Most investors know of cryptocurrency, but have never actually bought, traded or used it as a form of payment. But last year the market was worth roughly $560 billion, which although is much less than more traditional financial markets, still gains a lot of attention. Cryptocurrency was actually the best performing asset group in 2020, especially Bitcoin, which is the largest type of its kind.Â
It’s worth noting that this is a rise from nothing over 12 years, so surely is not some sort of craze. It could be investment-worthy at some point in the future. On the other hand, the crypto market has proven to be quite volatile over the last three years according to expert strategists, so here are some top tips if you’re thinking of investing in this digital currency.Â
Study the MarketÂ
As a newly emerging market, you should take the time to fully understand cryptocurrencies before investing. Firstly, research the technology itself to understand Blockchain and how the system works. This will help you make an informed decision on your investment, although you can never fully estimate the movement in the market.Â
The next step is to decide which type of cryptocurrency to invest in. As a more well-known currency with an established record, Bitcoin is a good option. As mentioned before, you cannot fully anticipate its price movement, but it tends to be more stable compared to other altcoins. Â
Learn the Basics
Now you know the workings of crypto-technology, it’s time to start learning how to sell and buy it. You can either buy or sell on an exchange or trade the cryptocurrency with an easy and secure platform such as Skilling.com, where you can learn more about CFD trading from Skilling, and where it caters for traders at all levels, offering extensive trading opportunities. This can help access the market in the best possible way, for example using leverage when trading with a Contract for Difference (CFD) and the option to invest based on your speculation of the price of the cryptocurrency to go up or down. A trading platform also ensures that an investors’ funds and personal data are all fully safe and secure.Â
With cryptocurrencies, you can either invest in them traditionally where you buy low and sell high, use CFD trading, or have a short-selling strategy. As forementioned, CFDs allow you to trade the cryptocurrency based on the prediction of their price movement, without owning the underlying digital currency. With short-selling, an investor will sell the cryptocurrency when its price is high, with the intention that they will buy it back again when the price has dropped.Â
Like all investments, there is still an element of risk when crypto CFD trading, especially as the digital currency itself alongside its market, is still developing. Although you can make some big profits, there is also the risk of losing your entire investment. A novice investor is best to invest in small amounts first, with reputable digital currencies, until you are more comfortable with the market.Â
If you are a more aggressive or seasoned investor, then you may want to take more of a risk, and invest in up-and-coming altcoins. These tend to be lower in price compared to the well-known names, and seem to generate faster profits, but can also come with their disadvantages, such as a low demand when selling or a hard conversion into real money.Â
Stay Protected When Trading Cryptocurrencies
Although a trading platform is the best place for the exchange, it is advisable to remain cautious in stocking all of your cryptocurrency in this one place. Your tokens, which represent the digital currency, should be stored in what is called a wallet. These wallets come in the form of hot or cold.Â
A hot wallet is a software-based type of storage, where there is a constant connection to the Internet, and quick access to and transference of the cryptocurrency. You should enable a two-step authentication to this wallet if possible, to increase the security of your digital assets. As mentioned, the crypto-exchange will provide investors with a hot wallet, but it’s recommended to not keep all the tokens there.Â
This is where a cold wallet should be used, which is a stand-alone device separate from the exchange, usually taking the form of an external hard drive or USB flash drive. It is best to store majority of all your assets in your cold wallet, and transfer to your hot wallet when you ready for a transaction to take place. This will reduce the risk of losing your assets in the event of a cyber-attack or hack.Â
Crypto-trading can be a risky investment, but with its continuous market development, it could be an investment-worthy strategy to include in your future portfolio.Â