Cryptocurrency is at the heart of all discussions and attracts more and more beginner or more experienced investors looking to diversify their portfolios or take advantage of the growth that cryptocurrencies have offered for several years now. In this article, we explain the steps to follow to get started investing in cryptocurrencies by explaining which cryptocurrencies to choose, the different steps to follow to buy cryptocurrencies safely and the solutions at your disposal to secure them effectively.
Why invest in cryptocurrency?
Here are the different reasons that push investors to invest in cryptocurrencies in 2024:
A high return potential:
Despite their upward and especially downward volatility, some cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) have shown a potential for exponential growth over the long term. Investing in cryptocurrencies can boost the overall return on your investments, provided you invest in the strongest and most promising cryptocurrencies.
Diversification:
Cryptocurrencies are less correlated to other asset classes such as the stock market or real estate and therefore allow you to diversify your investments. With a small amount of money, you can hope to have higher performances than stocks or ETFs.
Easily accessible:
In 2024, anyone can buy cryptocurrencies and secure them in their own wallet. It only takes a few minutes!
A safe haven:
Bitcoin (BTC), which is the largest cryptocurrency in terms of capitalization, is today considered a safe haven, just like gold. Indeed, BTC is limited to 21 million units and it is this rarity that gives it all its value.
Cryptocurrencies are not controlled:
Unlike currencies like the euro and the dollar, cryptocurrencies do not depend on a control body like a bank or a financial institution. Anyone can buy, exchange, sell or transfer cryptocurrencies to the other side of the world, whenever they want. Cryptocurrencies are independent and uncorrelated from traditional currencies.
Banks, Bitcoin ETFs and Crypto Caution
More and more banks and investment funds are holding cryptocurrencies and with the recent approval of Spot Bitcoin ETFs, this should not stop! But be careful! Cryptocurrencies are volatile, both up and down, so we recommend you to stay cautious.
In the bear market, you need to have strong nerves! When investing in cryptocurrencies, you need to be aware of the risks.
Cryptocurrencies should represent a small part of your overall capital and you should not invest money in them that you cannot afford to lose.
Investing in cryptocurrency: Which cryptocurrencies should you buy to start?
Which cryptocurrency should you go for? This is surely one of the most important questions you should ask yourself! The cryptocurrency sector is still young and it is important not to be tempted by small cryptocurrencies that face significant speculation.
Bitcoin and Ethereum
There are billions of cryptocurrencies and unfortunately, not all cryptocurrencies are based on solid fundamentals. Unless you are an expert, we recommend that you only focus on the 2 most important cryptocurrencies on the market which are:
Bitcoin (BTC):
BTC is the most important cryptocurrency on the market in terms of capitalization and fundamentals.
Ethereum (ETH):
ETH is the second most important cryptocurrency on the market and allows you to develop decentralized applications, smart contracts and interact with DeFi.
Given that this sector is very volatile, it is recommended to only invest in the most mature cryptocurrencies in order to limit risks. In times of decline, it is not uncommon to see the price of certain cryptocurrencies drop by more than 80%!
Unlike investing in the stock market, in cryptocurrencies, it is rather difficult to diversify your investments. Quite simply, because there are a multitude of cryptocurrencies and it is difficult to repair those that will stand out.
Some cryptocurrencies that do not bring any innovation to the ecosystem can face significant speculation and display very high performances. While cryptocurrencies that can revolutionize the ecosystem may not attract investors and display poor performances.
When you want to analyze a cryptocurrency, you can analyze elements such as:
- The reputation of the project
- The history of the project
- The white paper
- The founders and the team in charge of its development
- Its usefulness
To limit the risks when investing in cryptocurrency, do not hesitate to multiply the sources and ensure the veracity of the information you consult.
6 steps to follow to invest correctly in cryptocurrency
Here are the 6 steps that you must follow imperatively to invest correctly in cryptocurrencies:
1/ Define a capital to invest
Start by determining the amount you are ready to invest, keeping in mind that the cryptocurrency market is volatile. Never bet more than you can afford to lose.
2/ Register on an exchange to buy cryptocurrencies
Choose a reputable and reliable exchange platform or broker. Make sure that it offers a good level of security, quality customer service and that it is regulated by the competent authorities.
3/ Choose the cryptocurrencies to buy
Do in-depth research to choose the cryptos that match your risk profile and investment objectives. For beginners, it is advisable to start with well-established cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) due to their greater liquidity and history.
4/ Define your crypto investment strategy
When investing in cryptocurrencies, there are several investment strategies:
Hold:
this strategy consists of keeping your cryptocurrencies for the long term
Trading:
this strategy consists of investing in the short and medium term in order to take advantage of the volatility of cryptocurrencies to generate capital gains and increase your capital. Trading is preferred if and only if you are comfortable with technical analysis and have a certain coolness in order to withstand market volatility. If you adopt this strategy, we recommend that you use a stop loss and a take profit on each of your positions.
Dollar-Cost Averaging (DCA):
This strategy consists of regularly investing an identical amount of money in a particular cryptocurrency. For example, every 5th of the month, you can invest €50 in BTC and €25 in ETH.
Staking:
This strategy consists of blocking your cryptocurrencies in a contract in order to make them grow. Staking allows you to participate in your own way in securing a network and to obtain rewards in exchange. Staking rewards are paid in cryptocurrencies and allow you to increase your capital over the months. Be careful, the higher the returns offered, the greater the risks. For example, by depositing your ETH in staking, you can receive between 3 and 5% return each year. Knowing that in staking, the returns displayed vary daily.
5/ Develop an effective cryptocurrency investment strategy
Set clear goals, acceptable loss limits, and areas to secure profits. Whatever happens, stay disciplined and avoid making decisions out of anger or panic.
6/ Follow market prices, news and upcoming events
Stay informed about the latest news and market trends. Cryptocurrencies can be heavily influenced by regulation and macroeconomic conditions.
Secure your cryptocurrencies
Once you have purchased your first cryptocurrencies, you need to think about storing them safely! Especially if you hold several hundred or thousands of euros worth of cryptocurrencies.
To store your cryptocurrencies safely, we recommend that you buy a cold wallet. A cold wallet is a wallet that allows you to store your cryptocurrencies on a medium that is not connected to the internet.
Investing in cryptocurrencies with ETFs
Depending on your goals and expectations for investing in cryptocurrency, you have the choice between directly purchasing cryptocurrencies or investing in ETFs. As a reminder, an ETF is an index fund whose role is to replicate as faithfully as possible the performance of a stock market index or a particular asset, such as a cryptocurrency for example.
It has recently become possible to invest in cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) through an ETF. This investment solution allows you to avoid having to create an account on an exchange and having to take care of securing your cryptocurrencies.
In fact, since 2023, Spot Bitcoin ETFs have attracted all the attention in the United States and have attracted billions of dollars in liquidity since it has been possible to invest in them.
In addition, in the long term, some ETFs on cryptocurrencies will most certainly be available on PEA and life insurance, which will allow you to benefit from the performance of cryptocurrencies while enjoying tax advantages. What more could you ask for?
Investing in Cryptocurrency in 2024: Is it a Winning Strategy?
Investing in cryptocurrencies is a topic that generates a lot of debate among investors and the general public. To determine whether it is a good or bad idea, it is crucial to weigh the pros and cons while taking into account your risk tolerance, financial goals, and understanding of cryptocurrencies.
Cryptocurrencies represent a technical and technological innovation, offer high potential returns, and allow you to diversify your investments.
In 2024, we believe it is relevant to invest a small portion of your financial capital in cryptocurrencies, provided that it is in line with your beliefs and your cryptocurrency investment strategy.
For those who are new to cryptocurrencies, it is essential to start small, educate yourself, and not invest more than you can afford to lose.
As with any investment, diversification and caution are key!
Investing in cryptocurrencies can be a good idea for some and a bad idea for others.
