A Basic Guide on How to Invest in Cryptocurrency

In a post-pandemic reality, trust in the traditional financial system has taken a hit, and many are looking for an alternative to weakened fiat currencies. This has given a huge boost to the legitimacy and popularity of cryptocurrencies over the last year, where we have seen soaring prices, with Bitcoin experiencing an incredible bull run reaching a price-peak of over $63,000. Interest has grown from institutional as well as retail investors, with major global corporations investing in crypto or supporting digital currency payments.

However, before you dive in an invest in cryptocurrency there is a lot you need to consider, with regard to the types of coin you want to invest in, the strategy you wish to implement, where you wish to invest, the amount you want to deposit, and the best cryptocurrency to invest in for 2021.

Crypto Is More than Just Bitcoin

While Bitcoin has been making the most headlines over the past twelve months, there are thousands of cryptocurrencies to choose from across hundreds of exchanges. When deciding what cryptocurrency to invest in you need to take into account a number of factors such as past performance, the project behind the coin, developer activity, the project’s security record and more.

Before we take a closer look at each of these factors, it is worth mentioning the importance of diversification. Your best option is to have a broad portfolio that includes a wide variety of both fiat and crypto assets. In this way you can spread your risk and hedge against the dangers of a market crash. You also want a mix of established coins with a high market capitalization, such as BTC, ETH, and XRP as well as newly emerging altcoins that may, or may not, take off, with higher levels of risk and reward.

Research Asset History

It’s an advantage if you can invest in cryptocurrency with a proven record. Review a price chart and see its historic performance as well as the current price trend so that you can evaluate the trajectory of the coin and determine whether or not it is likely to be a profitable investment.

In addition to examining the history of a digital asset, when deciding what cryptocurrency to invest in, you should also keep up to date with industry news. Check industry news sites like CoinDesk or CoinTelegraph, sign up for newsletters, and follow and social media forums and feeds popular with the crypto community, across Twitter, Telegram and Reddit. In this way you can see what events are impacting the market, which coins are generating buzz and what is driving market sentiment.

Study the Development Activity

One of the most important things to know when investing in cryptocurrency is who and what stands behind a given coin. The top cryptocurrency to invest in will be one with an experienced team and a popular value-added project providing quality products and services.

Developer activity is a great indicator of the strength of a project. A look at GitHub, the public hosting site for software development will provide an idea of the scope of development, giving you all the important metrics and helping you determine the efforts being focused on the initiative.

Start Small

Once you’ve decided on the best cryptocurrency to invest in now, you need to decide how much you want to put in. The same rules apply as to any other form of investing. First of all start small and see how your digital currency performs. Once it has proven to be a good investment you can always commit additional funds.

How to Invest in Cryptocurrencies Safely

Any discussion of how to invest in cryptocurrency securely needs to factor in the dangers inherent in entering the crypto arena.

Know the Risks of Cryptocurrency

The crypto world is exceptionally vulnerable to hacks and fraud, as an uncontrolled, decentralized digital space that is characterized by anonymity. In addition, governments and regulatory bodies across the world are responding at different speeds and with varying degrees of enthusiasm to developments with this emerging asset class, so oversight and client protections can be limited. As a result, it is a good idea to use a platform, application or exchange that is licensed and regulated to guarantee the security and integrity of your crypto account.

Then of course, there is the fact that the crypto market is incredibly volatile. The extreme price fluctuations can be unbelievably lucrative but can also lead to huge and very sudden losses, so you need to manage your risk wherever possible.

Cold and Hot Wallets

One last factor to consider with regard to the security of your account is the type of wallet you choose. A hot wallet is connected to the internet, making it less safe, in that it will be vulnerable to a hack. However, in its favor is the fact that this type of wallet is very convenient for day traders or anyone making purchases with crypto, who wants immediate access to funds.

In contrast, a cold wallet offers airtight security, since it is a physical, offline storage device, which can be placed in a wall safe and is impenetrable to hackers. This type of wallet however can be expensive, and unlike hot wallets, which are generally free, they can run to around $200.

Investor Strategies

There are as many ways to invest in cryptocurrency as there are investors and the choice you make will depend on your profit goals and risk tolerance.

For example, day trading on the crypto markets can be incredibly profitable but equally, it can be very risky, with huge price swings potentially leading to the loss of all your capital. At the other end of the spectrum is HODLing, where you hold on to your coin for the long term, riding out short term ups and downs, but this means your money is just sitting idle and not working on your behalf.

However, the strategy widely acknowledged to be the lowest-risk way to invest in cryptocurrency is crypto arbitrage. Instead of taking advantage of crypto market volatility, it generates profits by exploiting temporary price inefficiencies – instances where briefly, a cryptocurrency is available at different prices, on different exchanges at the same time.

Here at ArbiSmart, our EU regulated crypto arbitrage platform is connected to 35 exchanges which it scans 24/7, looking for, and taking advantage of, price inefficiencies. It will automatically buy the coin on the exchange where the price is lowest and then sell it on the exchange where the price is highest to make guaranteed passive profits before the window of opportunity closes.

This is one of the best ways to invest in cryptocurrency, because there is close to zero risk, ArbiSmart’s fully automated platform does all the work, investing on your behalf, and you can earn generous passive profits, starting at 10.8% and reaching up to 45% a year, depending on the size of your investment.

Find out more about crypto arbitrage, or check out the ArbiSmart blog to explore a wide array of crypto-related topics.