Investing In Companies With Crypto Interests
Thats how personal finance expert Suze Orman initially did it. She recently told NextAdvisor about how she invested in MicroStrategy, a cloud computing firm that holds billions in Bitcoin, because its CEO was putting all of the companys working capital into Bitcoin. She figured if Bitcoin increased in value, so would the value of Microstrategys stock.
But as anyone who follows Ormans advice knows, she recommends index funds as a much better investment strategy than picking individual stocks.
Rather than buying shares in any single crypto-forward company, its better to maintain a balanced portfolio by identifying companies with crypto interests, and making sure their shares are included in any index or mutual funds you put money into. Not only does that allow you to invest in the companies where you see potential, but it also helps you keep your investments diversified within a broader fund.
If you invest with Vanguard, for example, you can use the sites holding search to find all the Vanguard funds that include a specific company. Just enter the companys ticker symbol and the tool will offer a list of all the Vanguard products that have holdings of its shares. Other investing platforms offer similar ways to search by company within index and mutual funds.
Advantages And Drawbacks To Investing In Cryptocurrency
Investing in cryptocurrency has a few advantages:
- Diversification: The value of cryptocurrency doesn’t appear to be correlated with the price of stocks, bonds, or other asset classes. That said, cryptocurrency has only existed for about a decade, so the data is limited in this regard. Theoretically, though, it makes sense that the price of crypto is unrelated to the price of traditional assets.
- Return potential: Cryptocurrency has produced extremely strong returns as adoption increases. Most people agree the expected return for a sound cryptocurrency investment is greater than that for stocks.
- Additional utility: Unlike stocks, some cryptocurrencies provide utility. Bitcoin , for example, can be used to pay for goods and services. Other tokens may provide access to projects or discounts on a project’s services.
But there are some big disadvantages for investors as well:
Do You Need A Paper Wallet
The answer to this question will largely depend on your circumstances. If you plan to spend the summer day cryptocurrency trading a few coins, perhaps you dont. Alternatively, if youre in for the long haul, and dont intend to touch any portion of your stash, then a paper wallet is the most secure option available to you. The paper wallets that you can use are as follows:
- For Bitcoin, Litecoin, Dogecoin etc. you can use Wallet Generator.
- For Ethereum and ERC20 tokens you can use My Ethereum Wallet.
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Trading Crypto Is Risky
Risk management is also a significant aspect of trading. Prior to entering a trade, it is important to know how much you are willing to lose on that crypto trade if it goes against you. This can be based on a number of factors, such as your trading capital. For example, a person might wish to only risk losing 1% of their overall trading capital either in total or per trade.
Trading is simply a risky endeavor in and of itself. Its almost impossible to predict any future market activity with certainty. At the end of the day, its important to make your own decisions, using available information and your own judgement, as well as to make sure you are properly educated.
Additionally, trading strategies can vastly differ from person to person, based on preferences, personalities, trading capital, risk tolerance, etc. Trading comes with significant responsibility. Anyone looking into trading must evaluate their own personal situation before deciding to trade.
To Trade Or Not To Trade
When you buy or sell a cryptocurrency, you are actively taking ownership of the coin itself.
If you are trading in cryptocurrencies, then things are a little different.
When you spread your bets or even straight trade your cryptocurrency, you are speculating on whether the market that you choose will rise, or fall, when you are trading in cryptocurrencies, you never actually have direct ownership of the currency that you are trading.
Trading is excellent fun, and when done well, you can be set to make yourself a hearty profit. It is quick and easy to open an account, and you can usually be trading within five minutes.
It does require that you keep your finger on the pulse of the cryptocurrency industry such as reading the news and monitoring trends and a whole variety of charts.
To understand the substantial difference, read our article on The Difference Between Investing and Trading Cryptocurrency.
Investing In Crypto
If you decide that investing in cryptocurrencies is something you want to try, you are going to need to find yourself an exchange where you can purchase your coins.
There are two types of exchanges, those where you can purchase your cryptocurrency with fiat currency, and those where you need to hold a currency such as Bitcoin already, to be able to buy other types of coins.
How To Store Your Cryptocurrency
When we say send it to your wallet, we dont mean you put your Bitcoin into an actual wallet. To store your currency, you need a cryptocurrency wallet, which is necessary to securely store the code that makes up your cryptocurrency portfolio. You can have either a software wallet or a hardware wallet. Software wallets are necessary to enable active trading, as they make accessing your currency much easier. If you sign up for a Coinbase account, you automatically receive a Coinbase software wallet.
Hardware wallets are physical devices they look a bit like USB drives and they are more secure than software ones. You can use them for currency that you dont expect needing frequent or easy access to. Think of a software wallet like a checking account, whereas the hardware wallet is more like your savings account.
What Makes Cryptocurrencies Different From Fiat Money
Fiat money money like the American or Canadian dollar is issued by the government, meaning theres a central authority that controls its value, interest rates, and supply . Many view this degree of government involvement in the mechanics of the free market as manipulation and as an archaic attempt to manage a vast and complex economic system. A noble intention at best, a catalyst of hyperinflation that makes wealth building very difficult for the average person, at worst.
Cryptocurrencies, on the other hand, are decentralized all transactions are done peer-to-peer or through smart contracts and theres no authority overseeing them. Many people consider this a massive advantage over traditional money, because it gives them full control of their assets.
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Best Penny Cryptocurrency To Invest In
If you come across the term ‘penny cryptocurrency’, this simply refers to digital tokens that trade for less than $1. As such you can explore the cheapest options via our best cryptos under $1 guide.
Crucially, it is important to remember that just because a cryptocurrency is cheap – this doesn’t mean that you are taking on enhanced risk. After all, the value of a cryptocurrency is determined by the number of tokens in circulation and its current market price.
- For example, as of writing, XRP is trading at just $0.86 per token, albeit, it carries a market capitalization of over $40 billion.
- On the other hand, Yearn.finance has a market capitalization of less than $1 billion even though as of writing – a single token would cost you more than $23,000.
Nevertheless, if you’re specifically looking for the best penny cryptocurrency to invest in 2022 because you wish to own a large number of tokens – consider the projects outlined below:
Once again, conduct your own due diligence before investing in penny cryptocurrencies.
Top Tips For Getting Started With Cryptocurrency
When you have a good understanding of what cryptocurrency is, you can begin to learn how you get started and invest in your own.
Cryptocurrency has taken the world by storm and has become one of the most popular and profitable online activities. This is because cryptocurrency has the potential to make people a lot of money, build their wealth, and can be accessed by individuals that have the internet.
While cryptocurrency is easy to access, it still requires knowledge, skills, and expertise to be successful. Its not an easy activity to complete and can be difficult to get to terms with. The market can be volatile and there is a lot of jargon that you need to become familiar with.
Whether you are a keen investor or a complete beginner, you should always start with the basics when you start your cryptocurrency journey.
Here are some top tips to help you get started with cryptocurrency.
How Is Cryptocurrency Taxed
The Canada Revenue Agency taxes crypto transactions as either business income or capital gains.
The difference between the two is immense. If crypto mining or trading is done as a business, then 100% of the capital gains are taxable. If, on the other hand, if an investor is crypto trading or mining that as a hobby, only 50% of the capital gains are taxable.
If youre not sure if your crypto transactions are a business or a hobby, reach out to a tax professional. Its better to pay a professional to help you understand the tax liabilities of crypto than to pay penalties for filing incorrectly later.
Please note, this information is provided for educational use only, and is not tax advice. For tax information that is personalized to your situation, please consult a tax advisor.
Cryptocurrency: What It Is And How It Works
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The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
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How Can Beginners Invest In Cryptocurrency
The easiest way for most people to start investing in cryptocurrency is using a beginner-friendly cryptocurrency exchange or brokerage. Apps from companies like Coinbase and Robinhood make it very easy to buy and hold cryptocurrency. When getting started and choosing where to open an account, pay close attention to fees and the exchanges reputation.
Do You Really Need A Crypto Wallet
In the early days of cryptocurrency, when crypto exchanges were more likely to get hacked, investors definitely needed a crypto wallet. But, nowadays, crypto exchanges have really stepped up their security measures, making them a much safer place to store a private key.
If an investor wants extra security, or plan to spend crypto at retail stores, they should consider getting a wallet. Likewise, if theyve amassed a large amount of cryptocurrency, then a crypto wallet might be the safest place to store them.
What Cryptocurrency Should You Invest In
First, Blockgeeks does not give financial advice, and second, never asks anyone else what to do with your money, least of all Google! Always educate yourself, understand the risks, the all possible outcomes, and dont make any investments if you are not 100% comfortable with your decision.
That said, Bitcoin remains the undisputed king of cryptocurrencies its been around the longest and has the largest market capitalization of over 674 billion USD . is the total value of all tokens available, or the price of each token multiplied by the number of tokens in circulation.
However, there are other cryptocurrencies to choose from, such as Ethereum, Cardano, Litecoin, and thousands of others. They all differ in price, availability, demand, transaction speed and fees, and the technology that supports them.
The website CoinMarketCap lists over 5,000 options in order of decreasing market capitalization. Here are the top 10 and their performance as of May 2021.
It doesnt matter what the price of a given cryptocurrency is, you can always buy a fraction of a token. For example, if 1 Bitcoin costs $35,000 USD, you can always buy 0.0001 Bitcoin for the equivalent of $350 USD.
When researching tokens to invest in, you can take a look at CoinMarketCap to get a snapshot of the top performers, but your research should not stop there. In fact, thats where the real work begins.
Understand What Youre Investing In
As you would for any investment, understand exactly what youre investing in. If youre buying stocks, its important to read the prospectus and analyze the companies thoroughly. Plan to do the same with any cryptocurrencies, since there are literally thousands of them, they all function differently and new ones are being created every day. You need to understand the investment case for each trade.
In the case of many cryptocurrencies, theyre backed by nothing at all, neither hard assets nor cash flow. Thats the case for Bitcoin, for example, where investors rely exclusively on someone paying more for the asset than they paid for it. In other words, unlike stock, where a company can grow its profits and drive returns for you that way, many crypto assets must rely on the market becoming more optimistic and bullish for you to profit.
Some of the most popular coins include Ethereum, Dogecoin, Cardano and XRP. Solana has been another massively successful coin as well. So before investing, understand the potential upside and downside. If your financial investment is not backed by an asset or cash flow, it could end up being worth nothing.
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Only Invest What You Can Afford
Because of the risks involved, you may only want to invest money you can afford to lose if your cryptocurrency investments don’t pan outsimilar to how many investors approach other types of high-risk investments.
You may also want to diversify your crypto investments by researching different types of coins and projects. For example, if you decide to put 10% of your investments into cryptocurrencies, you might take 5% and put it into well-known coins like Bitcoin and Ethereum. The other 5% could go to other investments in the crypto space, like crypto lending.
Good Reasons To Invest In Cryptocurrency
Understand How Cryptocurrencies Work
Bitcoin is the most well-known cryptocurrency, but there are thousands of different cryptocurrencies and crypto tokens that you can buy. But most of these share some similarities:
- They rely on blockchain technology. One of the major innovations behind cryptocurrencies is the use of blockchain ledger technology. These are public databases used to track transactions that can’t be changed once new information is added to the existing chain. This transparency and permanence helps make sure cryptocurrency isn’t duplicated, spent twice or otherwise manipulated.
- There are different blockchains. Cryptocurrencies may have their own unique blockchains. For example, there are separate Bitcoin, Binance and Ethereum blockchains.
- They are decentralized. People and companies around the world use their computers to help run the blockchains and get rewarded in return. Because the database and computing power is spread out, there isn’t a central authoritysuch as a company or governmentthat controls what’s happened.
- They are minimally regulated. While cryptocurrencies are relatively new and regulations can be murky, state and federal agencies have shown that they can and want to regulate them. But that doesn’t mean you’re protected or should trust everything you read on a crypto company website.
How To Start Investing In Cryptocurrencies
Similar to traditional investments, cryptocurrencies are also entirely free to start investing. All you need is an Internet connection and a wallet that supports the cryptocurrency you want to invest in.
Cryptocurrencies can fluctuate wildly in value. If youre unsure if cryptocurrency is right for you, contact Coins Union and learn about whats involved in buying and holding a cryptocurrency.
If you decide that cryptocurrencies arent suitable for you or your business, there are no hard feelings: all of your coins will be returned to you at the end of the investment period.
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What Is The Best Way To Invest In Cryptocurrency
The best way to invest in cryptocurrency varies depending on your investment goals and risk tolerance. Some crypto investors focus on the long term and are willing to HODL as cryptocurrency prices ebb and flow. Others like to take a more hands-on, active trading approach. The best approach is to not invest more than you can afford to lose.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.