Investing in cryptocurrencies has long been a controversial topic. In this article, we’ll walk you through what cryptocurrencies are, why they might be a good investment opportunity, the risks of trading cryptocurrencies, and whether you should believe some of the common rumors about cryptocurrencies.
Cryptocurrencies and other crypto assets are known for their dramatic price swings, which may not be what you want to see. However, cryptocurrencies have also historically enabled some investors to achieve huge gains, making them an asset class that should not be ignored.
What are crypto assets?
Crypto assets are digital assets based on blockchain.
The crypto asset industry is still in its relative infancy, with Bitcoin only being launched in 2009 and its popularity driving the adoption of cryptocurrencies. In recent years, the industry has continued to expand, with new cryptocurrencies being launched regularly and decentralized finance (DeFi) also expanding significantly in recent years.
Many new categories have been added to the crypto asset class, such as non-fungible tokens (NFT), utility tokens, stablecoins, etc. Crypto asset transactions use cryptographic principles to encrypt transactions to ensure the security of transactions. Most crypto assets are decentralized, which means that they are controlled by a distributed network of users rather than a single authority.
Why should you invest in cryptocurrencies?
Since the launch of Bitcoin, the ancestor of cryptocurrency, in 2009, the crypto asset industry has continued to expand in recent years, with new cryptocurrencies and crypto assets being launched continuously.
As cryptocurrencies become more popular, they are attracting more and more investors. Investors of different styles may choose to invest in cryptocurrencies for the following reasons:
Seeking high risk and high return. Investors with higher risk appetite are willing to take greater risks in exchange for potentially higher returns.
Pursuing long-term value preservation. Some investors invest in cryptocurrencies to protect their capital from the depreciation of fiat currencies. They believe that cryptocurrencies will gain more mainstream acceptance and adoption in the future.
Portfolio diversification. For ordinary investors, investing a small portion of their portfolio, such as 2% to 10%, in cryptocurrencies can diversify the risk of the portfolio and bring the possibility of increasing the return of the portfolio.
Whatever your reason for investing, it’s important to understand the technology behind crypto assets, as well as the benefits and risks of using cryptocurrencies to diversify your portfolio.
How to start investing in cryptocurrency
Investing in cryptocurrencies can take many forms, including:
Buy Directly – You can buy cryptocurrency using a cryptocurrency exchange or through a broker.
Binance is the world's number one digital currency exchange and the most commonly used virtual currency exchange in China. It is very friendly to novices. Click on the registration link to register and enjoy a 20% commission rebate to start your cryptocurrency journey. Binance APP download: https://www.binance.com/zh-CN/download
For detailed Binance registration KYC verification, please see the article: Binance Exchange Registration Tutorial
Investing in Cryptocurrency Companies - You can invest in companies that focus partially or entirely on cryptocurrencies, such as cryptocurrency mining companies, mining hardware manufacturers, companies that support cryptocurrency payments, or companies that hold large amounts of cryptocurrency.
Invest in cryptocurrency-focused funds.
Risks of Cryptocurrency
The prices of all financial assets fluctuate, but investors should be aware that price movements in cryptocurrencies can be quite extreme.
Crypto markets are known to move more than 10% in a matter of minutes, which can also bring about large swings in investor sentiment. Investors should be wary of cryptocurrency price volatility, but if timed correctly, it can create an opportunity for a positive return on investment.
Summarize
Investing in any asset, such as stocks or bonds, requires evaluating its risk-reward profile. In the case of cryptocurrencies, the risk-reward profile is significantly higher than other asset classes, so it becomes even more important to conduct thorough research. It is especially important to manage your risk and ensure that the possible loss of your investment is within your risk tolerance.
