Investing in crypto allows you to get a lot of benefits without much effort. To earn a passive income, you need to know a few basic rules. For example, beginners are strongly advised to start with little-known altcoins, whose value will not be a blow to the budget but can bring a good income.
Inexpensive coins can bring profit even more than investing in BTC and ETH over the same period. A huge start-up capital is not required to work with them. The fairness of these words is confirmed by the exchange rate of Cardano (ADA), which increased by 300% over the year or Stellar (XLM) with growth almost ninety times in 2017-2018.
Let’s consider the peculiarities of making money on the cryptocurrency exchange in order. Let’s start with the basics. Digital currency, which includes bitcoin and altcoins, is still considered a high-risk asset. Until a couple of years ago, there were almost no large (institutional) investors in the market. Now, however, things have changed.
Despite the fact that in most countries the regulation of crypto-assets is not yet clear enough, and the projects themselves are considered by many to be obscure and high-risk, they are actively being invested in. Some people buy crypto and store it in cold wallets for the long term, while others put crypto into circulation and make money on the exchange.
Most investors are not intimidated by the lack of back up in digital assets (gold, commodities, etc.). On the contrary, experienced traders are well aware that in the sphere of digital assets there is practically no upper margin of profitability, the main thing is to choose the right digital asset.
- Stellar, Bitcoin, Ethereum and a few more coins to add to your portfolio in 2022
- Important points when investing in crypto-assets through exchanges
- Is it profitable to invest in cryptocurrencies on the exchange
- Prospects and risks of investing on exchange
- Are investments without investing available
- Choosing a cryptocurrency for investment
- What factors affect the value of a crypto-asset
- Where to start when investing on cryptocurrency exchange
Stellar, Bitcoin, Ethereum and a few more coins to add to your portfolio in 2022.
The cryptocurrency sector has experienced several ups and downs, the most significant of which began near the end of 2018 and caused a serious collapse in asset values. It was even dubbed the crypto winter. Despite this, the industry survived and recovered fairly quickly. The good prospects of digital currencies proved their high investment potential, so in 2021 bitcoin and altcoins experienced serious growth and set several new price highs (ATH).
Analysts believe that now is the right time for cryptocurrency investments. Therefore, if you don’t want to miss out on the opportunities that are opening up, you need to put funds on the exchange and buy crypto. According to experts, it is best to consider such coins, investments in which are more profitable and safer than in other digital assets. What is the best to acquire in your portfolio in 2022.
A cryptocurrency that is a must be in your portfolio – 20% of your total portfolio would be an excellent indicator. The project is a “clone” of Ripple. At first it existed as a branch of that blockchain, but a year later Stellar switched to its own open-source blockchain. With its help it was possible to simplify international transactions and make them without intermediaries to any country in the world. XLM coin is used for transfers.
The project has many partnership agreements with various financial institutions: Tempo, ZED, Mobius. The high demand is based on the popularity of the original Ripple project and the refinements made by programmers for Stellar. The blockchain of this crypto has a high capacity. The danger of centralization, despite the presence of the developer – of Stellar Foundation is minimal, as this company owns only 5% of the total number of tokens.
Read more about the history of Stellar here.
If you think you can’t buy BTC because of its high price, don’t worry. Bitcoins, unlike the U.S. dollar, contain eight decimal places, not a pair. So, you don’t have to have a huge starting capital to buy 1 BTC. You can buy as little as 0.00000001 bitcoin.
And even if you have such a small amount in your wallet, there is nothing stopping you from replenishing it and increasing the funds in your account. Nowadays, when the prices of most coins show positive dynamics, you can expect a gradual increase in the value of crypto and, as a consequence, an increase in the return on investment.
Experts recommend investing 50-60% of your starting capital in bitcoin to get a decent profit. It is a popular investment product, the demand for which has remained at a consistently high level for years, largely due to the popularity and the constant reduction in the number of tokens in circulation.
This happens naturally – many people invest in crypto and keep coins in cold wallets in the long run. Also, a decrease in circulating supply can be caused by the loss of access to a wallet or exchange account. Against this background, a shortage of cryptocurrency assets is formed, which stimulates the growth of their value.
It is the second most popular and capitalized crypto in demand by investors. It shot up due to its blockchain, on which hundreds of thousands of projects are based. The work on Ethereum has attracted the attention of millions of programmers. The project has a strong development team led by Vitalik Buterin.
To overcome the inflationary nature of the asset associated with unlimited issuance, the developers decided to switch to a different way of mining blocks – from PoW to PoS mining. Two network forks passed in 2021 – London and Berlin. They lowered the commissions, and in 2022 another fork will pass, which will launch a difficulty bomb and make mining with proof-of-work inefficient.
Ethereum will move to blockchain mining in May 2022 with the approval nodes that have frozen the amount of ETH in an account in a special smart contract. Stacks-nodes are already forming on the network, and several billion dollars’ worth of tokens have been frozen in ETH 2.0. This gives a huge boost to blockchain development and makes its coin more in demand.
The popularity of Ethereum consists not only in attracting a large number of users, but also in having a wide practical application of the blockchain. Many decentralized applications in DeFi, NFT and other spheres have been created based on this platform. The ETH token is needed to pay fees, program smart contracts, and for other needs.
The project, formerly known as Antshares, got another name after a rebranding. In the developer’s field, it was often referred to as “Chinese Ethereum”. Its creators thoroughly reworked the technical aspects of the network – the system of support for smart contracts, documentation. They made a limitation of issuance to ensure the development of the ecosystem, so there is increased interest in their coin.
Despite attempts at active regulation and prohibition by the U.S. authorities, the coin is in the TOP-10. The high potential of this digital asset lies in its underlying basis. Ripple introduces progressive technologies and offers fast money transfers. Many banks and financial institutions around the world work with crypto blockchain. Therefore, investments in tokens are now very promising.
The disadvantage of the project can be considered the unlimited sale of tokens to developers, which may cause excessive centralization of the project in the future. However, against the background of active token trading on most exchanges, it is already possible to get a good profit on deals, as well as to acquire a token for a long term.
Important points when investing in crypto-assets through exchanges
If you are going to invest in exchange-traded investments, you need to understand that bitcoin and other cryptocurrencies are very different from other types of assets. They have their own characteristics that affect their popularity and profitability. For example, digital currencies have no formal back up, so there are other factors to consider when analyzing them.
Naturally, in this state of affairs, you need to build your working strategy differently compared to traditional assets. For example, the specifics of the cryptocurrency environment, regulation, news background and many other factors should be considered. There are also more important factors, which we have tried to compile and outline for you in a concise way:
- Liquidity, and therefore volatility. Digital assets are usually in high demand, so their value is constantly fluctuating. This process is called volatility, and it is not as scary as they write about it.
- Rate growth stability. By analyzing historical data, you can make sure that the market will grow.
- Reputation of creators. The launch of digital assets involves programmers and other specialists, who in some cases, as with bitcoin, remain in the shadows. And in others, as with Ripple, they have public status. This increases the credibility of the project.
- The prospects of the network. Blockchain technology has found applications in a lot of spheres. Some countries (such as China) prohibit digital assets but are enthusiastic about blockchain technology. Therefore, they are used in many spheres and will be in demand by users for a long time.
- Term. As practice shows, investing over the long term brings more benefits than trading. If you choose the latter, be prepared for high volatility of digital assets within a one-day trading session.
As was already mentioned, currencies are also affected by the news pool in the digital asset market. Any positive data or negative rumors can cause the market to rise as well as to crash. This is a consequence of a lack of formal back up, but it’s not all bad news. The news background can be used to predict asset price movements.
To better navigate this issue and understand where the price of bitcoin and other coins might be headed, follow crypto and blockchain news. Data about the legalization of coins, investments by major market players, and positive statements by government officials and figures often stimulate the growth of quotations. The negativity however makes them fall.
Is it profitable to invest in cryptocurrencies on the exchange?
Investments in cryptocurrencies, compared to fiat money, bonds and financial derivatives, yield the highest returns. It often happens in the market that by purchasing coins at the right time, an investor becomes a millionaire a year later. When investing in traditional markets, this happens very rarely.
Advantages and disadvantages of investing on the exchange
Decentralization (DEX). This is one of the main advantages of cryptocurrency projects. To be decentralized means to have no central governing body. Thus, authorities, law enforcement, and any third parties won’t be able to affect the functioning of this system. Neither the wallet nor the transaction can be blocked by anyone’s decision.
Anonymity. All transfers within blockchains are anonymous. The transaction history of a particular account is available to its owner, as well as to analytics tracking services. However, it is extremely difficult to find out who owns a particular wallet. It takes a lot of time and resources to identify the owner of the wallet. Even on a national scale, this is an extremely costly task. Therefore, cryptocurrency users don’t need to pay taxes if they are not required to pass KYC and AML checks to trade on an exchange.
Different options to create income. You can choose to trade cryptocurrencies or tokenized assets (commodities, energy, etc.), buy and sell NFT or engage in cryptocurrency mining. New assets for investments appear regularly, so every crypto-investor can choose the most suitable option for themselves.
As for the disadvantages, they include the following:
- Transaction cannot be canceled. Only a few times has its history been restored to some point after a general vote by blockchain users. This was the case with Ethereum after an epic hack by a scammer and the theft of a large sum of money.
- Hackers can gain access to resources. Hacking, theft of funds, fraud and scams are not uncommon in the crypto-sphere. That’s why I recommend working with exchanges from the TOP and investing in proven projects.
- Price volatility. Fluctuations in the value of crypto-assets scare newcomers, but when you get experience, you will be able to make money on the difference of cryptocurrencies on the exchange.
Considering the aforementioned, each investor chooses for themselves whether to invest or not. On the one hand, there are risks, but you can get rich on cryptocurrencies. For example, in 2021, one buyer of a SHIBA INU (SHIB) became a dollar billionaire by investing and purchasing that coin for $8,000. And there are many such examples.
Prospects and risks of investing on exchange
Unlimited profitability of cryptocurrencies not only attracts funds, but also allows you to earn with minimal investments. If you conduct a thorough analysis of projects on the market and find good new coins, the chance of serious profit increases significantly. It is also possible to earn without much trouble on the fluctuations of such popular cryptocurrencies as Ethereum, Bitcoin, Ripple, Litecoin, etc.
The risks of working with exchanges are in the danger of hacking into the exchange account – local, if they hack the user’s email, change the password from the account and gain access to their funds in the account, and global – if they hacked the exchange and withdrew funds from many accounts. With serious projects like Huobi or Binance, this doesn’t happen thanks to active protection measures.
The risk can also be associated with a scam project, which is ripped off either by hackers or by the creators themselves. This is what happened with the Squid Game (SQUID) coin, for example. A few days after its launch it went up in price to $628, and then the creators of the project withdrew $2.5 million and disappeared in an unknown direction. To avoid becoming a victim of such scam, you need to choose your tokens carefully.
Are investments without investing available
Trading on the exchange requires starting capital. Without money, you can’t make money. However, there are a number of ways to get coins, but they cannot be attributed to trading on the exchange. For example, you can earn tokens without investing by participating in raffles, using cryptocurrency crane websites, or by mining little-known tokens on your PC. However, you won’t earn much on that. You need at least a minimum investment.
How to earn on the exchange without a large investment
If you don’t have much money, choose little-known and inexpensive tokens on the exchange. They can cost a thousandth of a dollar, so they are available to a wide range of investors. The main thing is to choose the project carefully, so that it does not bail out and the coins actually go up in value in the long run. For example, investors who invested in the following tokens benefited:
NextCoin (NXT). It is a decentralized payment system. The project code was written from scratch by the programmers, so the blockchain is devoid of many disadvantages of earlier projects, including bitcoin. This crypto is completely anonymous, offers secure transactions and ample opportunities for mining using the Proof-of-Stake algorithm. The price of the coin has low volatility, so you can earn with minimal risk.
Ardor (ARDR). The project’s blockchain is similar to Ethereum. However, it is highly scalable, resulting in higher transaction speeds. Working with this project, you can create subsidiary networks and launch your own cryptocurrency projects. Transaction processing speed is less than a minute, especially at low and medium load. In 2021, the price of the coin went up and, as of this writing, is $0.11.
Aelf (ELF). A cryptocurrency project aimed at solving a large number of problems. The blockchain ecosystem provides for the creation of a full-fledged digital city. It is developed by a team from the U.S. with good reviews. This allows it to actively attract investors interested in finding promising products. The coin is currently priced at $0.15.
Omisego (OMG). Vitalik Buterin (one of the creators of Ethereum) took part in the development of the project. The startup aims to popularize cryptocurrency payments, which should become available to everyone. OMG allows one user to send crypto and the other to receive fiat money. This idea has attracted many, and the value of the tokens is constantly rising. Today, the price is $2.38.
Choosing a cryptocurrency for investment
To invest in crypto, you need to have the right idea of what you are buying. The rate of return on cryptocurrencies changes frequently, so the rating of profitable projects is updated with enviable regularity. To avoid being at a disadvantage, every investor should learn the basics of blockchain technology and key aspects of working with crypto.
Popularity. The weight of a project in the blockchain community means a lot for selection. Get information about the creators of the project, find out if they have created successful business startups before. Read the news about the project, find out if there have been any blockchain hacks and how many exchanges the asset is traded on. There is usually a lot of information in the media about interesting and highly liquid projects; some news is definitely worth listening to.
Project idea. The technology on which the crypto is based must have differences from the base technology. There are many exact clones of popular cryptocurrencies on the market, but they rarely have a good future. Experienced investors track projects with revolutionary technology that can bring fresh ideas to the crypto-sphere.
Security. It is important for the team to provide an appropriate level of protection. This is implemented through a number of technologies – two-factor account authentication for users, availability of cold storage for tokens. Blockchain must be secure and smart contracts must be written correctly, with no loopholes that hackers could exploit to steal.
It is also necessary for the project to have stable mining. In the case of PoW projects, there must be protection against a 51% attack , when an attacker can access the vast majority of blockchain nodes and rewrite transaction history. And PoS networks need protection against validator manipulation.
Investments in little-known tokens are often a source of high risk. There is a high probability of a startup collapsing at the formative stage. That’s why if you don’t know much about assets, you better choose one of the popular and time-proven coins – BTC, ETH, XLM, etc. Such tokens will be more expensive, but they have no risk of scam.
What factors affect the value of a crypto-asset
Ensuring a high return on investment is achieved through a clear understanding of the pricing factors in this sphere. The list of them, of course, cannot be identical. The list will vary depending on the selected assets. But there are more universal criteria that can be considered by all investors. Here they are as following:
- How often the project is mentioned in the media.
- Is there a partnership with large financial institutions or companies.
- How the project is viewed by regulators – are there any prohibitions and sanctions.
- How transparent is the information about the startup’s team; is it indicated who the founder is.
- Have there been any reshuffles in the top management of the cryptocurrency project.
- Is there regular work on updating the blockchain, launching patches to eliminate technical errors, etc.
- Whether the project has a unique value (e.g., an idea).
- Whether the timeline corresponds to the roadmap.
- How much the bitcoin coin is worth and whether there is news about crypto in the industry as a whole.
- Whether the coin is associated with illegal activities – money laundering, terrorist financing.
Monitoring news allows even beginners with little experience to successfully trade cryptocurrencies. Combined with the knowledge of quotation history and the ability to predict the movement of the value of the asset, it allows you to invest and profit more rationally.
Moreover, we should note the openness of information about funders. Project owners and founders should ideally be public figures with authority in the blockchain sphere. For example, like Vitalik Buterin, the creator of the Ethereum network. Such projects attract funding from big investors faster, which means they have more opportunities for ecosystem growth and safe protocols.
Where to start when investing on cryptocurrency exchange
If you want to earn through a cryptocurrency exchange, you need to act in a certain sequence:
- Determine a budget. Generate a startup capital.
- Choose a token. Depending on how much money you have, determine the coin in which you will invest. Choose the one that analysts say is one of the best.
- Determine the storage. You need cold wallets to store funds and an account on the exchange of your choice.
- Buy a crypto-asset. Exchange your existing fiat currency for the selected digital asset.
- Study the charts. Using price retrospective, you can choose a time when the value of a coin will be slightly lower.
Trading on the exchange every day is a speculative activity. You buy cheap and sell dear. All the difference that remains after you pay commissions is your profit. Often you have to spend a lot of time to get a high income. So keep in mind that it may take at least 6 to 12 months to make a noticeable profit. The main thing is to take your time and act with as little risk as possible.