Have you also been bitten by the bug to start investing in cryptocurrencies? Don’t worry read our guide to start investing in cryptocurrencies safely.
In the year 2009, when the first Bitcoin transaction was made, cryptocurrencies were a concept, then quickly became a fad, which hardly anyone paid attention to. While the blockchain technology (the well-known blockchain) behind Bitcoin was gaining more and more followers in the technological community, the general public was not yet attracted to Bitcoin as an investment and financing alternative. Now, after more than a decade, many cryptocurrencies have entered the ecosystem, with over 1,000 different tokens to choose from today. However, Bitcoin is still the highest value, the best known and often the gateway to arouse curiosity about cryptocurrencies.
Over time, investment in cryptocurrencies has earned its place in the portfolios of all investors. The people who bought cryptocurrencies back in 2017 have obtained spectacular revaluations, something that has made many investors, companies and institutions begin to pay attention to this investment segment.
We are going to see the main keys to start investing in cryptocurrencies.
Tips and Guide to start investing in cryptocurrencies safely
Here is how to start investing in cryptocurrencies from scratch if you are an entrepreneur:
1. Start small
Cryptocurrencies are an extremely volatile asset class by the standards of traditional financial assets. Next to it, stocks -the quintessential volatile asset- barely manage to cope with them. Volatility does not always imply risk, but it can play tricks on us if we are not prepared to withstand its ups and downs.
When we start investing in cryptocurrencies , it is prudent to set a moderate risk . Given that the volatility of any cryptocurrency is very high, the best way to manage this risk is by giving it a relatively small weight in our investment portfolio.
One of the most popular techniques is to establish a security fund to cover expenses, personal or business, for at least 6 months or a year. Once you have this, it is subtle to start investing in stocks (if you have not already done so) to know your ability to face and tolerate risks and volatility. Once we have a tolerance for high volatility, a prudent limit for our cryptocurrency portfolio is around 10% of the total weight.
2. Select the right cryptocurrency excellently
As we have seen before, there are more than 1,000 cryptocurrencies on the market right now, each with its own price, technology and values. Before launching to invest, it is necessary to do your homework, in the form of a thorough analysis, on the characteristics of each of the cryptocurrencies that interest us.
Right now Bitcoin is the largest cryptocurrency in the world, it is also the most reliable and the least volatile due to its market capitalization, but there are other interesting ones such as Ethereum, Ripple, Litecoin or Tether.
Depending on whether our interest in cryptocurrencies arises from the need for privacy, solidity, versatility or flexibility, we will have to choose one project or another. In this sense, it is much more advisable to understand a single cryptocurrency really well and to invest part of our portfolio in it with conviction, than to invest in a very large portfolio of them without having carried out prior analysis. In the last decade, many cryptocurrencies that saw the light simply disappeared in a few years, this means that an investment of 100 euros can become zero with a single decision taken in a hasty way.
3. Choose the right cryptocurrency exchange
An Exchange is a place where you can buy or sell your crypto assets . Like banks and other financial intermediaries, exchanges are designed to facilitate transactions , as well as many other associated services. The key when choosing the right Exchange is again the analysis, in this case, we can use comparators to help us see the pros and cons of each of them, their rates, their regulation and their requirements. Many times choosing the cheapest Exchange is not usually the best option, but we must value the simplicity, security and data that they request.
4. Get a cryptocurrency wallet
A cryptocurrency wallet is a software that stores the private keys of our cryptocurrency address, an address that serves as a link between us and the block chain (blockchain) where the transactions take place. Many people confuse cryptocurrency wallets with a cryptocurrency storage place, but technically they only allow us to access the blockchain with a crypto address known as the key. Without the key, we will not be able to carry out transactions.
When we select a wallet we must focus on security, whether it is a software wallet, the one that we will have on a device connected to the internet, or a hardware wallet, the one that allows us to store our keys outside of any connection, raising our level of security.
Hope you loved our tips and guide to start investing in cryptocurrencies safely, make sure to applause us in the comment section.