How To Invest In Cryptocurrencies?

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How to invest in cryptocurrencies?

Warnings:

  • 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:

  1. Buy and Hold
  2. Buy and Hold a basket of cryptocurrencies through a fund
  3. Individual Trading
  4. Cryptocurrency Trading funds
  5. CryptoCurrency Mining
  6. CryptoCurrency Staking
  7. Yield generating CryptoCurrencies
  8. CryptoCurrency Lending
  9. Operating a masternode.
  10. Buy mining equipment companies
  11. 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.

Challenges:

  • 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

Pros:

  • 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

Strategy:

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.

Tools:


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Challenges:

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.

Pros:

  • 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,

Individual Trading

Strategy:

Buy low sell high

Challenges:

  • 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.

Pros:

  • Some do make a profit.

Crypto Trading Funds

Strategy:

Investors buy into special funds managed by expert traders.

Tools:

Challenges:

  • 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

Pros:
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

Strategy:

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.

Tools:

The technically inclined can build their own miner and mine at home.
Purchase a mining contract.

Challenges:

  • 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.

Pros:

  • Mining contracts are hassle-free, the investor does not need to manage breakdowns.
  • Different currencies can be mined.

Buy mining equipment companies

Strategy:

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.

Tools:

CryptoCurrency Staking

Strategy:

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.

Tools:

  • 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.

Cons:

  • 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.

Pros:

  • PoS or Staking is more environmentally friendly than PoW, as it requires less energy.

Yield generating CryptoCurrencies

Strategy:

Investing in currency which provides yield

Tools:

  • Rialto, generates profits from cryptocurrency arbitrage.
  • Neo, generates another token called Gas.

Pros:

Compound interest is the most powerful force in the universe. The yield can be re-invested in other profit generating cryptos.

CryptoCurrency Lending

Operating a masternode

ICO Flipping

Strategy:

  • 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.

Tools:

Challenges:

  • 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.

Pros

  • 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.

Buying Cryptos

Buy Bitcoin with Euros: Bitcoin de
Buy Ethereym with Euros Bitpanda
Buy Bitcoin with USD: Coinbase

Exchanging Cryptos

Security

  • 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.

Wallets

Spread the word around, cryptocurrencies are stronger the more people know about them and use them!

Good luck in your cryptocurrency investing journey!

 

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