Despite having the notoriety as one of the riskiest investments to make, investing in cryptocurrency is now more popular than ever. Other than the possibility of being incredibly profitable and able to return fast profits, cryptocurrency’s market volatility has excited a lot of investors. But since it’s still an emerging market and most crypto technologies are in the early stages of development, not a lot of people are familiar with the different ways to invest in cryptocurrency.
In this guide, we’ve listed below the different types of cryptocurrency investments and what you need to know to get started.
Buying and Selling Cryptocurrency
Buying a coin or token — or usually a fraction of it — is one of the most popular ways to get into investing in cryptocurrency. Cryptocurrency trading platforms facilitate this exchange. Cryptocurrency traders will then use these platforms to purchase crypto coins and keep them in their crypto wallets until they’re ready to sell.
The thing with cryptocurrency trading platforms is that they’re not all created equally. Each has its own steep learning curve and crypto traders will have to study the technology and find one that best fits their expertise and knowledge the most. Furthermore, trading less popular cryptocurrency coins will be much more difficult as not all cryptocurrency trading platforms cater to all cryptocurrencies.
Other than cryptocurrency trading platforms, there are also other ways to buy crypto coins. One is through crypto ATMs (although most only cater to Bitcoin users). Unlike conventional ATMs, crypto ATMs allow you to exchange fiat money into a cryptocurrency of your choice and deposit it straight to your crypto wallet. What’s impressive about crypto ATMs is some actually allow you to sell your crypto coins using the machine.
But before you start with buying and selling crypto, be sure to remember that other than Bitcoin — the most popular out of all the cryptocurrencies out there — there are other established cryptocurrencies that you can also invest in. Ethereum and Litecoin are some cryptocurrencies that have shown great trading volume and high liquidity when paired with fiat currencies.
Cryptocurrency CFD Trading
CFDs are a fairly new investment type for cryptocurrency. It has a long and lucrative history with shares, forex, and commodity trading — and now it has found itself under crypto trading. In a nutshell, crypto CFDs are derivative products — meaning they allow you to speculate on cryptocurrency price movements without actually having to take ownership of underlying coins. If you think a certain crypto coin will rise in value for a specific time period, you can go long, or go short if you think the value will fall.
When trading cryptocurrency CFDs, you don’t actually own the underlying crypto asset, which allows for very fast transaction times and leverage. These can be especially useful for such a volatile market, as you can diversify your cryptocurrency CFDs and not just focus on one. Furthermore, CFD trading platforms and brokers are regulated by CySec, the FCA, and other reputable financial watchdogs — keeping your investments safe from theft, fraud, and bad practice.
But there are a few caveats to CFD crypto trading. Firstly, CFD crypto trading can be costly, as you’ll have to pay a spread that represents the difference between the buying and selling prices. If your chosen underlying cryptocurrency is high risk and less liquid, you’ll have to cough up more cash to pay for the spread. Additionally, you’ll need to have a huge amount of trust in your CFDs trading platform. So, be sure to do your due diligence and regularly check if the prices on your chosen platform are in sync with general market movements.
Digital Currency Investment Products
For those who want to trade cryptocurrencies on the stock market, the only way is to invest in digital currency investment products. The thing about digital currency investment products is that they are not widely popular, with Bitcoin and Ethereum as the only two currencies being used as a basis for these trusts.
The Bitcoin Investment Trust (GBTC) was the first one to be approved for eligible shares to trade publicly. Crypto investors using these can now buy and sell public shares of the trust with the symbol GBTC. This investment method has been fairly successful since its value is derived solely from how Bitcoin performs.
GBTC is an investment vehicle that’s traded over-the-counter. This means that GBTC is accessible through brokerage firms or even through tax-advantaged accounts like 401(k)s or IRAs. However, trading digital currency investment products usually come with a premium due to high demand and limited supply. For GBTC, this trust necessitates a minimum investment of $50,000 and annual fees go as high as 2%. So, this type of cryptocurrency investment might alienate casual investors who are limited financially.
All in all, investing in cryptocurrency is a great way to diversify your investments. Just be sure that you’ve done your research and find one that best fits your lifestyle and financial capacity the most.