How to invest in cryptocurrencies?
- The loss of capital is a high possibility.
- Making mistakes and losing coins happens
- Scammers actively target cryptocurrency users
- Do not trust any one source of information, check multiple ones and then some more.
- This is not financial advice or otherwise.
What are the different ways to invest in Cryptocurrencies:
- Buy and Hold
- Buy and Hold a basket of cryptocurrencies through a fund
- Individual Trading
- Cryptocurrency Trading funds
- CryptoCurrency Mining
- CryptoCurrency Staking
- Yield generating CryptoCurrencies
- CryptoCurrency Lending
- Operating a masternode.
- Buy mining equipment companies
- ICO flippingTools you need to invest in Cryptocurrencies.Bonus at the end of this post: Tools you need to invest in Cryptocurrencies.
Buy and Hold one cryptocurrency
Strategy: Buy a cryptocurrency and then hold it for the long term.
- Deciding which cryptocurrency one to invest in.Which cryptocurrency will still be around in 2, 5 and 10 years time?
- Very difficult to diversify into multiple cryptocurrencies because of wallets, updates forks etc..
- Important news might change the value of a cryptocurrency
- Learning how to use wallets and exchanges
- Holding safely your private key is key to cryptocurrency safety, and this strategy allows you to do so.
- It is possible to invest in a basket of cryptocurrencies by holding them in the same wallet, Exodus, Trezor and Jaxx are excellent tools.
Buy and Hold a cryptocurrency fund
Cryptocurrency funds hold a basket of cryptocurrencies. When buying the fund, the investor is generating an IOU from the fund to himself on the basis of the cryptocurrencies held.
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- Iconomi, CombiCoin, Digital Developers Fund are two active possibilities of owning a basket of cryptocurrencies.
- BlackMoon and Hedge, two platforms which will be launching soon will also offer cryptocurrency funds.
The one big mantra in cryptocurrency is holding your own coins rather than entrusting it to third parties. Investing in these funds is going against that.
- Easy diversification
- The list of the top cryptocurrencies looks very different today than it was last year. Trying to keep up to date and self-manage a basket of cryptocurrencies is time and energy consuming,
Buy low sell high
- Emotional Trading
- Fomo (Fear of missing out)
- Cryptocurrencies are extremely volatile and can bounce or crash just because of a tweet from a Crypto or Finance guru.
- Only a few day traders actually make a profit.
- Some do make a profit.
Crypto Trading Funds
Investors buy into special funds managed by expert traders.
- Cryptocurrency trading is ultra volatile.
- For some receiving the dividend might mean interacting with a smart contract. Which in practice is rather easy as long as the instructions are followed to the letter.
- Some funds calculate the returns in FIAT others in Crypto
Expert traders have an edge in computer-assisted trading, specialised info and special deals. Funds have a bigger pool to invest with, they can sustain a few losses.
Mining is the process by which PoW cryptocurrencies are created. Bitcoin and Ethereum are PoW currencies. Computers process their transactions and in return, each block mined generates a block reward.
The technically inclined can build their own miner and mine at home.
Purchase a mining contract.
- One of the very few reputable mining companies exist. Personally, Genesis has worked for me. They are based in Hong Kong with Mining farms in Iceland
- There are many mining scams other there.
- Recently a well-known cloud mining services changed their terms from a lifetime contract to a time-limited contract.
- Mining contracts are hassle-free, the investor does not need to manage breakdowns.
- Different currencies can be mined.
Buy mining equipment companies
Shovels in a gold rush. Cryptocurrencies need computer equipment and in particular, ASIC chips used for mining. The manufactures fo these chips will benefit with the rise of cryptocurrencies.
Proof of Stake (PoS) CryptoCurrencies can process transactions in 2 ways PoS or PoW (Proof of Work). A proof of stake system (PoS) process transactions through their wallets, in order to get a reward for staking investors, need only hold coins in their wallet. As a reward, this process creates more coins.
- Btcpop.co. This exchange makes staking easy, the investor need only hold stakable cryptocurrencies on the account and the exchange will distribute the staking rewards automatically.
- Waves and NEM have a system of leasing the coins, this permits staking without loosing control of the private keys. The NEM system is not very stable.
- Staking at home requires for a computer to be online 24/7.
- Third party staking means that the private keys will be held by someone else.
- PoS or Staking is more environmentally friendly than PoW, as it requires less energy.
Yield generating CryptoCurrencies
Investing in currency which provides yield
Compound interest is the most powerful force in the universe. The yield can be re-invested in other profit generating cryptos.
Operating a masternode
- Initial coin offerings (ICOs) is a system where a team, comes up with an ingenious plan to solve a particular problem. The plan usually involves a token or a cryptocurrency. ICOs tend to have a whitepaper which is not a legal document but gives an outline of what the team intend to do with the funds.
- Buy an ICO sell the initial investment plus 10% reinvest.
- ICOs are also called the token generation event (TGE), investors finance the idea.
- Your due diligence (this is needed for all strategies)
- ICO Calendar
- These tweets giver a great analogy to ICOs
- Token holders of ICOs do not in any way shape or form enjoy the same rights as shareholders
- Most ICO token economic models depend on the demand for the token/coin for it to appreciate in value.
- ICOs are like sperm trying to impregnate an egg, there are many many taking places but only very few will still be around a few years.
- In the real world, the work comes before the incentives. The ICO model brings the incentive before the work. In my experience, humans work better on an empty stomach rather than a full belly.
- The legal position of TGEs / ICOs is unclear.
- Some online personalities have created a cult following on their ICO suggestions.
- Tokens and cryptocurrencies are not the same. Cryptocurrencies are decentralised, while most ICO tokens are centralised. This means that the network effect has a weaker impact on these ecosystems.
- Some ICOs can double their value in a short time.
- Innovative ideas are hard to finance, ICOs could finance the next fin tech revolution.
Tools needed to invest in Crypto Currencies.
- Tunnelbear; Your internet browsing is precious info, protect from those willing to cause harm.
- VirusTotal; Scan software for free on this site before you install it.
- Sandboxie; Run software in a secure environment.
- EmsiSoft; A good virus scanner is essential.
- Trezor Hardware wallets
- Electrum (can be used with Trezor)
- Myetherwallet (can be used with Trezor)
Spread the word around, cryptocurrencies are stronger the more people know about them and use them!
Good luck in your cryptocurrency investing journey!