How To Invest in Cryptocurrencies

How To Invest in Cryptocurrencies

There is no doubt that you may have heard quite a bit recently about the magnificent performance of cryptocurrencies. 2017 was indeed the time to make money in this field as coins and tokens went on wild rides reaching levels close to a 3,000% appreciation.

You may be interested in finding out how you can get involved in the action. You may be feeling that there is something that you are missing out on and you want to invest in some cryptocurrencies to save for your future. Yet you are uncertain exactly of how to do this and the most effective way to purchase and store these goods.

That is exactly what this post is about. We are going to help you with the information that you require to make your first foray into cryptocurrency trading.

Trading or Investing

Before you can go ahead and actively take part in the cryptocurrency markets, you have to know whether you want to invest or trade the markets. These are two totally different dicisplines that may also require different services.

A cryptocurrency investor is termed a “Hodler”. This is a weird classification and is a legend amoung cryptocurrency holders. These are essentially those investors who sit and hold the cryptocurrency as long as they can and take advantage of the great appreciations.

These “hodlers” will not sell the cryptocurrency that they hold despite market swings. They are a semi cult as they believe that the long term value of these coins is in the several million.

On the other spectrum of the equation, you have the traders. These people will actively engage in buying / selling the securities and try to profit on the immense volatility in the currency. These traders wont hold a position in the coins for a very long time and will try to take an arbitrage position in them.

Bitcoin Volatility Explained

These traders will try to trade on rumours sweeping through the cryptocurrency world as well. These traders can reap a handsome reward as some of these coins can move several points a day. It is, however, still a risky endeavor.

You have to decide how you want to trade in the cryptocurrency markets. If you are a trader then you are probably better to enter a brokerage account at a CFD provider. If you are an investor then you will want to buy your coins off of an exchange and store them in a wallet.

The Trader

If you are more interested in the day to day thrills and volatility that is present in the cryptocurrency markets then you are more suited to trading CFDs on the pairs. This is because CFDs allow for leverage in the assets and hence can generate quite a handsome return for you.

CFDs are contracts for difference and are essentially just a derivative instrument that gives you the exposure to the underling instrument. They are marked to the market every day and will allow you to make large profits or losses as the crypto swings during the day.

It is sometimes quite hard to find a cryptocurrency broker that has all of the assets on offer for you to trade. Most will obviously include Bitcoin and Ethereum but not many more than this. That can be frustrating as you want to trade those assets that have the larger swings.

One of the better cryptocurrency CFD brokers that you can use is Plus500. They have numerous cryptocurrency CFD assets that you can trade with considerable leverage. You can read this Plus500 Review if you want more information .

The “Hodler”

The Cryptocurrenc hodler will look to buy cryptocurrency gradually and build up their stockpiles in secure wallets or online exchanges. They will buy the physical coins and not the CFD derivatives.

If you wanted to buy coins, there are a few exchanges where you can send your Fiat money and then purchase the cryptocurrencies. The top three are Kracken , Coinbase and Bitstamp. You read more about these exchanges in these reviews.

Once you have an account, they will want you to verify your identity before you can start purchasing large amounts of cryptocurrency. Once this has been done, you can then withdraw your funds to a secure wallet. There are a number of wallets where you can place your cryptocurrency but only a few are really safe and can be used to store.

Here is a list of all of the safest wallets were one can store their cryptocurrency and keep it for extended periods of time. The wallet will store addresses to which you can send your coins on the public blockchain.

Coinbase Cryptocurrency Exchange

How long you decide to actually hold your coins is a bit of a tricky prospect. The credence of the Hodler is that they are a limited good and hence should be held on for as long as possible. This may be unrealistic as the goal of many people is to eventually realize a return on their investment.

A reasonable middle ground could be that the holder will liquidate mere portions of their investments over time and realized the gains from them. Then, when they want to retire, they can just liquidate all of their coins. Selling the coins is just as easy and people can send them to their wallets on the exchanges and changes for Fiat cash.

To the Moon

Another really interesting saying amoung cryptocurrency enthusiast is that of “to the moon”. This is a belief that these coins are destined to appreciate as more and more people begin to adopt cryptocurrencies and it reaches mass appeal.

Whatever your investment strategy, by taking part in the cryptocurrency revolution you are no doubt setting yourself on the right path to freedom from centralized banks and financial institutions. Your savings are completely contingent on the strength of the global network and not your bank manager.

4 thoughts on “How To Invest in Cryptocurrencies

  1. What do you think is the most prudent thing to do? Should someone invest in holding the underlying asset or should they trade a derivative? I would think that CFDs are pretty risky and as such can lead to relatively large losses?

    • CFDs are really risky but most of the brokers have the option to allow you to insert guaranteed stops. These will ensure that you will get out of the trade the moment that it touches those levels. It is the most important levels to watch.

  2. Is it safe to leave my funds on the coinbase exchange if there is going to be a hard fork? They did not credit the Bitcoin gold into my account which is really unfair.

    • I think that they will be safe as Coinbase has said that they will credit both tokens to users. What will be interesting to see is what they will name the respective coins. Coinbase went against their honesty in the New York Agreement and many people are seeing this as dishonest. We will wait to see how it plays out…

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