To invest in crypto, research, choose a reputable exchange, create an account, secure your wallet, and diversify wisely with caution.
As traditional investments continue to show diminishing returns, investors are turning to the exciting world of cryptocurrency. While Bitcoin remains the most popular choice, there are thousands of digital currencies to choose from. So whether you prefer to invest directly in coins or want to explore crypto funds and startups, there’s a world of opportunity waiting. With the help of a reputable exchange or broker-dealer, you can dive into one of the most innovative asset classes of our time.
Exploring Different Options to Invest in Crypto for Your Portfolio
Cryptocurrency investing has become an increasingly popular way to diversify portfolios. There are various ways to invest in this innovative asset class. Here are some different options to consider:
- Buy Crypto Directly
One of the most common ways to invest in cryptocurrency is to purchase and hold one or more coins. This approach involves buying and storing the currency in a digital wallet. With so many digital currencies available, investors can choose from well-known options like Bitcoin and Ethereum, or newer coins released through an initial coin offering (ICO).
- Invest in Crypto Companies
Investing in companies focusing on cryptocurrency can also provide exposure to the digital asset market. Options include mining companies, hardware manufacturers, and financial firms like Robinhood and PayPal. Other companies, such as MicroStrategy, hold significant amounts of cryptocurrency on their balance sheets.
- Invest in a Crypto Roth IRA
Investors can also consider investing in a cryptocurrency Roth IRA, which offers the potential for tax advantages. Using a crypto IRA provider can also provide more secure storage for cryptocurrency holdings.
- Invest in Crypto – Focused Funds
A cryptocurrency-focused fund may be a good option for investors who want broader exposure to cryptocurrency without selecting individual companies. These include ETFs, index funds, futures funds, and cryptocurrency investment trusts.
- Become a Crypto Miner or Validator
Another way to invest in crypto is to become a miner or validator, which involves earning rewards in crypto for verifying transactions on a blockchain network. These rewards can be held as investments or exchanged for other currencies.
Whether you’re interested in buying and holding coins directly or investing in cryptocurrency companies or funds, there are many ways to gain exposure to this rapidly growing asset class.
How to Invest in Crypto and Store Digital Assets – Buying Crypto through an Exchange
Investing in cryptocurrency directly means buying and holding one or more crypto coins. The most common way to do this is by using a reputable cryptocurrency exchange, which lets you purchase and store different cryptocurrencies. Here’s how to buy cryptocurrency through an exchange:
- Choose a cryptocurrency exchange. Go for a well-known and reputable exchange with many currencies.
- Create an account. Complete the registration process by providing personal information and verifying your identity.
- Fund your account. Add fiat currency, such as U.S. dollars, to your exchange account.
- Select the cryptocurrency: Decide which cryptocurrency you want to buy by researching your options.
- Place a buy order. Follow the steps required by the exchange to submit and complete a buy order for one or more cryptocurrencies.
- Store your cryptocurrency. After purchase, store your cryptocurrency in a digital wallet, either hosted by the exchange or an independent provider.
Allocating Your Portfolio to Digital Assets
As an investor in cryptocurrency, deciding how much of your portfolio to allocate to digital assets is crucial. Therefore, it’s best to periodically review your entire portfolio to assess the need to rebalance your holdings. This might mean increasing or scaling back your crypto exposure, depending on your investment goals and other financial needs.
What are some major TRENDS to follow when invest in crypto?
Bear Market Takes Hold
The cryptocurrency market has entered a bear market, also known as “crypto winter,” with investors pulling out and asset prices taking a considerable hit. This is the fourth time the market has experienced a similar downturn, with each lasting more than 20 months and resulting in losses of over 70%.
The current bear market, which has been ongoing for more than 350 days, was triggered by several factors, including the fall of the Terra ecosystem, the collapse of FTX, and massive user withdrawals. Despite these challenges, positive signs are emerging, such as Bitcoin being close to its 200-day moving average and analysts predicting a recovery in 2023.
BTC halvings may also indicate a potential bull market, as seen in history, with the next one occurring in 2024. Regulatory actions, user sentiment, and the pausing of Fed rate hikes could all influence Bitcoin’s near-term value.
Resurging & expanding use cases for NFTs
NFTs, or non-fungible tokens, return to the crypto world as their use cases expand. For example, in gaming, NFT-linked digital cards allow players to earn in-game trade perks, and companies like ImmutableX have reported a significant growth in NFT trading volume. In fashion, luxury brands like Prada and Nike are launching NFT-based platforms and collections, with limited-edition products available exclusively to NFT holders.
The use of NFTs also extends to real estate, with homes sold as NFTs and companies like Mattereum tokenizing physical assets like musical instruments and vintage wine. The NFT market is predicted to reach $231 billion by 2030, indicating a promising future for this crypto trend.
Crypto’s growing climate impact
The growing climate impact of cryptocurrency is a concerning trend that has caught the world’s attention. Cryptocurrency mining requires enormous electricity, with some estimates suggesting that it uses more energy than entire countries. This is mainly due to the proof of work process, which requires high computing power to solve complex mathematical problems.
However, some cryptocurrencies, like Ethereum, have started adopting proof of stake, drastically reducing energy use. Unfortunately, Bitcoin miners have no current plans to adopt this process. With the increasing concern for climate change, states and governments are acting to regulate the industry and limit energy usage and pollution caused by crypto mining.
Increasing regulation of cryptocurrency & exchanges
As the use of cryptocurrency continues to grow, so does the need for regulation. Regulatory scrutiny is at an all-time high due to a lack of laws surrounding cryptocurrency in the US. In 2022, President Biden released a proposed framework to stop criminal activity in the crypto industry.
The Financial Stability Oversight Council (FSOC) has also called on Congress to pass laws regulating crypto, including stablecoins and crypto spot markets. One possibility is the creation of a centralized digital currency managed by central banks to offer the benefits of crypto without the risk. China is currently testing a digital yuan, which has been used in transactions totalling $13.9 billion.
The continuing fallout from the FTX collapse
The collapse of FTX, one of the largest crypto exchanges, has had significant fallout on the cryptocurrency industry. The founder’s arrest and details of alleged fraud led to bankruptcy filings and millions of dollars in losses for creditors.
The fall of FTX has highlighted the importance of cold wallets for keeping crypto safe, with growing interest in hardware wallets. The fallout has also affected other companies, with many scaling down their workforces and VC funding shifting towards Web3, DeFi, and other digital platforms. As the industry undergoes consolidation, the market is expected to pivot towards new opportunities and technologies in 2023.