A lot has transpired in the crypto market since Bitcoin's anonymous creator, Satoshi Nakamoto, first introduced the world to blockchain technology. The market has evolved from a few coins, mostly representing currencies, into a vast industry. Today, there are cryptocurrencies geared towards many different purposes.
From smart contract programmable blockchains such as Ethereum, all the way to gold pegged stablecoins, the decentralized economy continues to expand. As such, there are many different ways to invest in cryptocurrencies today. Here are some of the most popular ways you can invest in cryptocurrencies in 2021.
Mining is the act of validating transactions for a decentralized network. This practice was first made popular by Bitcoin. Depending on the network, miners will compete or get chosen randomly to accomplish these tasks. The miner that adds the next block of transactions to the blockchain receives a reward in the form of cryptocurrency. In the case of Bitcoin, the reward is 6.25 Bitcoin.
To get started in mining you will need to select a network. There are a wide variety of minable tokens in the market at this time. Some networks are highly competitive and require you to purchase sophisticated mining equipment to succeed. Others, like Bytecoin, have done away with these financial and technical barriers. You can mine this coin directly from your home PC.
Perhaps the easiest and most profitable way to invest in cryptocurrencies is to HODL (hold on for dear life). HODL is a term used in the crypto community to describe the act of purchasing cryptocurrencies and not selling them. For Bitcoiners, HODLing has proven to be a rollercoaster ride. The value of the coin has gone from $20,000 to $3,000 to $60,000 to $35,000 in the three years.
HODLIng is an easy-to-follow method that provides some solid results. The key to HODLing is to invest only in projects you believe in. The long-term potential of many crypto platforms today makes them ideal for HODLing purposes. For example, coins such as Cardano (ADA) have been in the market for years but are now just starting to develop their Dapp network. Projects like this present a lot of upside potential as usability is one of the main factors that determine the value of a cryptocurrency.
If you are ready for a little more excitement in your life, you can start day trading. Every day the crypto market swings. The job of a day trader is to catch these swings at opportune times and capitalize on them in a way that earns profits. Of course, to accomplish this task, you will need to monitor the markets intensely.
One way that day traders reduce their workload is through the integration of trading bots. Trading bots are automated trading software. Users can program these protocols to conduct trades based on certain market criteria. Platforms like Cryptohopper, enable you to execute trades based on daily volume, price points, and signals.
Notably, many platforms enable users to create, buy, and sell trading bot setups. This feature simplifies day trading even more. The main thing to remember when you day trade is that the market is volatile. If you leave your investments unattended, you may come back to find the value has fluctuated immensely. To avoid this scenario, it’s recommended you research and choose a reliable automated trading strategy.
Another way to trade cryptocurrencies with less risk is through the use of indices. A crypto index provides investors exposure to a particular coin, sub-section of the market, or top-performing projects. For example, there are crypto indices that provide exposure to the top 20 cryptos based on market cap. There are also indices that simply focus on a particular sector, such as DeFi tokens.
Crypto indices are a powerful tool that enables traders to gain exposure to markets while reducing their overall risks. The diversification of these funds makes them more resilient to major losses. Additionally, there are crypto indices that offer rebalancing features. These systems monitor the market and adjust your portfolio based on the conditions.
Platforms such as Crypto Army take the concept even further by simplifying the creation process. Crypto Army users have an excellent selection of indices at their disposal. There are indices that represent the top performing coins, DeFi, smart contract programmable blockchains, and much more. Best of all, the system automates these indices to keep your portfolio current and profitable.
DeFi (decentralized finance) is one of the fastest-growing industries in the blockchain market. These projects seek to transfer centralized financial services over to decentralized networks. By doing so, they can take the profits that were once only available to the banks and redistribute them among the community.
For example, there are DeFi savings accounts that pay you interest for keeping your coins on the network. Since there is very little overhead associated with these systems, the added profits get recirculated via interest payments. On average, a DeFi savings account pays 10% interest. In comparison, your bank pays you around .25%.
There are also staking and farming systems. Both of these features enable users to secure consistent rewards by providing liquidity to smart contracts. The main difference between the two is that staking has a lock-up period, whereas yield farming doesn't.
You can also engage in peer-to-peer lending using DeFi platforms. Instead of a bank providing users with funding, regular users take over the task. In return, you get to keep the interest paid by borrowers. Notably, many of these platforms utilize large lending liquidity pools to ensure that lenders receive repayments regardless of the borrower’s actions.
Now that you have a firm grip on how to invest in cryptocurrencies, you’re ready to begin your crypto adventure. The main thing to consider prior to investing in any platform is its reputation and security. Always DYOR (do your own research) and you’re sure to see some healthy ROIs. Luckily, you can save some time as all the platforms listed in this piece have earned their stripes in the market.