fade anytime soon.
4 Reasons Why You Should not invest in Cryptocurrencies
Well, as the charms of investing in cryptocurrencies are high, so are the demerits. If you choose to invest in cryptocurrencies, you are essentially holding a double-edged sword, you either make extremely high profits or eventually become broke. As a result, there are certain disadvantages related to investing in cryptocurrencies.
1. Highly Volatile
Cryptocurrencies are highly volatile. There prices fluctuate in a huge price bracket each day. So, it might happen that you either gain or loss a significant amount. Also, if you are that kind of person who enjoys a fixed and know return then cryptocurrency investing is perhaps not for you.
2. Legal Risks
Well, when you invest in cryptocurrencies you are always having the risk of some legal complications. Many countries despise the idea of cryptocurrencies as they can’t exercise control over it. Also, cryptocurrencies are becoming favorite among people indulged in illegal activities as it is not possible to track down the parties involved in such crypto-transactions.
As such many, countries have totally banned cryptocurrencies and many are planning to regulate it. So, it might happen that your entire invest may become void if the government of your country bans cryptocurrencies.
3. Pump & Dump Schemes
Another thing to be cautious about while investing in cryptocurrencies are the pump and dump schemes. A good example to explain is Dodge Coin. Started as a meme coin, the dodge coin recently touched its all time high as Elon Musk made people optimistic about its future. The crpyto rose by about 2000% in the last couple of months. Soon people started pumping its price by buying more and more. But as soon as the prices reached a good level, investors started selling it at 1000x profits. Now the coin is dead, and is waiting its next pumping.
In this way, most cryptocurrencies are first pumped by the investors which leads to a price soar and as soon as the price reaches a good level, all the investors try to sell their holdings and this leads to a dump in price. What happens in this pump and dump cycle are huge losses for less aware people and great profits for the investors.
4. Poor store of value and limited acceptance
Whilst bitcoin and some other cryptocurrencies are now accepted across a growing number of payment platforms, the number of places where one can exchange cryptocurrencies for real goods or services remains very limited. For similar reasons the volatility inherent in cryptocurrencies makes them a poor store of value given the fact that when converted back into an individual’s base currency the value of crypto will swing about wildly even on an intraday basis.
Are Cryptocurrencies legal?
Well, the short answer is, yes, cryptocurrencies are absolutely legal. However, there are certain hidden implications in this statement.
Cryptocurrencies are legal in most of the countries, however, there are certain disputes revolving around its legitimacy. Some of the places where cryptocurrencies are legal include the European Union, USA, South Korea, Japan and India.
In india, the status of cryptocurrencies has swung twice in the last two years, Before April 2020, while Cryptocurrencies were not officially ban in the country but the banks were not allowed to transact any crypto related transaction. As a result, while cryptocurrencies were legal, it was impossible to actually buy or sell them.
However, in April 2020, the Supreme Court of India gave a landmark decision in favour of Cryptocurrencies and declared that thre government cannot stop banks from completing transactions related to crytpocurrencies. This resulyed in a huge boom in crypto investment and trading.
However, again in February 2020, the government decided to ban cryptocurrencies and instead launch RBI’s own cryptocurrency that could be regulated and monitored. But this decision was met with severe criticism from people and experts alike. So, for the time being the government postponed its decision and this decision is not going to change any time soon.
So, you can freely trade and invest in cryptocurrencies. Even if it is banned, which is very unlikely now, the government will adequate time to withdraw all your investments, thus you can be sure of security of your investment.
How to Invest in Cryptocurrency?
Well, investing in cryptocurrency is not a hard science. Anyone with basic knowledge can start investing in cryptocurrencies. There are certain things you need to do to start investing.
1. Choose a Cryptocurrency Exchange
Like you need a stock exchange to buy and sell stocks, similarly you need a crypto-exchange to start buying, selling and investing in cryptocurrency. There are a lot of platforms and exchanges dealing in cryptocurrencies. Some of the best ones are Binance and Coinbase. Coinbase is essentially the best platform for the beginners.
Wazirx and CoinDCX are also some great apps particularly if you want to buy and sell cryptocurrencies suing indian rupees. You can consider anyone of these to start investing in cryptocurrency.
2. Create your account and Verify its Details
Having selected a crypto-exchange, your next step would be to create an account with the crypto-exchange. For this you will need to submit certain documents like identity verification proof and bank account details so that you can deposit and withdraw funds. After you submit all the required details, the crypto-exchange will verify it which usually takes around 2-3 days. Once your account in verified you can start buying and selling cryptocurrencies.
3. Invest in the right Cryptocurrency
Creating an account is easy but what is typical is where you invest your hard earned money. It is important to invest in the right cryptocurrency if you really want to make huge returns. Therefore, do proper research before you invest. Also be aware of scamming cryptos which rise and fall too easily. Don’t fall in pump and dump cycles. If you are finding it difficult to chose the right crypto then you can consider investing in the ones I have discussed in the next segment.
Best Cryptocurrencies for Investment
Starting investment with a good investment strategy is an intelligent move which surely would like to adopt. As a beginner you would like to know which are the best cryptocurrencies to invest in where you can get both a good return and a security of investment.
Well, there are a lot of cryptocurrencies you can choose to begin with. The decision will entirely depend on whether you are ready to take high risk with the potential of gaining greater results or you can choose to have a steady returns with much more security and less risk.
Well, in both the cases, you have to select the right cryptocurrency. You can know about the best cryptocurrencies to invest by reading our article on ‘Best Cryptocurrencies for Investment‘.
While investment in cryptocurrencies look quite lucrative, the downside is that many people lose their entire life earnings in the crypto-world. However, strategical planning and a balanced approach could help you to diversify your investment portfolio with great returns coming from cryptocurrencies. Because while the handful of rags to riches stories are known to most, only a few people know about the devastating impact that the crypto-investment has brought to many. The best way to ensure safety as well as growth at the same time is to invest only that much amount which you can afford to lose