How to make a profit on cryptocurrencies
Over the past year, more and more people have been interested in making money on cryptocurrencies. But how do you do it in practice? If you are willing to take concrete steps to benefit from cryptocurrency schedules, you should look at the process in more detail. Many people invest in the right assets at the right time, but still lose money in the end because they either do not plan their actions or, if they do, do not stick to the original plan. There are three issues that need to be addressed first:
- How much money to invest in the business with cryptocurrencies?
- What is the time horizon for investment?
- What kind of cryptocurrencies should I be studying?
The answer to one question may affect the answers to the other, so let’s take a look at them one by one.
Read it too:
- «Cryptocurrencies with huge growth potential in 2018. Part one. Monero, Ripple and Dash.”
- «Cryptocurrencies with huge growth potential in 2018. Part two. NEO, Stellar Lumens, Zcash»
- “What kind of cryptocurrencies will survive in the market?”
- “State regulation of cryptocurrencies in the world.“
- “How to choose a promising cryptocurrency for investment“
- “How to create an investment portfolio from the Altcoins in 2018.“
- «How to choose the right cryptocurrency exchange»
- «The future of IOTA: Why does Tangle beat Blockchain Iota’s forecasts for 2018»
What’s the risk?
Cryptocurrencies are extremely risky investments. So risky, you must actually be prepared for the fact that the value of any cryptocurrency can fall to zero or the efficiency of the investment will be zero before you have the chance to liquidate your investment and exit. That doesn’t mean you can’t try to benefit from the cryptocurrencies. In fact, the investments that carry the greatest risk often have a huge potential for growth and maximize profitability. The above gives us an idea of what we can get.But you should also know that there is a small chance of a maximum potential loss. All investments in cryptocurrencies could burn. The truth is, you have to be prepared to lose every penny at worst. So, the question “What can I risk?” becomes the question “How much can I afford to lose?”Reasonable investors usually allocate a certain part of their investment capital to risky operations, and the rest to safer investments. For example, 80% to 90% of free capital should be held in extremely safe investments, such as interest accounts with a large insured bank or treasury bonds. And only the remaining 10-20% of the money to use for more risky investments, dividing them into small positions. Because of the extremely volatile nature of cryptocurrencies, just for the sake of security, it is not possible to invest in them the entire “risky” investment fund.There are two methods that can be used to make operations less risky:
- Invest in several cryptocurrencies. Such diversification should reduce the overall risk.
- If you decide to trade, you should find a broker offering a guaranteed stop-loss and not use leverage.
What are time horizons? Invest or trade?
You need to decide how much time you are ready to wait for potential profit, how much time you can and want to devote to investment activities. Depending on this, there are two options – to become a “trader” or “investor”.If you plan to buy and sell cryptocurrencies within minutes, hours or several days, it is better to trade cryptocurrencies through a brokerage company in the Forex market and consider yourself a trader rather than an investor if you manage to trade.If you are ready to stay in the transaction for weeks, months or even years, then you are an investor. There are advantages and disadvantages to both the trader and the investor, which you should consider before deciding which way suits you:
- Available currencies; All cryptocurrencies are available for investment and only those offered by brokers are available for trading. Usually Bitcoin, Ephirium, Dash, Ripple
- Investment returns can be very high, and trading does not guarantee high returns.
- Risk of loss; In investments, you can lose everything, but in trade this risk is limited.
- Labour costs; There is a lot of work to be done in trade, and investment does not require such an effort.
- Methods of investment; You can invest through exchanges, funds and wallets, and trading is available only through brokers.
- Time frame; It makes sense to invest only for long periods, and you can trade on any time frame.
- Transaction fees; Transaction costs are significantly higher in trade transactions than in investment transactions.
In some situations, these differences are erased or, conversely, may be greater.
Choice of cryptocurrencies for investment
As mentioned above, the choice of objects for investment depends on the line of business. Any cryptocurrency can be used for long-term investment. However, they are all divided into three types. There are several known, reliable cryptocurrencies with a high level of capitalization. This could include Bitcoin, Lightcoin, Ephirium, Ripple, Bitcoin Cash. The second group includes currencies that are less well known, but with a capitalization of over a billion dollars and high growth potential. Examples of such currencies are NEO, Waves, IOTA, Zcash. The third group of currencies is more risky, but can give the investor a profit of hundreds of percent. This group includes cryptocurrencies with a capitalization of over $100 million. In order to reduce the risk, it is desirable to create an investment portfolio, distributing capital proportionally among all cryptocurrency groups.For trader’s activity the choice of financial instruments is limited. Many independent Russian brokers from our 2018 ranking, such as the Forex Club broker, who has recently received many positive reviews, offer short-term trading in cryptocurrencies for the purpose of making a quick profit. It’s also possible on the cryptobirch. There is a significant difference between these types of trade. Cryptobourses offer more currency pairs, but do not provide leverage. In addition, there is a risk of hacking into exchange-traded crypto wallet. Forex brokers offer to trade derivatives of cryptocurrencies – futures and contracts for difference. In most cases, offers are limited to Bitcoin and Etherium. But this way of trading is much safer.
Read it too:
- «Cryptocurrencies with huge growth potential in 2018. Part one. Monero, Ripple and Dash.”
- «Cryptocurrencies with huge growth potential in 2018. Part two. NEO, Stellar Lumens, Zcash»
- “What kind of cryptocurrencies will survive in the market?”
- “State regulation of cryptocurrencies in the world.“
- “How to choose a promising cryptocurrency for investment“
- “How to create an investment portfolio from the Altcoins in 2018.“
- «How to choose the right cryptocurrency exchange»
- «The future of IOTA: Why does Tangle beat Blockchain Iota’s forecasts for 2018»
Brokers who have Bitcoin trading available
- XM.com
- Etoro
- Plus500
- Instaforex
- FXTM
At the end of the article, check out the webinar’s “Profit in Cryptocurrencies”.