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Investing in cryptocurrency and crypto assets is a high-risk endeavor that requires careful consideration. It is important to understand the risks involved and be prepared to lose all the money you invest. This article will provide advice on how to invest in cryptocurrency and altcoins in 2023, including using exchanges and self-custody. Please note that this article is not financial advice, and it is essential to conduct your own research (DYOR) before making any investment decisions.
How To Invest In Cryptocurrency Directly
When investing in cryptocurrency directly, you hold the actual cryptocurrencies in your digital wallet without involving any intermediaries. To purchase cryptocurrencies directly, you need to use specialized exchanges that facilitate cryptocurrency trading.
Here are a few popular exchanges for trading cryptocurrencies:
- Coinbase
- Kraken
- Uphold
- Binance
It is crucial to understand the difference between base coins and altcoins when investing in cryptocurrencies. Base coins, such as Bitcoin and Ethereum, serve as the foundation of the cryptocurrency market. You can invest in these coins directly with fiat currency (USD) through an exchange. Coinbase and Kraken are reputable exchanges for investing in base coins.
Altcoins, on the other hand, refer to any cryptocurrency that is not Bitcoin. These coins have specific purposes or aim to improve upon blockchain technology. Examples of popular altcoins include Chainlink, Polkadot, and Dogecoin. When investing in altcoins, it is essential to research their underlying technology, market potential, and risks. Binance is a recommended exchange for investing in altcoins.
Benefits and Risks of Investing in Altcoins
Investing in altcoins can offer high potential returns due to their volatility and the potential for rapid price increases. It can also diversify your investment portfolio and provide exposure to innovative use cases and early investment opportunities. However, altcoins also come with risks. They can be extremely volatile, making them susceptible to significant losses. The cryptocurrency market is largely unregulated, which increases the risk of scams and market manipulation. Additionally, not all altcoins will succeed in the long term, leading to potential losses.
When investing in altcoins, approach them with caution and develop a well-informed strategy. Research individual altcoins, understand their underlying technology and purpose, and consider market trends and potential for growth. Only invest money that you can afford to lose.
How to Invest in Altcoins through Centralized Exchanges
Centralized exchanges are the simplest way to invest in altcoins. These exchanges offer a wide range of coin listings, allowing you to access a variety of altcoins. Here are a few centralized exchanges to consider:
- Binance: The largest cryptocurrency exchange in the world, offering over 500 different cryptocurrencies for trading.
- KuCoin: Offers over 400 different cryptocurrencies for trading and does not require KYC verification for basic account features.
- Uphold: An exchange that also functions as a digital wallet, offering 250+ cryptocurrencies and requiring KYC verification for account creation.
Using centralized exchanges is convenient, but it comes with some risks. Recent mishandling of funds by prominent exchanges has led many investors to explore self-custody options.
How to Invest in Altcoins through Self-custody
Self-custody involves setting up your own personal cryptocurrency wallet and transferring base coins to your wallet for decentralized transactions. Here’s a step-by-step guide to investing in altcoins through self-custody:
- Choose a wallet: Research and choose a cryptocurrency wallet that meets your security, ease of use, and altcoin compatibility requirements.
- Transfer BTC or ETH: Once you have set up your wallet, transfer your Bitcoin or Ethereum from the centralized exchange to your self-custody wallet.
- Purchase Altcoins: Connect to decentralized exchanges like Uniswap or Curve to exchange your BTC or ETH for altcoins.
- Secure your wallet: Set up a strong password, enable two-factor authentication, and back up your wallet’s seed phrase to secure your assets.
Self-custody gives you complete control over your assets but requires responsibility for their security. It also opens up opportunities for investing in altcoins through different chains like Ethereum, BSC, and the Polygon (Matic) Network.
How To Invest In Cryptocurrency Funds and Futures
Investing in cryptocurrency funds can help reduce volatility and eliminate the need for maintaining a digital wallet. One popular cryptocurrency fund is the Grayscale Bitcoin Trust (GBTC), which holds Bitcoin. Another option is investing in Bitcoin futures through the Chicago Mercantile Exchange (CME) Bitcoin Futures Contract (BTC).
GBTC provides exposure to Bitcoin but does not track it 1-1. It has a lower volatility compared to Bitcoin but charges a higher management fee. CME’s BTC futures contract allows short-term positions in BTC without relying on cryptocurrency exchanges, providing liquidity and reliable margin requirements.
How To Invest In Cryptocurrency Companies
Some companies are involved in cryptocurrencies through technologies that power crypto mining, develop their own cryptocurrency, or create platforms that support cryptocurrencies. These companies have publicly-traded stocks that you can invest in through online stock brokers. Here are a few examples:
- AMD, INTC, and NVDA: These companies create microprocessors used in crypto mining, with NVDA leading the pack.
- COIN (Coinbase Global Inc): The publicly traded company behind the Coinbase cryptocurrency exchange, which makes money through trading fees and other offerings.
- CRM (Salesforce): Salesforce has developed a blockchain platform called Sales Blockchain that utilizes its metadata and can be shared with network partners.
- V and MC (Visa and Mastercard): These companies have integrated cryptocurrency into their networks, allowing the issuance of debit cards linked to digital wallets.
Investing in cryptocurrency companies can provide exposure to the crypto market through established entities with diversified revenue streams.
Final Thoughts
Investing in cryptocurrency and altcoins can be a lucrative but risky endeavor. It is crucial to understand the risks involved and conduct thorough research before making any investment decisions. Whether you choose to invest directly through exchanges, self-custody your assets, invest in cryptocurrency funds or futures, or invest in cryptocurrency companies, always approach investments with caution and only invest what you can afford to lose. Remember to DYOR (do your own research) and stay informed about market trends and developments in the crypto space.
