How to invest in a cryptocurrency – Everything you need to know
Ways to invest in cryptocurrencies
There are many options, but usually the first step is to sign up with a broker or stock exchange. These platforms act as intermediaries to help you buy, sell and exchange a variety of coins. There are several features available depending on what you choose.
While these platforms allow for investment, other alternative services are available. Some entities offer wallets for securely storing cryptographic information, while others allow trading by leveraging investment products such as ETFs. Use the links below to access guides, reviews , and tutorials on everything you need to know before making your first investment with Meme Token.
A Beginner’s Guide to Cryptocurrencies
What are cryptocurrencies?
Cryptocurrencies are digital currencies that do not require a centralized institution in the background, such as a bank, to review transactions. Instead, they use blockchain technology to create an undisputed, distributed record of the movements of coins and tokens that anyone can use.
The first ever cryptocurrency is Bitcoin , which was introduced to the market in 2008 by a person or group using the pseudonym Satoshi Nakomoto. The identities of the people behind the project have never been revealed, but it seems that the project was intended to provide an alternative form of financing after the 2008 economic collapse that shook the banking world.
As many of us know, the value of Bitcoin, as well as many other cryptocurrencies, has risen sharply in recent years. The value of cryptocurrencies is also determined by supply and demand, in the same way as in the stock or foreign exchange markets.
Thousands of other cryptocurrencies have been created since the advent of Bitcoin. The largest currencies are Ethereum , Litecoin and Theta – all of which allow for 24/7 trading, such as Bitcoin, and which have achieved particular success as crypt has now become an increasingly important part of the mainstream.
How to invest in its cryptocurrency?
You can invest in a number of ways, and most beginners usually choose a few of the best-known coins, such as Bitcoin. Most trading platforms currently allow easy and secure investment in these cryptocurrencies.
When you start, it’s important to know that investing and trading aren’t the same thing. These are two different functions and understanding the difference between them will help you choose how you want to make your first investment.
Here is a summary of the main differences between investing and trading in cryptocurrencies:
When investing in a cryptocurrency, your goal is to buy and hold coins for a long time because you believe their value will increase. For example, if you choose 100-euro tokens today because you believe they will be worth 200 euros next year, this is an investment. The following are the key issues to consider in pursuing this strategy:
Focus on the basics. Making a long-term crypto investment requires making a purchase decision based on fundamentals and long-term trends. It’s best to research things and choose cryptographic products whose value you believe will develop well in the coming months and years – leaving less attention to daily price fluctuations.
Look for added value. The ideal crypts for this strategy are the ones you think are currently undervalued. This may be because you believe the project behind the coin will be a long-term success, or because the token is new and has not yet received enough attention from cryptographic investors.
Consider your time span. You need to have an idea of how long you want to keep your cryptos. For example, if you bought Bitcoin in late 2017, when it was at its peak, your investment would have lost nearly two-thirds of its value by the end of 2019. However, if you had held it for more than two years, your ranking would have gone up. 2.5x by the beginning of 2021.
Clear on volatility. While price fluctuations may and will occur, a true long-term investor will not allow downturns (as well as upturns) to disrupt themselves, but the goal is to maximize long-term profits. The slang term for this approach is HODL, which means you plan to hold on to the property in the long run.
Take an active approach. Instead of just buying a cryptocurrency (e.g. Bitcoin ) and sitting on it, you may want to react to market movements. For example, if you believe that the value of a coin will rise to a certain value at which you plan to sell, you may be more inclined to see if the price goes down in the short term. As with other investment targets, most market winners are long-term investors. Alternatively, if you have the maximum loss you are willing to suffer, sell the coins if they fall to that value.
Keep the coins safe. If you plan to hold a large amount of cryptocurrency in the long run, you may want to consider purchasing a personal secure digital wallet. Stock exchanges and brokers usually allow you to keep your coins on their platforms, but cold storage wallets can give you peace of mind and extra security – just like storing valuables in a bank vault.
Remember that investing in cryptocurrency requires a cold head. The prices of individual coins can be very volatile in the short term, so it’s important to rely on fundamental analysis to detect value and stay strong if you believe the cryptographic investment will eventually turn positive.
This is similar to investing in stocks. Tesla’s investors tolerated the weak development for many years, but as the need for green technology became clearer, the company’s share price rose sharply. This meant that investors who held their shares for a long time were rewarded for their proactive performance, and early sellers lost the benefits.
When trading cryptocurrencies , your goal is to buy and sell coins often within a short period of time and earn regular small profits. For example, if you take $ 100 worth of Bitcoin on Monday and sell it for $ 120 on Tuesday, it’s trading. Here are the main things you want to keep in mind when it comes to cryptocurrency trading:
Study technical analysis. To be a successful trader, you need to master technical analysis (reading and analyzing charts). This will allow you to learn to detect trends in the price fluctuations of different cryptocurrencies. Instead of looking for the long-term strengths of the coin, it is more important to identify these trends and use them to make predictions about the future during trading.
Adapt to events. No one can predict the market with 100% accuracy, so you need to be prepared to adapt if market conditions change. If the whole market suddenly turns south, you need to be prepared to leave the market and minimize losses.
Manage your risk. As mentioned above, the purpose of trading is to ensure that the trades as a whole are profitable, rather than having to make money every time. You are inevitably sometimes wrong, so you need to use techniques to make sure you don’t take too many risks. Limiting the amount of money you invest in individual trades and setting stop-loss orders are good ways to protect your investment.
Keep your head cool. When trading cryptocurrencies, one of the hardest things is to avoid speed blindness. When the market is on the rise, some people get excited and make trades based on emotion instead of research and logic. Doing so can lead to big losses when you return to earth.
As a whole, it is important to focus on short-term decisions during trading. Suppose you buy a coin with a purchase price of € 300 and sell it for € 330. You have then made a successful trade that has generated a 10% profit. It doesn’t matter if the price of the coin then rises to € 400 – you achieved the short-term benefit you were looking for, which was your goal.
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