Wondering how to invest in cryptocurrencies? Before you spend your hard-earned money, create your own investment strategy. Consider, how much time do you haveto look after your investment, on how long can you freeze your capital, what a big risk you want to bear, what are your skills and experience in investing on the stock market.
The article is part of free training - Cryptocurrencies - how to start and survive? A course for everyone!
Why invest in cryptocurrencies?
Reprimands, dreams and hodl
Many people investing in cryptocurrencies, do not understand them, and even more the technology behind them. They simply want to earn money quickly. Most often they have a gambler's line and they are willing to take a chance because they see the opportunity to get rich. They have no strategy and they behave like this, if they were buying a lottery ticket.
Often they listen to the beaterswho they promise them great profitswithout informing about the risk of loss of capital. They shout that the bitcoin valuation will once reach 1 million USD and make them rich. The whole is driven by dreams about easy earnings and a graph of historical quotations of bitcoin, ethereum or XRP, which made those who years ago invested in long-term, wealthy ones.
Some tittlers, trainers, youtuberzy encourage you to buy selected projects (for which they usually receive a salary). They call their viewers to long-term breeding, regardless of the current price and market situation. They show that many years ago the bitcoin price was also dropping from 10 to 2 $ and you had to keep bitcoin on your safe wall, regardless of everything, to survive until it is worth a dozen or so thousand a piece. They often offer their viewers paid training and purchases of products and services from which they themselves earn a commission. It happens that these youtuberzy never earned a penny on investing in cryptocurrencies, and live mainly by feeding on the naivety of their recipients.
Under the slogan "investing in cryptocurrencies" you will also find a whole lot of financial pyramids, frauds and pseudo-investment fundsthat promise a monthly profit of a dozen or so percent. It is worth being careful not to be robbed. The great advantage of investing in cryptocurrencies is the ability to do it yourself and directly. We do not need middlemen and managing our capital. We should do it ourselves. So how to invest in cryptocurrencies?
Investing in the future
We do not know if history will repeat itself and if we buy bitcoin today, when everyone has heard about it, we will earn. Maybe it's better to look for a project that no one knows yet, how about bitcoin ten years ago, and it is so perspective and well planned that it will be loud about it in the future? Whether it may be better to invest only in the largest, oldest, proven cryptocurrencies with the largest capitalization, which in the future may want to invest institutional capital, creating digital gold from bitcoin, raising its price to new maxima? Nobody knows the future. If anyone knew her, he would easily become the richest man on Earth.
Formerly, cryptocurrencies were bought to pay for them, as money free from the banking system and government regulation. There have been very few such idealistic investors today because Bitcoin i altcoiny they have become mainly today speculative asset, something like stock exchange shares.
Some investors treat cryptocurrencies as investment in new technologies, new economics, as well as in technological start-upsthat can one day become large and profitable companies. It is possible that it was born in this market or it will be the second Amazon. This assumption is based on a comparison of the current, still early stage of the development of the blockchain industry, as well as a huge boom for investing in cryptocurrencies from the end of 2017 and the beginning of the 2018 year, to dot-com bubble, which was created at an early stage of internet development. It was after the burst of that speculative bubble that even the weakest projects achieved huge valuations, the companies that today are global corporations like Facebook and Google are in the foreground.
In today's economy model, it may not even be important that tokens have small relationship with the project, they do not guarantee anything to investors and their valuation is most often detached from the foundationsif the shares of companies are valued so high that even 100 would have to wait for the profits of a given company to catch up with its market capitalization. In this sense, the contractual linking of the cryptocurrency and the project it emitted is not a problem.
Speculation on the cryptocurrency market
The fundamentals of a given asset are irrelevant to the stock market speculator. It does not matter to him what the asset is - whether he buys and sells bitcoin, litecoin, PKN Orlen shares, ETF for gold or pigs! All that matters is the price change. The main tool of his work is the chart and its analysis, as well as the market mood survey in the context of expected events related to a given asset.
The speculator builds a position, sets take profit, sets stop loss and trying to earn a price change. In contrast to Hodler, typical member of the cryptocurrency communitywho lives on the development of the project and supports its creators, the speculator does not attach much to the given asset. He is not joined by any emotions, thanks to him no scruples to sell a given token, making profit or cutting the loss, while the hodler will not sell, because he thinks it is a great cryptocurrency - he is afraid that by selling he will get off the train, he will miss something unique (FOMO), and the price will go away and he will have to buy a token more expensive to continue being part of the fan community and investors of a given project.
An investor strongly ideologically connected with the cryptocurrency movement will not buy XRP, because it is a crook-bank, centralized cryptocurrency, which is a denial of what crypto-currencies were supposed to be. The speculator makes no difference whether he earns a change in the price of XRP, bitcoin or crude oil.
The pros and cons of speculation on cryptocurrencies
Speculation is one of the possible strategies for investing in cryptocurrencies. They are perfectly suited for this, because the cryptocurrency has a high volatility. Speculation requires the investor, who in this case plays the role of a traser, great mastery of emotions, experience and appropriate graph analysis techniques. Speculation It consumes a lot of time, which means that for some people it can become a full-time job. You have to keep track of itwhat is happening, what are the news, rumors, news. You need to search for bargains on the market, which is open 24 hours a day, and at various hours increases the intensity of activities of investors from Asia, Europe and the USA.
Traider performs many moves, he assumes many positions, which means that he can make many mistakes, losing funds. The summary results are key for himthat the realized profits outweigh the losses in stop loss.
Long-term investment, i.e. hodlowanie, is one of the possible strategies how to invest in cryptocurrencies. It is simultaneously the easiest strategy. It assumes only two moves, purchase and sale, so it is difficult to make a larger number of errors. You do not have to keep track of daily charts and spend a lot of time looking after your investment.
Drawing on Warren Buffett, we buy perspective kryptowaluty and we keep them, counting that as the project progresses and the adoption of blockchain and cryptocurrency technologies increases in everyday life, kept by us on secure wallet cryptocurrencies, they will become much more expensive someday. Before buying, of course, we should carefully evaluate projects and invest only in the best of many. After purchase we have to follow their fateso that you do not miss an important event.
Will we earn? As I mentioned above, no one knows the future. Warren Buffett bought shares of American companies and keeps on a long-term basis. The economic growth in the US and the current bubble in the local financial markets have made it one of the richest people in the world. If he did the same in Argentina, today he would be bankrupt. If he did the same in Japan, today he would be on a small minus. He made investments in good projects, but he was lucky enough to do it in the right place and time. The situation is similar to the cryptocurrency market. Buying a good cryptocurrency in 2015, 2016 or even 2017 year and doing nothing but breeding, you could become really rich. Will history repeat itself? If we buy a good cryptocurrency today, we will earn thousands, hundreds, and maybe tens of percent, time will tell. Do not forget that it is likely that the project will fall, and the price of its cryptocurrency will fall to zero.
Choosing your own investment strategy
In the past you could be rich by buying XRP in 2015 year and selling in 2018 year. It was necessary to make only two great moves - the purchase of a good cryptocurrency when hardly anyone about cryptocurrencies heard it, and selling it when it became very cryptocurred. However, it was just as easy to invest much more time and, speculating, to buy ICO tokensand then sell them right after entering the stock market, at the first good opportunity. In this way, you could multiply the capital by doing a lot of moves, making a lot of decisions.
And you, what strategy do you prefer? You must decide for yourself how you want to invest your funds.
Will you use stop loss on capital or on price? What part of your capital devoted to investment in cryptocurrencies? How long can you afford to free up your capital in cryptocurrencies? Will you invest the whole of your money in the long term by buying the most promising projects and are waiting a few years for their development and the expansion of the entire market? Or maybe you will be speculating in the short and medium term? Will you have enough time, perseverance and skills to make money from it?
The decision is yours.