You must have read the story of Aladin. Don’t you think it would be great if you had Aladin’s magic lamp and could make yourself wealthy? True that Aladin’s lamp does not exist in the real world, but thanks to Cryptocurrencies with the right investment and patience, even you will be able to earn a lot of profit, and become wealthy!
If a person had invested $ 19,000 in Bitcoins, in the year 2017, he must have seen the investment dip by 75% to 80% but if he has shown patience, his Bitcoin investments have now risen by 300% . That is exactly why people these days want to invest their money not just in stocks and mutual funds, but also in the cryptocurrency market.
Cryptominati Capital is of the opinion that anybody starting from entrepreneurs, investors, and individual investors, everybody is getting attracted to the cryptocurrency market. But is it so easy to earn profits in this field? Cryptocurrency has the potential of making you very rich, but only with the right investment can you go up to that level. Patience and proper analytical research will surely help you gain great results.
With time, the crypto market has become very fierce and unpredictable. So, if you want to know how you can make money with cryptocurrencies this year, then this article is for you. Here I will be discussing everything about cryptocurrency investment, the easiest cryptocurrencies in the market, and also about all the low-risk complex strategies that you can take up.
What is Cryptocurrency?
Before understanding the strategies of Cryptocurrency investment, let us discuss the basics of cryptocurrency . Cryptocurrency is a completely decentralized payment method . You can use cryptocurrencies to make online transactions. In the present day, there are about 18000 types of cryptocurrencies out there in the market. For example, Dogecoin , Bitcoin , Ethereum , Litecoin , etc.
These cryptocurrencies work on a blockchain network. The blockchain is also known as the digital ledger of cryptocurrency networks. This network makes sure that every payment that is made is safe and no one coin can be used twice. Each coin is uniquely encrypted, thus the name, cryptocurrencies.
And how are cryptocurrencies created? New cryptocurrencies are mined by setting up computers and hardware that can solve cryptographic mathematical puzzles. This process also legitimizes each transaction on a blockchain network.
What is Investing in Cryptocurrency?
So, if you buy cryptocurrencies, what can you do with them? Well, you could obviously use it as a medium of exchange and transfer it to someone in exchange for goods and services. Other than that, cryptocurrencies can also be stocked up like an investment. People use various cryptocurrency wallets like Coinbase , Crypto.com , Coinmarketcap , BlockFi etc, which help in converting fiat or traditional currency to buy cryptocurrency.
If you are planning to keep your cryptocurrencies as an investment and gain a huge amount of profit from their resale value in the future , then it is quite similar to stocks. And how does tax on cryptocurrency work? Well, that varies from year to year.
If you earn not more than $ 40,000 every year from the cryptocurrency market, you do not need to pay any income tax . On the other hand, income from cryptocurrency up to $ 44,1150 is taxed at 15% . Whereas, income higher than that is taxed at 20% .
But still, investing in cryptocurrency is the best form of investment because it is easy to trade, sell, and even buy online. And when does cryptocurrency gain value? When big companies announce that they are going to accept payments in form of cryptocurrencies, their value automatically rises in the market.
For example, when Elon Musk, the CEO of Tesla announced that they could only accept payment in form of cryptocurrencies, its value rose. Thus, celebrities promoting cryptos can bring in a real difference in their value .
And what about the increase in demand for cryptocurrencies? It does not matter what the demand in the market is, the supply will always be limited. For example, there can be only 21 billion Bitcoins in circulation, and once that happens, no more Bitcoins can be created from mining.
Similarly, the value of cryptocurrencies will drop as soon as the big companies stop accepting them as a method of payment or even if a huge number of people try to sell them at the same time.
How is Investing in Crypto Different Than Stock?
If you think that investing in stock and cryptocurrency is the same thing, then you are wrong. Cryptocurrencies and stocks are undoubtedly valid forms of investments, but they have completely different values in the portfolio. They have a huge amount of difference starting from how they are bought to how they are sold as well. Here are a few key differences in characteristics between stock and crypto.
- 1. Ownership – The first difference between stock and Cryptocurrency lies in the kind of ownership . In the case of stock ownership, buyers would have to open an account in a brokerage like TD Waterhouse, Charles Schwab, or Fidelity. Then the brokerage would make trades and hold stocks in the name of the buyer. Not just that, the buyer would also have to give personal information like a street address, social security number, etc to invest in stock.
- On the other hand, cryptocurrency investments are completely anonymous . The user would hold crypto assets in a digital wallet and thus, nobody needs to know who the buyer really is. It is also because of this anonymity that the responsibility of security falls totally on the owner.
- 2. Volatility – In the case of stock, rapid and sudden changes have been a key characteristic feature. A simple thing can raise or drop the process of stock in just a day. That is exactly why terms like “Black Monday” or “Blank Friday” are a thing. But it is also true that, although the prices may be unstable for some period of time, in reality, total losses are really rare.
- But cryptocurrencies are different. Cryptocurrencies are known for their volatility . For example, the cryptocurrency Ethereum started at $ 730 at the starting of the year 2021, but at the end of May, it rose to $ 4080. But again in July, it dropped to $ 1786 , and again rose to $ 4082 in October.
- 3. Exchanges – Stocks are bought and sold on an accredited basis all throughout the world. This provides the stock buyers with transparency, security, and stability. Stocks can also handle large volumes of trade every single day. Also, exchanges are very secure, it is regulated all the time and provide protection to their buyers and sellers.
The concept of cryptocurrency is comparatively very new, thus buying and selling of cryptos is also very new. There are more than a dozen of cryptocurrency exchanges in the world. But some of these exchanges also involve third parties so that exchanges from crypto to fiat or traditional occur smoothly.
Cryptocurrency vs Stocks: Investment Strategies and Regulations
Both the investments, stock as well as for cryptocurrencies, have some great similarities and differences as well. Experts who have a specialty in stock investment can easily make use of the basic strategies to understand the weaknesses and strengths of both the investments and use the same portfolio for different reasons.
Stocks have been a source of stable investment from the 20th century and have maintained their stability in the 21st century as well. But as mentioned earlier, the first cryptocurrency was just created a decade ago. Thus, it is still a riskier investment. You might gain huge profits from it, but it has a huge risk .
The key difference in both investments is regulations. In 1929, when the stock market fell or crashed completely and consequently gave rise to Great Depression, the American government created a stock market regulation committee known as SEC (Securities and Exchange Commission). This regulatory body makes sure that the stock market is safe and the investors are protected.
According to SEC, the companies have to disclose all kinds of information that can affect their stock value. Other than that, the investors also have financial advisors who have studied the market and have great knowledge about the investment market.
But in the case of cryptocurrency, that is not the case. Most Cryptocurrencies are not regulated by anybody and are completely decentralized. These do not have any protection and the buyers are solely responsible for safeguarding their investments.
5 Ways to Make Money with Cryptocurrency
Something that you must remember is that investments are always risky. They might be low-risk or high-risk assets, but some kind of risk factor will always be related to cryptocurrency. In fact, experts believe that cryptocurrencies have a high level of risk factors associated with them. It is only by making educated choices will you be able to invest in cryptos safely.
Here are 5 tips for you that are not just safe, but will also help you gain profit in 2022 from the cryptocurrency market –
1. Lending and Borrowing cryptocurrency
You can earn a good amount of profit from lending your cryptos . Such transactions have agreements that both the lender and the borrower have to agree to. You can also make safe crypto exchanges through platforms like Celsius , Nexo , BlockFi , SALT Lending , and Oasis . This process is not completely risk-free, but if you want to gain profit from cryptos, this is one of the perfect strategies.
2. The traditional process of buying and holding
Another safe method is just to invest in cryptocurrencies and hold them for some years . You might end up with a lot of profit if the valuation of the cryptos increases. For example, cryptos like Bitcoin, Ethereum, etc, have always maintained an upward chart.
3. Trading cryptocurrencies
If you think that long-term strategies like buying and holding, or lending do not work for you, you can use the strategy of trading your cryptos for profit. If you can analyze the market tactfully, you can end up successfully trading your cryptos .
4. Research the crypto exchanges
Another way to earn a huge amount of profit from this industry is by researching the crypto exchange platforms. There are about 500 exchanges that you can choose from in the market so, talk to an expert and choose the best one that provides you with security.
5. Diversify your investment
Another way to earn huge profits safely from crypto is by diversifying your investments. Do not invest all your money in one crypto, rather do your research and choose the best cryptos in the market and diversify your investment accordingly.
Conclusion
So, after reading this article, you must have a clear idea about how you can make safe crypto investments. Remember, it is important to understand crypto before investing even a dollar in it.
Picking up the correct crypto requires a good amount of research. So, make sure you analyze every aspect before you even think of investing in it.