Wallets that automate some of the activities involved in asset exchange can assist investors in acting fast on market opportunities.
The learning curve for cryptocurrency investing is quite steep. Suze Orman, a personal financial guru, described her first effort at investing via a bitcoin exchange as “aggravating.” “It was simply too hard,” she recently explained to NextAdvisor.
Additionally, being a volatile, highly speculative investment, many investors are prudent. However, for people interested in cryptocurrency but not in purchasing and holding physical coins, there are still methods to invest, albeit indirectly. Additionally, you may already be exposed to cryptocurrencies without realizing it.
The Best Way to Invest in Cryptocurrency Without Purchasing Coins
The simplest approach to gain exposure to cryptocurrencies without purchasing it is to buy stock in a firm that has a financial stake in the future of cryptocurrency or blockchain technology.
However, investing in individual equities carries the same risks as cryptocurrencies. Rather than selecting and investing in individual stocks, experts recommend that investors invest in diversified index funds or exchange-traded funds, which have a track record of long-term value increase.
“Believe it or not, the majority of individuals who have a retirement plan or invest in an index fund already have some exposure to cryptocurrency,” says Daniel Johnson, a certified financial planner at ReFocus Financial Planning.
Many of the best index funds — such as the S&P 500 or total market funds — invest in publicly traded companies that are involved in the cryptocurrency industry in some way, whether by mining crypto, developing blockchain technology, or holding significant amounts of crypto on their balance sheets, according to Johnson.
Tesla, for example, is included in any portfolio that tracks the S&P 500. Tesla possesses over a billion dollars in Bitcoin and has previously accepted Bitcoin payments. Since its entry in 2020, it has grown to be one of the index’s most valued and thereby significant firms. Additionally, the ARK Fintech Innovation ETF includes Coinbase, the only publicly traded bitcoin exchange.
If you have some additional cash (and are willing to take on some risk), you can invest a portion of your portfolio to specific firms or more specialized index funds or mutual funds. “An investor enthusiastic on the future of cryptocurrencies may invest in the stocks of companies developing the technology,” Jeremy Schneider, the Personal Finance Club’s personal finance expert, explains.
Experts generally recommend that you limit your speculative investments — whether they are in a single company’s stock, specialist index funds, or cryptocurrency itself — to less than 5% of your whole investment portfolio.
Have a crypto trading strategy
It’s not always simple to tell the difference between real cryptocurrency suggestions and scammers; there are plenty of sharks out there eager to steal your money.
According to Action Fraud, the UK’s fraud alert agency, reports of crypto investment scams increased by 57% year on year to 5,581, with investors losing a total of £113 million.
Therefore, when confronted with an abundance of information about a cryptocurrency, pull back from the frenzy.
Consider the project critically.
- What is the total number of users?
- What issue does it address?
- Is there any connection to industry?
- Avoid coins that make grandiose promises but give nothing substantial.
Diversify your cryptocurrency holdings
It is not prudent to invest an excessive amount of money in a single cryptocurrency. As with stocks and shares, diversify your holdings by investing in many digital currencies. This ensures that you are not over-exposed if one of them loses value – especially given how volatile the market values of various investments are. There are thousands of options, so do your homework.
Make a long-term commitment
Prices fluctuate rapidly on a daily basis, and inexperienced traders are frequently fooled into panic selling when prices are low.
Cryptocurrencies are not going away, and investing for months or even years at a time may yield the biggest returns.
The cryptocurrency market is in the red – your next investment will depend on the type of crypto investor you are.
Between August and November ’21, the value of crypto assets surged by about $1 trillion, prior to last week’s massive splat. While most investors’ first reaction may be to sell and minimize their losses, skilled traders take advantage of such opportunities to ‘buy the dip’ — acquire cryptocurrencies at bargain prices prior to the next bull run.
“Many market participants are seizing the opportunity and rushing to stock up on cryptocurrencies from the top-10 list that are currently experiencing a drawdown, as shown by numerous indications,” Johnny Lyu, CEO of cryptocurrency exchange KuCoin, told CoinNewsDaily.
Naturally, all investors should conduct their own research prior to making any type of investment, dator or otherwise — which is why it’s critical to understand when to HODL – hold on for dear life — and when to purchase and sell based on their risk tolerance.
When demand for a cryptocurrency increases, its value increases. And, while the market is influenced by a variety of different reasons, the majority of bitcoin adoption — as well as cryptocurrency investment — falls into three groups.
A coin that serves a purpose, no matter how insignificant
Bitcoin is viewed as a cash-equivalent asset by businesses, Ethereum is unique in its support for third-party NFT platform developers, Binance Coin benefits from the weight of its exchange, Solana is establishing a foothold in the DeFi sector, MANA is native to Decentraland’s metaverse games, and Monero is accepted as payment on the darknet, and so on.
Within the cryptocurrency ecosystem, those who invest in cryptocurrencies by betting on the underlying solution are referred to as ‘true believers’—because they ‘believe in the technology.’ They’ve read the white papers, comprehended tokenomics, performed fundamental analysis, and are compensated when they identify a currency with a use case.
Due to the lack of historical data, these types of investments incur a little increase in risk. They do, however, promise larger returns on investment if the correct judgment is made, as investors enter before a cryptocurrency becomes mainstream.
A cryptocurrency that is inexplicably popular, but thrives nonetheless
Dogecoin began as a joke, Shiba Inu has its ‘WoofPaper,’ Ethereum Classic grew out of uncertainty, and Namecoin plummeted from fourth to eighth place in the game. Numerous such currencies grow in value for no discernible reason then decline in value as investors seek safer havens. The problem is that after one season in the sun, such coins may never bounce back.
What should you do in the event of a crypto market correction?
For real believers who are confident in the long-term viability of the coins they have invested in, a humorous yet alluring tactic is to “be scared when others are fearful, and greedy when others are greedy.” That would entail taking advantage of the current decline in coin values to acquire additional coins.
For those who purchased coins at a discount and witnessed a significant price increase, “keep your powder dry” may sound reasonable. This entails withdrawing a portion or all gains to safer shores in order to wait for future investment possibilities in the cryptocurrency market.
Individuals with a low risk tolerance may discover that now is an advantageous moment to dedicate additional effort to learning about the coins in their portfolio. This would assist in determining which investments would generate marginal gains, which are projected to decline further, and, for example, whether now is the ideal time to increase your holdings of Bitcoin, which is approaching its next ‘halving.’
The historical pattern indicates peaks followed by declines, with some trends persisting for years – indicating that those investors who hung on — or HOLDed — to a reliable coin got larger-than-life profits, even if it took a few years.
While market timing is not recommended, the majority of investors who followed Bitcoin’s lead this year and bought in altcoins were profitable by October’s conclusion. Additionally, the majority of currencies have begun to rebound in value, suggesting that a redoubled bull run in December is still feasible – at least according to the wild Bitcoin price predictions made by billionaires, influencers, and analysts alike.
Regardless of the type of crypto investor, the recent week-long fall shown that the namesake ‘hopium’ is no longer sufficient to generate gains — just hoping for bull runs that boost all coins is becoming increasingly rare as the crypto market matures. The next one could occur within months or take years to reclaim the top spot.
The author’s thoughts and opinions are entirely his or her own and do not necessarily reflect those of CoinNewsDaily. Each investing and trading action entails risk; before making a decision, you should conduct your own research.