DeutschNot only due to the yield developments in many classic asset classes in 2020 are many investors thinking about which alternatives are available on the financial market. The fact that the crypto sector is increasingly recognized as a sensible approach is not only due to the tempting profits from digital currencies – above all: Bitcoin. Also and especially the increasing acceptance that cryptocurrencies are experiencing, as well as better regulation in many countries, is making many investors sit up and take notice. The past weeks and months have shown one thing in particular in this regard. While the prices of Bitcoin and some other leading cryptocurrencies showed certain correlations with the stock market for a long time, a dissolution of these connections is increasingly noticeable. Anyone who wants to invest in cryptocurrencies will find a variety of options.
Essential Characteristic for the Selection of the Investment Model:
- the available budget
- the willingness to take risks
- the targeted investment horizon
- possible technical interests regarding the topic of cryptocurrencies
- sufficient understanding of the matter of crypto trading
But what exactly are the possibilities if I plan to invest in cryptocurrencies? At the latest here, often only experienced connoisseurs of the industry know a suitable answer. It is not that difficult to get an impression of the opportunities for lucrative investments. Basically, it is certain: It can be worthwhile to use cryptocurrencies for investment projects. At least if I know the opportunities as well as the risks of the different crypto investments. Our specialists explain what is possible and what approach is advisable in the next sections.
First Acquire Basic Knowledge of Crypto Trading, then get Started
At the beginning, the development of the right background knowledge should always be the focus. We offer several guides on how and where to buy Bitcoin. Our experts also offer countless worthwhile experience reports on altcoins such as Ethereum, Litecoin and Co. In this way, every potential crypto fan can acquire knowledge in order to be able to invest in cryptocurrencies immediately afterwards. The selection of the right coins is of great importance and is not always easy at the beginning. After all, there are now well over 5,000 coins and tokens whose prices are listed on many specialist portals. The mentioned crypto prices fluctuate in some cases. This can have various reasons. For example, prices can vary if they are obtained from crypto exchanges. These charge trading fees, which in many cases are priced into the price. This is how price differences can be explained.
In addition:
Prices are not always updated at the same times, which can also lead to deviations. Depending on which trading approach is pursued, exactly these differences can lead to success. The important keyword is arbitrage trading, which is described in detail elsewhere.
Cryptocurrencies: Industry is Currently Experiencing a New Significant Upward Trend
Back to the actual topic. The important realization when investing in cryptocurrencies is that there are still opportunities lurking in this area. Since the summer of 2020, for example, the leading crypto currency, Bitcoin, has been able to impressively increase again. The boom in the so-called DeFi sector also ensures positive prospects for many Ethereum-based tokens. But there are also black sheep that should be treated with caution.
Huge Selection of Digital Currencies and Trading Portals
In particular, if providers of coins or tokens advertise with such statements or if forecasts come from trading platforms, you should not always believe everything. Both groups have a vested interest in getting as many new customers as possible to invest in cryptocurrencies. So it’s about finding objective statements with realistic content. Anyone who wants to invest in cryptocurrencies can quickly get an overview with our tips.
Basically, there are three different approaches available when investors plan investments in crypto coins. Last but not least, the willingness to take risks is a decisive point in order to make a sensible decision when it comes to investing in cryptocurrencies. The investment goals of different investors can differ significantly from each other. So let’s take a look at the overarching investment goals that the crypto market has held out so far.
The path to sensible crypto investment:
- direct investments in digital currencies
- Investing because of future technical developments
- Speculating on the prices of cryptocurrencies
Variant 1: Sensibly Invest in Cryptocurrencies within the Investment Portfolio:
As already mentioned, many traditional investment models – such as savings accounts, call or fixed deposits – offer only limited opportunities for growth these days. The stock market is also partly characterized by difficult phases. Not only for this reason, more and more investment experts recommend the “physical” purchase of cryptocurrencies as a sensible component for the portfolio. An important keyword here is: diversification. This refers to the spreading and thus the distribution of the investment risk across different market areas. The increasing acceptance of digital currencies makes Bitcoin and Co. an attractive addition to any portfolio. Directly next to stocks, classic funds and other products such as exchange-traded funds (ETFs), commodities such as gold and other products of the financial market.
A question that arises at this point is which crypto coins are a good alternative for the portfolio. Bitcoin and other now established cryptocurrencies such as Ethereum are the most suitable here.
Many Investors Prefer the Leading Cryptocurrencies of the Market
Because the larger coins and tokens are finding more and more supporters, including in the banking sector. The boom in the so-called DeFi sector in particular is giving the sector a hearing. Bitcoin as the leading digital currency undoubtedly deserves special mention here. After all, more and more (online) retailers are accepting the coin. The current price forecasts confirm the potential benefit of BTC for many portfolios. The good performance alone must not obscure the fact that investors must be prepared to take risks when buying digital currencies due to the still existing volatility. On the other hand, however, there are return opportunities that at least at the moment no security can offer. But here, too, patience is needed as so often.
Variant 2: Interest in the Technical Opportunities of Digital Currencies
The hope for positive developments is ultimately only one side of the proverbial coin with sensible approaches for investing in cryptocurrencies. More and more companies are recognizing the opportunities at the technological level. At this point, Bitcoin competitor Ethereum (ETH) also presents itself as an exciting approach. The so-called smart contracts are an innovative way in the field of decentralized financing and other areas. In addition to Ethereum, models such as Ripple or IOTA are also proving to be pioneers of new approaches. Contract conclusions via the “smart contracts” are characterized by the fact that they are concluded quickly and cheaply directly and without an intermediary such as a notary or lawyer. Providers such as IOTA, for example, cooperate with well-known automobile manufacturers and fashion labels as part of tests on possible applications.
| Attention: → More and more industries are discovering the technologies behind digital currencies for themselves! |
Decentralized Currencies Technologically on the Rise
Decentralization, in any case, is enjoying growing popularity. Anyone who wants to invest sensibly in cryptocurrencies must, however, carefully weigh up in which weighting altcoins should also be acquired in addition to Bitcoin. The amount of available capital is of decisive importance here. Experts often and gladly draw the justified parallel to stocks and other securities that are associated with technology values for blockchains with smart contracts. What is needed with this investment approach is a healthy optimism that the crypto technology sector will continue to develop so rapidly. However, the chances are very good due to the support from many corporate areas. Large corporations such as Apple, IBM and many others are also active. The companies recognize the increasing number of “Use Cases”.
Indirectly, this also includes shares of manufacturers from the field of storage media and mining technology. Their products are important so that the crypto industry can continue to develop rapidly in many areas. Anyone who decides on this path of investment is not out for the quick return, but wants to participate in trends in the crypto market in the long term. Many experts see this as a particularly good approach to investing in cryptocurrencies and not just achieving profits through rising prices.
Variant 3: Short-term Speculations on Crypto Prices
Even if investors do not want to invest money in cryptocurrencies in the long term, there are sometimes amazing success stories. Nobody has to believe in the lasting success of digital currencies and invest in the long term. It can be perfectly sufficient to speculate on digital currencies and their price developments for a few days or weeks. This does not require much more than a crypto wallet and a trading account with one of the many crypto exchanges. For beginners without any experience, this is certainly more of a speculation. However, even such trading approaches can be crowned with success. As far as the willingness to take risks is concerned: This should be rather high if acute fluctuations in crypto prices can be used for taking along. And every investor should be aware of this without ifs and buts. In addition, every investor must be resilient and flexible. Because sometimes opportunities arise in very tight time windows. In this context, the aspect of trading – i.e. speculating – plays a major role.
High-risk Trading Can Bring Returns
Models such as trading with futures, options and contracts for difference (CFD) on a crypto basis come into play at this point. Some brokers even allow trading with leverage. This is about investors buying, selling or simply speculating on upcoming positive/negative price trends with cryptocurrencies at a multiple of their capital with a correspondingly high risk. At this point, special preferences for a certain coin or token do not play a significant role when trading via crypto brokers. Rather, it is about keeping an eye on conspicuous movements in market prices and deriving the best possible decisions from them. This path is not optimal for “fans” of individual currencies of the digital market. The main thing is that the highest possible and usually also quick positive results are beckoning. In a serious case, traders say goodbye to their positions within minutes. Either in the sense of early profits or to limit losses. This of trading is risky and can lead to capital losses.
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Sensible Approaches to Investing in Cryptocurrencies – our Conclusion:
Like the normal financial market, the crypto sector is increasingly offering models to participate in the increasing popularity of digital currencies and the systems behind the coins and tokens such as the blockchain. Which approach is best suited for which investor depends on several factors. The budget and the willingness to take risks are only two essential points. The fact that trading platforms are increasingly emerging through which investors can constantly deposit money into crypto savings plans complements the mentioned previous ideas in a pleasant way. Important at the end: The more return investors strive for through the sensible approaches to investing in cryptocurrencies, the more likely or must investors also be prepared to take high risks.
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Bitvavo, one of the leading exchanges from Europe (Netherlands) with a large selection of cryptocurrencies. PayPal deposit possible. Extra: 10 Euro bonus when registering via CoinPro.ch
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OKX is one of the largest crypto exchanges in the world and combines numerous functions such as a wallet, staking, futures, margin, and spot trading in a single platform.
With several hundred thousand customers worldwide, Binance is one of the top 10 largest and most well-known exchanges. The use of the exchange is free of charge, with fees only applying to the purchase and exchange of cryptocurrencies.
