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Investing in Cryptocurrency for Beginners: Where to Start and Is It Worth Investing Now

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The desire to save money from high inflation is the main reason for investing in cryptocurrency. Thanks to BTC or LTC we can deposit to casino en ligne, travel, and pay for services. Let’s consider how to competently buy a digital coin, what financial risks exist, and whether it’s worth investing in cryptocurrency now.

What You Need to Know Before Investing in Cryptocurrency

A cryptocurrency is an electronic means of payment that exists only in virtual space. With digital currency, you can buy goods and services, transfer a virtual asset to third parties, open cryptocurrency deposits, etc.

Before investing in digital currency, it’s important for an investor to make an investment plan, find a safe exchange, have a wallet for storing virtual coins and consider all the risks of investing in cryptocurrency.

Pay attention! Most cryptocurrencies are not backed by anything: neither gold, nor real investment assets (stocks, bonds, real estate, etc.). The main value of such digital coins is the trust of users. Bitcoin is an example of such cryptocurrency.

Before buying a particular cryptocurrency, an investor should study the digital asset. The financial market distinguishes between fundamental and technical analysis.

Fundamental

Fundamental analysis of a digital currency is a method of identifying the real value of a cryptocurrency and is used when making long-term financial investments.

To fully understand the digital coin market, this type of analysis includes an assessment of the political and economic situations in the world, the prospects for cryptocurrency development, user interest in the virtual asset and other factors.

There are three cryptocurrency analysis metrics:

  • Onchain metrics. It helps form a characteristic of the electronic asset with the help of data taken from the history of financial transactions of the cryptocurrency. Such information can include: the number of transactions, their market value, the amount of commission, etc.
  • Design metrics. It refers to the analysis of the purpose of creating a cryptocurrency. For this purpose, the technical documentation of the virtual coin is studied and the presence of competitors in the digital currency market is checked.
  • Financial indicators. Data from this category is needed to find out the history of exchange trading on the investment asset.
  • The parameters an investor needs: the market capitalization of the cryptocurrency, its liquidity and the volume of daily trading.

Today, there are many platforms in the digital currency market that offer investors ready research on each virtual coin. The most popular services for fundamental analysis of cryptocurrencies are Baserank and Crypto Fees.

Technical

Technical analysis of a digital coin is based on predicting the future movement of the market price of a cryptocurrency in the short term (up to one year).

The main idea of technical analysis: the market value of an electronic asset reflects everything that can affect its value. Therefore, investors are only interested in the price movement of a virtual coin.

The main methods of technical analysis:

  • Trend lines. Presented as sloping lines to reflect the maximum (resistance level) and minimum (support level) price of the asset. The moment to buy a digital currency is when the coin price is near the support level. Accordingly, the resistance level is the point at which it is worth selling the cryptocurrency.
  • Fibonacci levels. Presented as a set of horizontal lines and used to find a profitable entry point for a digital asset and to make a short-term investment.
  • Elliott Waves. Because exchange prices move in waves, this method of technical analysis allows you to find recurring trends on the charts and make predictions about the future movement of the exchange rate of an asset.

 

There are more technical analysis methods which reveal the direction of price movements. We have only considered the most popular ones. However, none of them is suitable for investors who buy cryptocurrency for a long time.

Ways to Invest in Crypto

Trading

This option is based on financial transactions with cryptocurrency on the principle of “buy low, sell high”.

As a rule, the period of time between buying digital currency and selling it lasts from a couple of seconds to several hours, so trading is based on technical analysis.

Trading is considered a high-risk way of investing for first-time investors. The high volatility of coins affects the profitability. Cases of complete loss of financial capital are not uncommon. However, in the period without strong price fluctuations, it’s possible to get up to 30% of profit and higher.

Long-term Strategy

People who make long-term investments in cryptocurrency are guided by the “buy and forget” earnings principle.

The essence of long-term investing is to study a particular cryptocurrency using fundamental analysis, then find a growth-promising digital asset and buy it.

In this kind of investment strategy, the market value of a coin is only important to compare it to the real price of the crypto. If the market value is lower than the real value, the digital currency is undervalued and can be bought.

With proper analysis of a cryptocurrency, the amount of income can usually exceed the investment by several times.

Mining

Refers to the process of mining new virtual coins. The rate at which cryptocurrency appears depends on the power of computing equipment (processor, video card, etc.)

How to earn money from mining? Buy computing hardware and install software on it that deals with mining. The computer then begins to solve the complex computational task that the cryptocurrency network puts before it.

After successfully solving the problem, the owner of the computer is paid a financial premium, which consists of a certain number of electronic coins of the mined digital currency. The return on such investments in cryptocurrency is 50-100% per year of the amount invested.

Investments With Interest

If the investor bought crypto, he can open a cryptocurrency deposit on the exchange at interest and receive a passive income.

For example, investments in cryptocurrency at interest are offered by the Binance exchange.

According to its terms, an investor can open a deposit with an option to return cryptocurrency assets at any time and with a yield of 3% per annum. If the owner of a digital coin wants to make a deposit for a certain period, the rate of return will be 6-8%. In this case, virtual assets will become unavailable for withdrawal for the term of the deposit.

Affiliate Programs

An affiliate program is a way of cooperation with an exchange in which the trading floor pays a transaction participant in cryptocurrency for bringing new investors to their digital currency market.

For example, BitMex exchange pays clients up to 20% of the commission on transactions of investors they have invited. The percentage is paid in bitcoins.

DeFi

DeFi is a set of blockchain-based financial applications that offer clients various services using cryptocurrency.

One can make money in DeFi, for example, through income farming. An investor lends his or her cryptocurrency in return for high interest for the use of his or her capital. The income of a digital asset owner can reach hundreds of percent per year.

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