There was a time when the cryptocurrencies available in the market can be counted using only one hand. Today, there are thousands of crypto tokens available.
On top of the sheer number of digital currencies now present, investors and traders also have different expectations and goals when investing in the market. However, not all cryptocurrencies will readily fit any investor’s mould. This means choosing the best investment opportunities can be a bit of a challenge, and decisions can go well beyond crypto price levels.
Nevertheless, there’s no doubt that there are opportunities to make money in decentralised digital currencies. With the right knowledge and tools, investing in this market can help investors reach their goals.
Crypto Market Potential
One of the key factors that traders use when investing is getting some ideas of how much money is moving in and out of a particular market. In financial parlance, this is often referred to as market capitalisation. For cryptocurrencies, this can be calculated by getting the total number of tokens or coins in circulation for a particular currency and then multiplying it by the prevailing market price of each token or coin.
The total market capitalisation of cryptocurrencies now stands at over USD$200 billion, and that figure continues to increase. More people and big companies have started to accept cryptocurrencies as a form of payment. With a lot of money flowing in and out of the crypto sphere, the potential for growth cannot be denied.
Note that crypto price levels are also more volatile compared to other investment assets. Thus, investors may face a higher degree of risk when trading in this market.
How to Invest in Cryptocurrencies
There are many ways to enter or invest in cryptocurrencies. You don’t even have to spend money if you merely want to get the feel of the crypto market. You can earn free crypto to get you started. For the most part, investors can play the market in three ways. As an investor, you may choose one or all these methods to achieve your objectives:
You may say that this is the old-fashioned way of joining the cryptocurrency market. By mining for cryptocurrency like Bitcoin, you will use computers to obtain cryptos and join other miners to solve complex functions or validate data in the blockchain. It’s like getting your hands dirty in the crypto trenches.
Since you mine for your own crypto, your profits are higher than if you merely speculate on crypto prices. On the downside, you need to invest in expensive hardware to make this whole endeavour worth your while. Also, different cryptos have different mining requirements, so you could be less flexible with your investment.
Buy, Sell, and HODL
Buying and selling cryptocurrencies has brought forth two schools of thought. On the one hand, there are investors who ‘short’ their investment. These are traders who buy and sell their crypto in the short term. On the other hand, there are investors who believe in the long game or ‘HODLing.’ In the crypto community, HODL is the slang term used for holding on to a currency instead of selling it, even during times of market volatility.
Buying, selling, or holding onto crypto assets can be an easy but profitable way to make money in the market. Depending on your trading strategy—whether you want to short or hold onto your assets—you need to keep tabs on the real-time price on crypto to improve your investment decisions. On the downside, buying and selling cryptos may require a sizable investment, and it may provide less flexibility for investors.
Contract for Difference (CFD) Trading
This type of trading allows you to invest in the market using the services of a broker. Engaging in CFDs is not direct trading wherein you need to buy or hold an asset or cryptocurrency.
CFDs are derivatives where the investor speculates on crypto price changes. The investor and the broker only need to set and agree on a set of parameters regarding the investor’s trading position. Profits or losses are made depending on the conditions present when the investor’s position closes.
CFDs may use leverage trading, so you don’t need high capital to invest. And since you don’t hold or own a cryptocurrency, you can be flexible with your investment and easily get in and out of the market. However, if you use leverage trading, you’re also exposed to higher risks, and you may lose money quickly.
Best Investment Opportunities in Cryptocurrencies
Cryptocurrencies have been around for more than 10 years now. While Bitcoin may have been the first one in the market, countless other digital currencies emerged after. Here are the top cryptos that may well be considered the best investment for your money.
- Bitcoin (BTC)
With a market capitalisation of over USD$300 billion, Bitcoin is the largest and most valuable cryptocurrency in the market today. Think of it as the gold standard. Any investor who wants the best investment platform should consider BTC.
Reasons to invest in BTC include:
- High trading volume
- All exchanges accept BTC
- Profit potential remains high
- Scarce supply means less inflation
- Ethereum (ETH)
Ethereum is the blockchain platform, and its cryptocurrency is called Ether. It enjoys an estimated USD$40 billion in market capitalisation and is one of the most popular today, with liquidity levels second only to BTC.
This cryptocurrency may be the right one for you if you’re looking for the following:
- Moderately priced digital currency
- Highly accessible and with widespread use
- A platform that allows developers to build their own crypto projects
- Litecoin (LTC)
If BTC is the gold standard, then Litecoin may well be considered as the silver. With a market capitalisation of almost USD$5 billion, this crypto has maintained the most desirable features of BTC and added elements that make it less complicated.
Some of the advantages of LTC include:
- Affordable cryptocurrency
- Transactions are confirmed faster than BTC
- Less volatile compared to assets like BTC
- Can be mined using ordinary computers
- Bitcoin Cash (BCH)
As Bitcoin became more popular, the platform blocks became sluggish regarding validating transactions done on the platform. Thus, some developers came up with Bitcoin Cash to address the weaknesses shown by BTC. With a market capitalisation of approximately USD$5 billion, BCH has huge growth potential.
Here are some of the reasons why BCH may be a good investment for you:
- Faster validation of transactions due to large block size limit
- Network scalability is high, so transaction fees are lower
As with any other type of investment, there are risks involved when dealing with cryptocurrencies. Many traders maintain that you shouldn’t put more than 10% of all your money in crypto markets.
Cryptocurrency investing is not for the weak. The market itself is vulnerable to wide volatility, and there are no sure-fire ways to predict market behaviour. However, if you enjoy the idea of investing in high-risk, high-reward assets, then cryptocurrency may be the best investment for your money.