Cryptocurrencies have been a hot investment property for several years now, and the trend shows no signs of slowing down. One of the driving forces behind cryptocurrency’s popularity as an investment is the possibility for huge growth.
Based on what we’ve seen over the past few years, cryptocurrencies can be very volatile. While that can be scary – there’s the potential to lose money if the market takes a downturn – it also means that growth tends to outstrip that of traditional investment. The golden rule is to only invest money that you can afford to lose. If you do that, you’ll have the potential for huge growth.
Despite all the jargon and buzzwords surrounding crypto investment, it’s actually surprisingly simple to start building a cryptocurrency portfolio. Here are some initial steps that every investor should take.
Nobody should walk into any investment opportunity without a reasonable understanding of the market. With crypto, there is a wealth of information out there online, so you don’t need to look far to find articles about how cryptocurrencies work. It’s a good idea to read up on the technology behind them, and how they differ from traditional currencies.
You can also get information about the hottest cryptocurrencies available at the moment. With so many different cryptocurrencies to choose from, it’s important to read tips and suggestions from seasoned investors – they’ll be able to guide you towards the better performing options. You can also take a look at charts showing the recent and historical performance of your chosen currency.
Allocate a budget
Decide how much you’re willing to invest before you start. This will help you to avoid getting swept up in the excitement, and keep you on budget. Typically, you should only invest money that you don’t need for your bills or other essential payments. Ideally, you should also set aside an emergency savings pot that’s separate from your investment money.
Open a ‘digital wallet’
Now you can start on the fun part: setting up your investment. To store bitcoin and other cryptocurrencies, you’ll need to open a ‘digital wallet’ – it can’t be kept in your bank account. There are lots of different options out there, and they can be accessed via desktop software, browser or mobile app depending on your selection. Again, do your research first. Choose a digital wallet that has mostly positive reviews from a reasonably large number of members.
Choose an investment platform
You’ll also need to find somewhere to buy your cryptocurrency. Typically, traditional brokers don’t deal in crypto, so you’ll need to go to a dedicated cryptocurrency exchange such as CoinDesk or Coinbase. Remember, you’ll need to pay a small fee when buying or selling currency. You could also consider using one of the modern bitcoin currency trading apps, such as Bitcoin Up. These apps make it simple for any investor to get started with buying currencies.
Diversify your investment
You’ll notice that we’ve been talking about building a portfolio, rather than simply investing – and there’s good reason for that. By putting your money into just one currency, you’re less likely to reap the full benefits of crypto investment. A diverse portfolio, with investment in several different currencies, is also less risky, as any potential losses with one currency can be covered by gains from others.
As you become more confident as an investor, you may decide to start trading your currencies based on market movement. That’s fine if you enjoy the thrill of short-term investment, but remember that the best strategies are long term; in the long run, you’re likely to yield higher returns by choosing a couple of recommended currencies and then sitting on them for several years.