Crypto Investment Options: All You Must Know
In the last decade, cryptocurrencies have exploded exponentially. Thousands of different cryptocurrencies have popped up. From a single coin to thousands of investment options, the investment options in the crypto space have grown. Several crypto coins like Bitcoin have even become household names. However, the truth remains the same. Just like there are good stocks and bad stocks in the equity market, there are good cryptos and bad cryptos among the various crypto investment options.
The price can be highly volatile and you may not properly understand the risks. This is why it is important to take a highly balanced view and consider the potential profit and loss that comes with crypto investment. More importantly, any investor should be aware of some basic crypto strategies and investment options so they can invest in a way that suits them. Here we’ll do just that.
Crypto Investment Options
When cryptocurrencies launched with the release of Bitcoin, investors only had a single option. Now that cryptocurrencies have gone mainstream, several other investment options are available. From crypto tokens to NFTs, both new and old investors will find themselves spoiled for choices. Let’s go through some of the most popular crypto investment options.
Crypto Coins and Crypto Tokens
The most basic and simple way to get started in crypto. Buying a crypto coin or a token is much like buying traditional stocks. You make an account with an exchange and buy and sell them through their platform. Most newcomers that enter crypto usually go down this route. Several exchanges have made the process of signing up very easy. With just a few clicks anyone can enter crypto investment and start buying coins and tokens.
Crypto Mutual Funds
These funds use futures contracts for cryptocurrencies. When an investor puts their money in a crypto mutual fund, the money gets invested in a futures contract. It stipulates that the fund manager will buy an asset at some agreed-upon point in the future at a fixed price. At the time of the date, the asset is typically worth more than the agreed-upon price. By doing this, it can be sold for a profit immediately. The profit is then used to invest in another future contract thus increasing the value of your investment. While this leaves your money management to professionals, it can also lead to hard feelings. After all, if your mutual funds turn into a loss, the investor will have no choice but to accept it.
This tracks either a single coin or a group of different coins or tokens. Just like regular ETF funds, crypto ETFs are also traded on a daily basis. Based on their sales and purchase, their price varies every day. Crypto ETFs are diversified and provide a much safer option to the investor. Since they outsource their security to the one providing the ETF, they’re also much better protected. Moreover, ETF funds are significantly lower in terms of ownership costs.
Crypto Index Funds
A crypto index fund works like a regular index fund and tracks one of the several crypto indexes that are available. The price of the fund moves based on the movement of the index. This provides a diversified range of cryptocurrencies to the investor and helps offset any losses in certain coins.
Non-fungible tokens are also another way of investing in crypto. Unlike regular coins or tokens, they’re not a fiat currency replacement. They represent the proof of ownership of a digital asset. NFTs can be sold on NFT platforms. In a way, they’re much like conventional auction houses.
Crypto Investment Strategies
It’s simple to buy a crypto investment. It’s a whole other game to utilize a strategy with the purpose to maximize your gain. At its core, any investment strategy is meant to help investors make the optimal choice over a long period of time. Crypto investment strategies are much the same. Every strategy comes with its risks and benefits, which must be considered before applying them. Let’s go through a few of them.
This is an acronym for hold on for dear life. A quite popular strategy among crypto investors. It might not sound very serious but it’s a legitimate strategy. In the stock market, this would be considered a long-term strategy. In HODL, an investment option is bought and held for a long period of time. It is easy and does not require any special research. You just have to be sure of the future prospects of your investment option.
Another common strategy and a very profitable one too. Staking is also called earning a yield and is somewhat similar to fixed deposits of a bank. In this, you simply buy your coins and keep them with a service provider for a fixed amount of time. The investor will continue getting a percentage return on their staked asset at fixed intervals. Staked assets can also be used as collateral and be used to take out loans and invest the money to buy more crypto.
This strategy involves buying a crypto investment and holding onto it for a fixed amount of time to generate a return. Unlike HODL, there is a fixed time frame involved. Similarly, it is also different from staking as there are no guaranteed returns on the investment. The goal here is to buy an asset at a lower price and sell it at a profit within a time frame.
This strategy involves investing a fixed amount of money at regular intervals. The crypto market is volatile. It often swings up and down. Cost averaging allows investors to ride out through the waves and maintain their portfolios. By investing at regular intervals, the average of the portfolio can be maintained. This means that your investment will average out over time and you’ll be safe from the rapid price movement of the market.
The crypto market was often touted as an easy way to get rich quickly and without effort. However, it is far more complex than that. Simply throwing your money will get you nowhere. There needs to be a purpose and intent behind every investment that goes into the market. There are over 8000 cryptocurrencies in the market and many other investment options. Investors need to carefully consider their investment options and strategy before coming to a decision.