It’s never been simpler. Simply sign up with an exchange then hit “buy” and Bob is your uncle. Now you’re an authentic crypto-investor.
There’s more to investing beyond buying the chosen cryptocurrency. As an experienced investor you’re likely to have a lot of questions regarding crypto, such as the things you should be aware of prior to investing, the best way to get it, and how you can secure (and ensure the security of) your investment.
We’ll tackle these important questions, plus more, in this guide on the best ways to make money investing in crypto.
Three Things You Need to Know before investing in the cryptocurrency Market
1. It’s a volatile and High-Risk Investment
The cryptocurrency market is extremely volatile. Bitcoin is an excellent example, and it’s unusual for it to fall 30% over a period of time, only to then surge to record levels the following week.
Bitcoin may be performing very well in comparison to when it first became popular however, the gains aren’t guaranteed or stable. Anyone who purchased BTCUSD in the latter part of 2017 and then sold it between October 2020 and October 2017 suffered an loss.
If you decide to invest in cryptocurrency, we suggest just allocating a small percentage of your portfolio in the beginning.
2. Cryptocurrency Holdings Are Not FDIC Insured
If your bank is insolvent the checking and savings accounts will be protected by up to $250,000 per. If your crypto exchange is bankrupt, compromised or shuts without notice then you’re probably lost.
3. Cryptocurrency Can Be Taxed
Gains from cryptocurrency are tax-deductible. The IRS has decided to tax the gains from crypto as capital gain in 2014 after which it has issued at most 24,000 notices to crypto enthusiasts.
Select an exchange
The first step to take when buying crypto choosing an exchange that you trust. Exchanges are where you’ll buy, sell and most likely storage of your cryptocurrency.
It’s a good thing that cryptocurrency has been around long enough that the most popular exchanges have grown quite reliable and user-friendly. There are several that we would recommend as a whole however, these are the three most popular exchanges for beginners:
Coinbase is an ideal option for beginners to start with. It’s a publicly traded company with more than 73 million customers, and is known for their user-friendly and intuitive interface and the possibility to earn crypto for free through Coinbase Learn. The drawbacks include higher-than-average fees as well as the inability to transfer your private keys to the cold account.
eToro allows you to invest in ETFs, stocks and more than 30 cryptocurrencies with the simplest fee of 1% when trading or buying cryptocurrencies. All in all, eToro provides a very easy way to add cryptocurrency to your portfolio.
Binance.US is competing with Coinbase by offering lower charges as well as a greater range of cryptocurrency as well as more sophisticated features that you can grow into. It is currently under strict regulatory scrutiny. While this isn’t a major issue since it’s not uncommon with other crypto-related platform, there are some things you should be aware of.
BlockFi gives investors the opportunity to take advantage of crypto-backed loans. For those who want to earn more crypto the possibility of earning bitcoin back on all purchases you make with the BlockFi Rewards Visa(r) Signature Credit Card.
Visit Cryptela for crypto education.
Select Which Cryptos You’d Like to invest in
Bitcoin does not mean that it’s the only cryptocurrency available around. Actually, it’s the case that there’s more than 7,500 cryptos available.
The good news is that most exchanges provide a handful of dozen. They are generally the most authentic and reliable coins that have a decent market capitalization.
Here are a few examples of the most popular cryptos traded currently:
Bitcoin (BTC USD) The most powerful of cryptocurrency is still in existence and can be purchased at any popular exchange.
Ethereum (ETH) Ethereum (ETH) second-most popular cryptocurrency according to market capitalization achieved its success due to technological innovation that allowed for the creation of smart contracts onto the blockchain.
Dogecoin (DOGE): Dogecoin was invented in less than two hours in a joking manneran affectionate satire on cryptocurrency. Yet, DOGE has reached an $185 billion market value which highlights how powerful speculation as well as online chatter.
Binance Coin (BNB): BNB is the coin that is owned by Binance. of Binance the world’s biggest cryptocurrency exchange (Binance.US is the only version available in the United States.). It has gained popularity due to its widespread acceptance and capacity to lower the cost of trade at Binance.
What are the best ones to buy? The fact is that cryptocurrency is so unstable and speculative that choosing the best cryptocurrency to invest in could boil down to which one you trust. For instance, do you think that Ethereum has more technical value and applications in the world than Bitcoin?
Although stock traders can review 10-Ks from the form when they are evaluating companies, crypto investors may look into whitepapers like the one used for Bitcoin.
Decide How Much Crypto to Purchase
What amount of crypto should you include in your portfolio? I’ve written an entire article about the topic Here’s the short version:
I asked two experienced wealth advisors for a specific number and the two responses were:
“Maybe 10% is the best – therefore in the event that crypto goes down it is still possible to be retired – but I would not advise it.”
“Get 100,000 in secure investments first” because if you manage to secure $100,000 in investments that are safe before you turn 35, and you continue to put in another $100 per month then you’ll become a millionaire.
It’s not surprising that experienced wealth managers don’t have a lot of fondness of cryptocurrency because it’s not a part of an unbalanced risk profile. It’s unpredictable and it’s impossible to create a 99 percent guaranteed prosperous financial future around it.
What’s the bottom line? Start with a small amount. Begin to 10 percent, or better, 5percent in your overall portfolio.
Securely store your private keys in a wallet
When you purchase a cryptocurrency then the next thing to decide is where to keep those keys.
To summarize Hot and cold wallets function on and offline and offline, and vice versa. Hot wallets let you access and trade your cryptocurrency easily, while security measures for their users are now more effective than ever.
However, hackers are becoming more nimble and more daring, which is the reason why many cryptocurrency traders, and particularly those who are long-term investors, opt the option of saving their confidential keys in a cold walletwhich is an USB or HDD is kept in an secure.
If you’re just playing around with tiny amounts, and believe you’ll continue to buy a little every now and then the hot wallet should suffice for the moment. There are also savings accounts for cryptocurrency that will pay you interest on your cryptocurrency to store it.
Keep Your Investment
The final step is to ensure that you keep your cryptocurrency investment. There is only one way to accomplish this wrong is to buy cryptocurrency and then put it away. You avoid crypto investment missteps by:
Add your cryptocurrency to your main investment dashboard, to monitor the performance of your crypto over time.
Because crypto trading is in the Wild West, check headlines often to check the regulatory scrutiny of the particular exchange.
Get involved in crypto-related communities. Explore the crypto subreddit and then filter by the most recent and trending topics. Think about joining a crypto-related community on the social network of your choice platform or perhaps attending in-person crypto-related events or meetups.
Find out which governments have banned crypto or, in the opposite direction, allowing it as legal tender , and creating the Bitcoin city on a volcanic.
Continue to educate yourself on the latest blockchain and crypto-based technologies — and get compensated in cryptocurrency via Coinbase Learn.
Alternatives to Investing in Cryptocurrency
The purchase of crypto isn’t the only method for you to “invest” on it. There are other alternative, less risky options to consider.
Earn Crypto “Free” By learning and Mining
If you own a powerful PC with a gaming-capable graphic card, you are able to mine cryptocurrency at no cost. Mining is the process of lending your computer’s processing power to the blockchain, and then receiving some crypto back in exchange.
Make investments in Cryptocurrency ETFs and stocks
You could also invest in the cryptocurrency industry by buying shares of companies highly focused on or invest into the development of crypto. For instance, you could buy the shares in Coinbase (COIN) Mining companies like Hut 8 Mining (HUT) or chipmakers who indirectly support crypto through the production of chips that are used for mining like Nvidia (NVDA).
Invest into the Blockchain
Another method to invest in crypto, without purchasing bitcoin is investing into the technological that supports it, namely blockchain.
In 2014, only two of the 100 largest publicly traded corporations investing in blockchain-related projects. The current figure is now 81.
There are even ETFs that deal in blockchains including those that are called the Amplify the Transformational Data Sharing ETF (BLOK) and the Amplify Transformational Data Sharing ETF (BLOK), which provide an excellent mix of blue chips as well as innovative newcomers.
Pros and Pros and Cryptocurrency
The possibility of huge gains Cryptocurrency particularly Bitcoin is the top-performing investment asset of the past decade. It could plummet or continue its upward trend.
Help support a new technology Blockchain technology has a profound impact on almost every industry including finance, public medical and more. your investments in crypto are helping these industries.
You can earn some “free” There is no way to “mine” stocks or make short videos and earn real estate for free — however, you can both to earn crypto for free!
It’s not the only option to invest Blockchain ETFs and crypto can be a convenient way for investors in the stock market to include crypto into their portfolio without having to expose them to the risks of actually holding crypto.
High risk and high volatility: Crypto is still too uncertain to bet on, and that’s why traditional wealth advisors suggest restricting your portfolio’s allotment to 10 percent — or less.
Theft scams, fraud, and theft: Squid is just the latest scam in the cryptocurrency industry where its developers took $3.38 million of the investors’ funds. The majority of victims of the 2014 Mt. Gox hack, in which the theft of 850,000 Bitcoin was stolen have not yet seen any coins returned.
Do you have to pay the tax on cryptocurrencies?
Yes. Gains from crypto are taxed according to a normal capital gains rate of 10-37 percent for short-term gains, and zero to 20% on long-term profits.
Based on the IRS the following three items aren’t tax deductible and don’t require filing:
Paying for crypto using cash and storing it (affectionately called hodling)
Donating cryptocurrency to a tax-exempt non-profit or charity
Transferring crypto from wallets
The following are not required to be reported, and will have to be taxed under capital gains
Cash-for-crypto trading (even the possibility of losing funds on your initial investment)
Paying with crypto for services or goods
The exchange of one crypto for another
Paying in cryptocurrency or through airdrop.
The possibility of receiving crypto as a bonus or reward
If you do not declare your assets, you could be fined. This is the same penalty for tax evasion – and according to the IRS themselves state, “they can add up quickly”:
Late filing fees
A late payment fee
In addition to the interest, both penalties
Your penalty total could amount to 25percent or more of the tax liability that you have not paid.
Should you consider investing in Cryptocurrency?
You might consider investing in crypto if:
You’d like to add high-risk assets to your portfolio. If you’ve already evaluated the risk you are willing to take and seeking to incorporate more risk to your portfolio, crypto will fit the bill.
You are a believer in the purpose of blockchain and crypto Perhaps you believe in the benefits of blockchain and crypto technology and see it as an element that is part of ESG investing.
You might want to stay clear on cryptocurrency if:
If you’re averse to risk, cryptocurrency can be extremely unstable, volatile, and risky. If this causes you to feel more anxiety than excitement it’s probably not a suitable investment to your portfolio.
This is your first method of investing. To follow the advice of Varun Marneni who is a certified financial planner from the Atlanta-based CPC Advisors, it’s best to have at least $100,000 in secure investments before investing in crypto.
The Bottom Line
The world of cryptocurrency has never been more simple to invest and purchase. Crypto remains an unregulated Wild West in many ways. There’s a wild gold rush that’s void of oversight from the regulatory side — though President Biden’s crypto executive orders may soon alter this.
If you decide investing in cryptocurrency, make sure to educate yourself on the dangers, the best practices and be aware of the business. Don’t forget to pay Uncle Sam his debt!