Investing in cryptocurrency – methods, opportunities and risks
Over the past 4 years (since 2017), the topic of cryptocurrency, investments in bitcoins, blockchain technologies has taken one of the leading positions in the TOP-10 rating of a query in search engines – browsers on the Internet .
What is really behind investing in a crypt, how it can be done and what risks can be paid for it and will be discussed further.
Basic methods of investing in cryptocurrencies
The goals of each investor when investing in crypto assets may be different. From the currently existing methods of investing in crypt, you can pick up any coin or a combination of them for any purpose. These practical and affordable ways include:
- Purchase of cryptocurrency for the long term in order to preserve or protect capital from inflation, increasing its value significantly. The average, for example, the return on Bitcoin since 2017 was about 1600%. And for such coins as Ripple – about – 6000%. Investments can be made by directly buying a crypt on an exchange like Binance , Bitfinex, Kraken, EXMO, in cryptocurrency exchangers, through crypto-wallets … And now there is such a wide variety of cryptocurrencies on the market (more than 5000) that you can create an investment portfolio for any term and task.
- Mining – earlier for “mining” or mining cryptocurrency some initial knowledge of the use of computer equipment, setting up the corresponding programs were needed. Now for mining it is enough to use special cloud mining platforms. Here you can receive cryptocurrency as a reward in exchange for using the computing power and Internet traffic of the user’s computer to maintain the network – blockchain what – then specific coins .
- If there is no desire to directly get involved with risky investments in crypto, there is more confidence in traditional financial instruments (stocks, futures on the stock exchange), then in this case they have already appeared appropriate financial schemes for investing in crypto. In particular, there are futures contracts for Bitcoin and Ethereum and others altcoins . It is possible to purchase shares in special exchange-traded funds (ETF). The portfolio of such funds includes a variety of cryptocurrency assets – altcoins, futures, NFT tokens. Here, investor capital is managed by professional fund managers for a small commission.
Opportunities and Risks
Any investment, especially in asset types such as cryptocurrency tokens and coins, carries a risk. These include:
- cryptocurrency market volatility, which is an order of magnitude higher than the fluctuations of conventional financial markets.;
- no government regulation, i.e. the problem of protecting the rights of the investor;
- not all tokens can be classified as promising and reliable. Most of the crypto projects do not survive in the market for a year.
- many fraudulent hype or fake crypto projects
- Difficulty in many countries converting to and from fiat currency.
The advantages of investing in cryptocurrencies include:
- Possibility of obtaining returns at levels tens and even hundreds of times higher than the standard options for capital work;
- reliability of cryptocurrency transactions and protection of blockchain systems from hacking and fraudulent activities
- transaction speed in seconds and scalability (any amount can be controlled);
- complete freedom to cross borders