Cryptocurrency Investing

 

This Chapter Will Cover:

• How to Invest in Cryptocurrency.
• Which Ones to Invest in.
• Where Can You Get Them.
• Do You Need to Pay Tax on Them?

 

You may be thinking about investing in cryptocurrency. Cryptocurrencies are the hottest investment around right now. These exchangeable tokens promise to be the new money for the entire world. These people see a future where cryptocurrencies will take the place of the dollar, the Mexican peso, British pound, or the Euro. They want to create the first free world currency.

Having Bitcoin means you own a share of this venture. If Bitcoin were ever to replace monetary reserves or become the main currency for world trade, its value would be well beyond 100,000 USD. By buying and keeping cryptocurrencies is betting on the success of this new money revolution.

Cryptocurrecy investing is essentially buying some coin and holding onto that coin in the hope that the value of that coin will go up. For example, if you were to buy Litecoin (LTC) when its price was $50 per coin and you hold onto that coin for two years and sell it for $250 a coin you essentially invested for two years to make a 400% profit. Similarly, if you to buy that same coin at $250 and sold at $50 you would have made a loss of 400%. It is however noteworthy that all cryptocurrencies which have a strong user base have only risen in the long run.

Yes, it would have been in your best interest to invest years ago. However, it is not too late. If you understand the potential that can be found and if you believe in this vision, today is a good day to invest in cryptocurrency.

 

Crypto Investments

Cryptocurrencies are not normal investments. There volatility greatly exceeds any other class of investments. They are unregulated. There is a potential risk that they will get outlawed. They might be someone out there who learns how to hack into them. You could also lose your key. Investing in cryptocurrencies is very high risk. It is important to realize that you should only invest as much as you can stand to lose. Do not invest everything you own. Only invest in what you can afford to lose if it all goes away tomorrow.

There are three main reasons to invest in cryptocurrencies:

• You want to increase your net worth encase the Dollar falls. Many people assume this will eventually happen.
• You support cryptocurrency’s vision that the entire world needs a free money.
• You like the technology and understand it.

There are also bad reasons to invest in cryptocurrencies. Many will fall victim to all the hype around each cryptocurrency. There will always be someone who gets captured by the fear of missing out (FOMO). They will buy huge amounts at the peak hoping to make fast money. They do not understand it. This is a very bad reason. You need to learn about your investments.

Bitcoin was the only cryptocurrency for a time. That is up until the late part of 2016. If you wanted to invest in cryptocurrency, you had to buy Bitcoin. Other cryptocurrencies were called Altcoins, they were just penny stocks on shady markets just to keep miner’s GPUs working. They would just up the price then dump the coins.

This has all changed. Bitcoin is still the main cryptocurrency, but in 2017, its shares fell from 90 to about 40 percent. Many saw this as a result of Ethereum’s growing popularity. Bitcoin’s community is having issues with the size of the blocks. This shows why it is important to keep your ears and eyes open to what the cryptocurrency community is saying.

If you still want to invest, Bitcoin is still the main one in everyone's portfolio, but it is not the ONLY asset. In every well-balanced portfolio you might find coins like:

• Monero
• Dashcoin
• Litecoin
• Ripple
• Ethereum
• And many more (to be explained)

If you want a balanced portfolio, it is good just to reflect the ten most valuable cryptocurrencies within your portfolio. You need to take the time and read about these coins and decide if you agree with their vision and use it to choose your selections.

 

Crypto Exchanges

Some coins focus more on privacy such as Zcash, Monero, and Dash. Some focus on smart contracting such as Ethereum. Some use scaling payments such as Dashcoin and Litecoin. Bitshares, Nem, and Ripple are decentralized and less open to Bitcoin and others.

The cryptocurrency market is blazing. It is a confusing system where you could find many chances to get a lot of money or possibly lose it. Each day gives birth to new cryptocurrencies and death to old ones. Each day some coins fall heavily, and some rise vertically.

If you choose to buy altcoins, there are some ways to find the good ones from the bad. Good coins will have a clear technical vision, and active team, and an enthusiastic, vivid community. Bad coins are not clear, they do not have any technical advantages, and you will never be able to reach them. Their community is only focused on making more money. The worst cryptocurrencies are MLM coins like OneCoin. They target the uninformed with a marketing system that has many different levels, and they promise they are going to be the new Bitcoin. Stay away from them.

Years ago it was hard to buy cryptocurrencies; now you have many different options.

Let us look at buying Bitcoin. This is the easy part. Some want to invest without having to go through the problems of storing them.

You could use investment strategies such as XBT tracker, Second Markets, Bitcoin ETI, etc. XBT tracker is available to German and Swedish exchanges. Second Markets is for USD. Bitcoin ETI is used in Germany and Gibraltar. The more Bitcoin rises, the more brokers are trying to set up financial products based on Bitcoin.

These investment products enable investors to bet on Bitcoin’s price without buying Bitcoin. Many fans of cryptocurrency think this gets rid of the fun of it. Many people think it is the easiest way to invest in Bitcoin. You could use what you already use to invest, and if anything were to go wrong, you can take your certificate to court and sue someone.

If you would like to own real Bitcoins or you just want to stay away from paying the high fees for investing, you can buy Bitcoin directly. You have options for buying anywhere in the world. In Europe, you could use Kraken or Bitcoin.de. In America, you could use Gemini, BitStamp, BitFinex, or Coinbase. In Asia, there is BitFlyer, BTCChina, and OKCoin.

Buying Bitcoin is not a problem. You just open an account with the exchange, verify your identity, and fund the account with USD, Euro, or the paper money your country uses. On Bitcoin.de you do not need to fund the account, you just trade with other users.

The exchange you use all depends on where you live. It is always better to use one that is close to you. If it is located within your jurisdiction, you have better chances of legally getting your money back if something were to go wrong. If there is not an exchange in your jurisdiction, use one that is based in a stable country that has a good legal system.

One more factor is which exchange will use the coins you want to invest in and how much patience you have. If you are looking to acquire a large amount of Bitcoin very quickly, you should use a major exchange that gives the liquidity you need. If you are only wanting a small amount of coins and are not in a hurry to make millions, you can buy them on smaller exchanges. If you can get your order filled, you will get a better price than using a larger exchange.

Altcoins are harder to buy than Bitcoin. Major exchanges such as BitStamo, BitFinex, and Kraken have begun to list popular Altcoins such as Ripple, Monero, Ethereum, and Litecoin. If these are part of your portfolio, try to find a one-stop shop that deals with all of them.

There are hundreds of different cryptocurrencies available. If you want a crypto supermarket, a place where you can sell and buy most of them, then register at an altcoin exchange.

For example:

• Poloniex
• Bithumb
• Yunbi
• Bittrex

 

The website coinmarketcap is very useful because it will list every crypto exchange. It sorts them by trade volume.

The Altcoin exchanges do not have strict know your customer (KYC) rules since you are not trading with fiat money. You can fund the account with Bitcoin. This will serve as an account for all altcoin markets, just like a USD works with Forex markets.

With Bitcoin exchanges, you need to choose one that many people trust. Most altcoin exchanges are not regulated, most of these are located in Asia. Do not ever place a lot of trust in these. You will not be able to get any money back if they file for bankruptcy or get hacked. Bittrex and Poloniex are US based and provide a safe and secure trading environment.

There is no true rule of when to buy. It is not a good idea to purchase at the peak, and it is not smart to buy when it is crashing. It is never wise to catch a knife that is falling. The best time is when the price is stable and low.

Decide when the cryptocurrency you want to buy is in bubble mode and has reached the bottom after it has fallen. There is never an absolute certainty to anything. A coin might begin to rise, and once it has passed a mark, and everyone thinks this is the peak, the rally is just beginning.

There are two pieces of advice to follow:

• Do not try to compare crypto bubbles with normal financial bubbles. Ten percent means it is up, but it does not...