- Look into the past
- How to start investing in cryptocurrency?
- What profit to expect?
- Which is the best cryptocurrency to invest in? / What is the most promising cryptocurrency?
- Technical analysis of popular cryptocurrencies
- How to make an investment portfolio correctly?
- How do I buy and sell Cryptocurrency?
- Buying cryptocurrencies: Two kinds of exchanges
- Is there a good time to buy?
- How to store cryptocurrencies?
- Hot Wallets vs Cold Wallets
- Paper wallets
- What’s with taxes and so on?
- How to control investments?
If you think that investing in cryptocurrency is an easy way to get rich, you are mistaken. This is a fundamental process, requiring serious preparation, the ability to subtly analyze the situation and remain calm where others would push the “stop loss” button.
Now that the price of Bitcoin and most altcoins is flying up, the history of 2017 repeats. Then, on a wave of Bitcoin’s explosive growth, everyone started to invest in cryptocurrencies. We believe you have also heard about the events of 2018. In order not to become a victim of cryptocurrency volatility, it is worthwhile to approach investing consistently. This means that all decisions should not be made spontaneously, but be part of a developed strategy. Do you ask how to invest in cryptocurrencies profitably? We will tell everything in detail.
Look into the past
To understand the future, you need to remember the past. It’s the analysis of previous cryptocurrency movements that makes it possible to predict its prospects and future growth or decline. Let’s take, for example, the first and most popular cryptocurrency — Bitcoin. Consider all the changes in its price for 11 years of existence:
The history of Bitcoin began in 2009, then for one dollar, it was necessary to give 1309 BTC.
In late 2010, the price has already reached $0.5.
In 2011, Bitcoin rose to $31.9 and ten days later pulled back to $10.
The entire 2012 price was under the previous maximum of $31.9.
Already in 2013, the BTC price not only overcame the mark of $31.9 but also conquered the sum of $1,000, which attracted enormous attention to cryptocurrency.
2014 was the first truly bearish year in Bitcoin’s history, the price dropped from $1,000 to $350.
The bearish trend continued in 2015, the price was in the corridor $220-240, and sometimes it also broke through the $200 mark. But at the end of the year, it flew up to around $450.
The whole of 2016, the deadly grip of bears weakened, giving way to the bulls, the price increased on the way to $1,000.
2017 was the year when billions of dollars flowed into cryptocurrencies from large and small investors. The price flew up like a rocket. From $1,000 per BTC it reached $20,000 by the end of the year, then it seemed that this was not the limit.
However, 2018 became the kingdom of bears. In just one year, Bitcoin sank 80% to $3,200. Considering that many traders came into the mark with highs, such a scenario caused panic and horror in the crypto market.
Now in 2019, which did not start very well, but the so-called crypto winter came to an end, today the Bitcoin price exceeded $8,600. Experts are forecasting further growth throughout the year and beyond. Someone calls the amount of $1 million per BTC in the next few years. However, is this true?
We have led the whole story with one sole purpose — to show how changeable the cryptocurrency market can be. And, if the strongest cryptocurrency is subject to such ups and downs, then what about altcoins, which are under its submission? We remind readers once again that investing in a crypto is a very risky business that requires a serious approach. If you are not ready for this — leave the ship now. If you are aware of all the risks — we will continue.
How to start investing in cryptocurrency?
Investing in cryptocurrency goes far beyond the strategy of “buy and hold”. In 2019, there are many ways to invest:
You can trade cryptocurrencies, earning on a rate change.
You can invest in new crypto projects by participating in IEO, ICO.
You can do mining by purchasing the necessary equipment.
You can invest in cryptocurrency funds, or cloud mining projects, receiving a percentage of its profits.
Or choose a classic investment way — buy and hold.
These are not all possible methods, but the most popular today. Of course, each of them implies a certain risk; without it, money cannot be earned. The level of earnings in each individual investment will be different. If we talk about funds and cloud mining, they, most often, orient clients to a certain percentage per annum. Participation in ICO, IEO can bring both thousands of percent of profit or 100% of losses. Trading in the cryptocurrency market is also a very risky business, although the classical investment strategy does not guarantee calm and high profitability. You decide!
Choosing the desired method to invest with, you need to note of a few key points. The main one is investment capital. Let it sound trite and jaded, but this quote is true:
You have to invest only the money that you are ready to lose.”
If you don’t have such funds, and you invest all your assets, get ready to be nervous. In the case of trading and direct investment in cryptocurrency, nerves will cause large losses. Staying calm is the key to profitability.
Point number 2 — choose one of the above methods, or find an alternative. There are other ways, but they are more specific and risky.
Point number 3 — carefully study the project in which you want to invest money. If this is a new cryptocurrency, read the white paper, understand the practical value of the crypto for society, analyze the project team, the news background and in general everything that you can learn about this token. Only on the basis of all these facts can you make at least some predictions about the future of a new cryptocurrency.
If we talk about cloud mining projects, then find out where the data centers are located, how long the project has existed, read reviews. This is an important and necessary process because 2017 was the year of the appearance of a huge number of cryptocurrency scam projects, the sole purpose of which was to acquire the investors’ funds. After that, such projects were quickly closed.
What profit to expect?
No one in their right mind will undertake to predict the exact numbers from investing in cryptocurrency. It’s simply impossible. And it's not just a matter of high volatility and total unpredictability of cryptocurrencies. Each method of investing have different perspectives and horizons. We can lift the veil of what will affect the profit, and also name the hypothetical amounts if the scenario is positive.
Responsibility rests entirely on your shoulders. Success depends on what strategy you choose, whether you will adhere to the rules of money and risk management, which cryptocurrency will pick up for portfolio and how successfully you will get deals done. Without special knowledge in trading, we don’t recommend choosing this path. Profit forecast: from a loss of 100% to x100 per year.
The most important characteristic for a trader is stress resistance. Because the course changes every few minutes, there are corrections, pullbacks, consolidations and other surprises. After an unexpected pump, a gap may form, which is likely to be closed, and no one knows when the closure will occur. At such moments it’s necessary to remain calm and either take profits immediately after the pump or bite the bullet and watch the course drop, not taking any action. Trading is really a promising type of investment, but high-risk.
ICO is an initial coin offering, and IEO is an initial exchange offering. Investing in tokens of a cryptocurrency that has not yet been released can be a very risky business. But the profit, in this case, can be enormous, for example, the ROI of Binance Coin is above 9000%! However, even for the experts, it’s very difficult to guess the choice of the project.
2017 will be remembered by many as the year of ICOs and scams. Many projects were created with one goal — to get investors' money and disappear from the radar. The crypto community’s confidence in new tokens and projects has dropped significantly. The SEC actively fought with fraudsters, trying to settle the rules for the ICOs. In 2019, the major players more often use IEOs, since they are more credible. Still, it’s rather difficult to select a project with good potential.
Cloud and standard mining
Both options are still profitable. Even though mining of classic cryptocurrency is becoming increasingly difficult and is declining. The bottom line is the purchase of equipment in the first case and computing power in the second. Prices for current miners exceed thousands of dollars and not everyone can afford them. In this case, people turn to cloud mining. Contracts start from a few dollars, but in this case, you can’t count on profit. A percentage of mining is spent on equipment maintenance and electricity. The profit is received daily.
In the case of standard mining, you need to purchase and set up equipment, prepare the premises, calculate the profitability of mining (based on the price of electricity) and constantly monitor the state of the network. The main danger of mining is that ASIСs quickly become morally obsolete, moreover they become useless when changing the protocol of the mined cryptocurrency.
Your profit depends on the investment’s size and the market situation. Potential profit is from 10-15 to 50-60% per annum.
On the one hand, it’s easier than personally understanding the trading, and on the other hand, not everyone will entrust their assets to a stranger. Most often, funds orient their clients to specific numbers per year, 10-20%, someone calls 30-40%. But any fund depends on the market situation. The opportunity to remain without profit is also present.
As a rule, funds pay dividends to their clients once a month, providing progress reports along the way. There may be no profit at all if we draw a parallel with 2018 when the market rolled down. At such times, funds are struggling to preserve the body of customer investment and not profit. Today’s conditions say that profits can exceed 100% per annum, it all depends on the professionalism of the fund’s traders.
Buy and hold (HODL)
To call such a method of investing tricky strategies is extremely difficult, but many do just that. Moreover, this approach brings good results, of course, if you enter the market in the bottom area. There is also a reverse side of the coin. Remember 2017? Then people bought Bitcoin for $10, $15, or even $20 thousand, and what did it lead to? Thoughtlessly buying Bitcoin or another crypto and waiting for a miracle is stupid! Predicting potential profits is also difficult, using Bitcoin as an example, it can be up to 50-60% per annum.
On the other hand, if you look at the results of some cryptocurrencies in May, the HODL strategy can give fantastic results. The light fork of BTC, Bitcoin SV, had 230% growth only for May, and the further potential of the token is unknown. If you manage to catch the moment, huge profits are possible.
Which is the best cryptocurrency to invest in? / What is the most promising cryptocurrency?
With the total number of cryptocurrencies, which exceeds far beyond 2000, not everyone deserves attention as an investment asset. They are far from the units, but not thousands. We want to point out the main ones that we believe will remain afloat anyway:
- Binance Coin
- Bitcoin Cash
There are other, no less promising tokens, but these seem to be the most stable today. But, not to mention EOS, Cardano, Monero, Tron and Bitcoin SV would be wrong. They also show themselves well for a long distance. But absolutely all cryptocurrencies are dominated by the pioneer — Bitcoin.
Even people not familiar with cryptocurrencies and investments have heard of Bitcoin. We described its story a little earlier. The potential of BTC is huge, experts predict a carefree future, and even that Bitcoin will become the new gold. The estimated price of BTC at the end of 2019 is up to $20,000.
The second largest and influential cryptocurrency. The capitalization of the main altcoin is about $30 billion. At present, the price of ETC has exceeded $280. Ethereum’s technologies are used by most altcoins, including smart contracts, blockchain and other utilities. If growth continues, we can expect $400-500 at the end of 2019.
XRP tokens are quite modest, for today it’s $0.46, although at the very beginning the cost was 0.003. Imagine how much profit people who invested in the ICO received. The idea of Ripple as a tool for exchanging currencies without chargebacks is viable. So the token has good prospects for the future. It’s possible that by the end of 2019 the cryptocurrency will reach the top at $1.
This token ranks sixth in total capitalization in the cryptocurrency market. It appeared as a result of Bitcoin’s hard fork. Today, the value of the asset is above $115. Against the background of the cryptocurrency market’s active growth, Litecoin shows a good upward movement. If it continues, it’s possible to talk about $200 by the end of 2019.
This token is the altcoin of one of the most popular cryptocurrency exchanges — Binance. The altcoin is actively promoted. Its value today exceeds even the end of 2017’s highs. The Binance token can definitely be called one of the most promising tokens for today. The price now is $33. Growth up to $60, $80 or even $100 by the end of 2019 is possible.
The first hard fork of BTC gave life to the token named Bitcoin Cash. Today it’s the fourth largest cryptocurrency capitalization in the market. Although BCH hasn’t shown such explosive growth against the background of a bullish market, it can be safely called one of the best crypto assets. With a price of $465 for today and a continuing uptrend, we can expect at least $600-700 for 1 BCH by the end of 2019.
And so we smoothly approached other altcoins. We don’t say that they are something worse or deserve less trust than those listed. But we simply cannot dwell on each. We list only a few facts. The fork of Bitcoin — Bitcoin SV (Satoshi’s Vision) — showed a 230% increase over the past 2 weeks. First, from $60 to $100, and then from $100 to $200. In 2017, cryptocurrency portfolios consisting of altcoins gave 2,000-3,000% of profits, today's situation is similar to the repetition of the scenario. We wrote more about promising tokens here.
Technical analysis of popular cryptocurrencies
Can the forecasts of reputable experts be free? Yes, it’s possible. They aren’t trying to mislead anyone, but simply increase their popularity and expert value. Therefore, their technical analysis and forecasts clearly deserve attention. The most popular platform is TradingView. In terms of functionality, it has no competitors. Experts who actively use the resource understand it too. We offer to consider the opinions of popular users about the most popular cryptocurrencies.
Let's start with the most popular crypto — Bitcoin. Every day dozens, if not hundreds, of predictions about the prospects of BTC are released. Blindly believing everyone is not worth it, but there is a user group that has earned some credibility with their predictions. The first of these is a user named TradingShot. His forecast is based on an analysis of the Gaussian channel, which for the first time in 270 days entered the green zone. The last time the Bull Cycle was observed in January 2016, then the price was around $365, and after that, it never repeated such lows. Subsequently, we saw the consolidation phase inside the Triangle pattern, and with the compression of Ichimoku, an active growth began along with the trend. Historical patterns are prone to repetition, so based on this forecast we can expect rapid growth.
ProwdClown supports the growth theory of Bitcoin too. He expects another breakthrough upwards after and the continuous of bullish trend. The price of Bitcoin should soar beyond the $9,500 mark. Another popular analyst who believes in a positive scenario is D4rkEnergY, predicting Bitcoin's parabolic growth in the near future.
User MagicPoopCannon is of the opposite opinion, asserting that if there is a Bitcoin increase, then it will be a short-term one. According to his forecast, by October, the BTC price will reach the bottom at around $3,000.
The difference in expert opinion once again shows how difficult Bitcoin and other cryptocurrencies are to predict. Therefore, even experts should be approached carefully, comparing the results of their forecasts with the real state of affairs. To invest profitably, you need to study a large number of analysts.
User MrCryptoRisin gave a fresh prediction for Ethereum price. He believes that, unlike Bitcoin, ETH doesn’t have the best prospects for the near future. In many respects, next few steps could be crucial and the price could go down. It’s not worth talking about a trend reversal, but if the price doesn’t hold around $260, a breakdown of up to $150-200 is possible. This will be a good time to enter the market. After this, the reverse movement will take place. ETH can try to conquer $400 height.
There is a reverse opinion. Thus, the user easyMarkets believes that Ethereum price is in the first support zone and this will be followed by an increase in the resistance zone. ETH price will rise beyond $300, up to $350.
Despite the negative movement in recent months, there are analysts who believe in a positive outcome for the XRP story. One of these is kyer. His forecast says that now the Ripple is indeed in a local downtrend and the situation will not change over the next few weeks. The whales pushed the price to $0.26, which is to make purchases. Therefore, the author of the forecast advises to do the same and prepare for the events in September.
Already familiar to us, easyMarkets recently made a long-term forecast on the graphs of Litecoin. The main idea is that a bearish divergence can signal a change in trend. If the price falls below the support level (in this case, $100), a further drop is possible. But many indicators signal a subsequent increase. In principle, for Litecoin, like for many alts, the overall market mood will be important.
Despite the systematic decline in Binance coin prices over the past two months, cryptocurrency is promising. One of the reasons for its promise is Changpeng Zhao, CEO of the company. The forecast presented by the user SonicTrade says that the trend is still bullish. The BNB didn’t hold the mainline of the uptrend and didn’t find support at 0.6 Fibo. The next target is the middle of the channel and the level of 0.5 Fibo. After that, the rise may follow.
A hard fork of Bitcoin is gaining momentum behind its elder brother. User Ajion made a detailed forecast in which he considered all the options for the development of events. According to the author, Bitcoin Cash expects a gradual drop in price. Depending on subsequent events, the price will break $400 down and then roll down below $300. The user is motivated by the fact that the bull run started only for 5 main cryptocurrencies, and Bitcoin Cash is not among them.
Technical analysis of almost any crypto can all be found on the same site. Once again, the authors' opinion is only an opinion. Do not trust them 100%. The best way is to learn how to do the analysis yourself. Without this skill, you will not be able to invest in cryptocurrencies profitably.
Alternative sources of information
TradingView is not the only platform where you can find out Bitcoin and other cryptocurrency forecasts. A very simple way is Youtube. There are popular analysts who regularly upload videos with their predictions, as well as discuss the latest news from the cryptocurrency world. On such channels, you can find not only analyses but also useful materials on the topic of cryptocurrency.
The Modern Investor, for example, often makes reviews of the latest news, and also explains the ups and downs of altcoins. The channel audience is 150 thousand people. Check out the video:
Similar channels include Crypto Daily and Altcoin Daily. As an additional opinion source, they are good. But don’t lose sight of the popular media. For example, recently, Bloomberg often writes about cryptocurrencies and especially Bitcoin. They have good reports from reputable research firms. Therefore, the classic financial news resources for viewing are required! The list of the most popular includes:
- Wall Street Journal
How to make an investment portfolio correctly?
The key to asset protection from global losses and stable profits is asset allocation. Didn’t you know? Classical methods of forming an investment portfolio will also help with cryptocurrencies. You should not invest all your money in one asset, for example, Bitcoin. The rules of investing don’t work this way.
For good, cryptocurrencies should be part of a classic portfolio that has gold, bonds, stocks, and other valuable assets. This approach is called diversification. And with intelligent management, it gives good results. But we are talking about the crypto, so we consider only the part where tokens are used. If we look at the cryptocurrency market closely, then we can see that there are analogues of standard assets. Bitcoin is gold because it’s the most stable asset. Popular altcoins are bonds. New cryptocurrency and ICO projects — these are stocks.
Depending on the set of cryptocurrencies in your portfolio, it can be described as conservative, aggressive or moderate. To better understand the meaning, we propose to consider each of the types as an example.
This type of portfolio is aimed, first of all, at a low level of risk, with an average level of profit. It can be described in one word — stability. The term of investment is at least 2 years. The optimal number of cryptos in a portfolio is up to 10. The allocation of cryptocurrencies will be something like this:
- 50-75% on Bitcoin and Ethereum
- 50-25% of the top 10 cryptocurrencies
The portfolio is suitable for people who want to make a significant profit but aren’t accustomed to great risk. Although, cryptocurrency is always a risk. The number of tokens in the portfolio is 15-20. The term of investment is 2 years. The optimal allocation of cryptos:
- 40% Bitcoin and Ethereum
- 40% of the top 20 cryptocurrencies
- 20% for promising cryptocurrencies
Aggressive (high risk)
This portfolio is perfect for shorts strategy traders. It’s focused on maximum profit in the shortest possible time. But the chances of losing a large part of the investment are great. The number of tokens is at least 30-40. The term of investment is 1-2 years. The composition of the portfolio:
- 25% of Bitcoin and Ethereum
- 25% of the top 20 cryptocurrencies
- 50% promising alts
This is a generalized example of crypto portfolios. In practice, you can experiment and create moderately-aggressive, aggressively-aggressive and other types of portfolios. It all depends on your goals and the level of risk you may take.
A separate point is ICOs, as the most high-risk investments. Most often, the sale of new tokens should be carried out immediately after the opening of trading on the exchanges. ICO can bring x100 or x1000 of profit, and zero the bill.
It’s important to remember that even when making a crypto portfolio with the highest degree of risk, it’s not worth lowering the Bitcoin percentage below 20-30%. This is your lifeline and other tokens performance indicator. And don’t hesitate to change the composition of the portfolio, there are too many events in the world of cryptocurrencies that may affect the quotes of a particular token.
In addition to the diversification of assets between different cryptocurrencies, you need to think about the distribution between different exchanges. This is all the same principle "do not keep all eggs in one basket". Imagine the situation that all your assets were on one exchange, it was hacked and you lost 100% of the capital, the situation is mourning. If you diversify your investments, let’s say, between the four cryptocurrency exchanges, and if one of them been hacked, you will lose only 25%. This scenario sound much less offensive.
How do I buy and sell Cryptocurrency?
The process of buying and selling any cryptocurrency, not only Bitcoin, is no more difficult than with fiat money. Only in crypto’s case, the wallet will not be physical, although this is possible. Even more, each token has its own e-wallet. There are many official and not very purses. Some can be very large, like BitcoinCore, which requires the entire history of the Bitcoin blockchain to be synchronized. And this, for a moment, 200 GB of hard disk space. There are more simple and convenient wallets for storing Bitcoin, like Electrum.
The second method, which is even more popular than the first, is the storage of cryptocurrency on sites. The most popular is Blockchain.com. Almost on all websites of publishers of all altcoins, there are private wallets where tokens can be stored.
The purchase and sale of the crypto are carried out on special exchanges. One of these (Binance) we mentioned in a conversation about the best tokens to invest. There are hundreds and thousands of cryptocurrencies available for sale and purchase on the stock exchanges. To carry out the operation, you must have a wallet in the desired network. In your account, you can bind all the desired crypto assets. Popular exchanges:
If you decide to invest in cryptocurrency, you will definitely need to learn all of them, because each has its own characteristics and functionality. In addition, prices for the same cryptocurrency on all exchanges are different. Already this fact can serve as an aid for earnings.
It is worth considering the fact that the exchanges also need earnings — this is a commission for trading. Each platform has its own value, but if in general, it’s 0.1-3% of the transaction. Consider this fact when choosing a place to buy cryptocurrency.
Buying cryptocurrencies: Two kinds of exchanges
Speaking of cryptocurrency exchanges, it’s worth noting that they are divided into 2 main types: centralized (CEX) and decentralized (DEX). They offer exchanges in the fiat-crypto and crypto-crypto format, but are based on different ideas.
The centralized stock exchange is controlled by a certain organization, including the transactions themselves are controlled by the company.
In contrast to CEX, decentralized exchanges don’t depend on centralized management and provide full control of cryptocurrency into the hands of the owners. All processes are automated and uncontrolled. That is, all exchanges exclude the participation of third parties and occur in the format of peer-to-peer (p2p). In essence, decentralization is one of the key ideas of Bitcoin, designed to replace the existing financial system with the participation of third parties.
It cannot be said that decentralized exchanges are definitely better than centralized ones. Each of these methods has its pros and cons. We will list them:
- Most DEX exchanges don’t have the ability to perform fiat-crypto operations.
- Functional of CEX is much broader and more diverse.
- The trading volume at CEX exchanges is significantly higher than at DEX.
- High liquidity of CEX, compared with decentralized exchanges.
- The degree of protection of cryptocurrency assets at DEX is significantly higher than that of traditional exchanges.
- Lack of control by companies and organizations, as well as independence from government influence.
We have already written the list of popular exchanges above. Which option is best for you, you will understand only by trying both ways. There is also an alternative form — a hybrid. Such platforms combine the best features of both types.
By the words “best” we mean the functionality and liquidity that are inherent in CEX exchanges, as well as the confidentiality and security of DEX exchanges. That is, such exchanges allow you to legally and securely trade cryptocurrencies without breaking the rules and not being afraid for your assets.
One of these exchanges is Eidoo. The company has received a license for financial services standards and has 'know your client' system (KYC). The accounts are based on Ethereum smart contract. In turn, verification of all operations is entrusted to the mechanism of centralized approval of orders, which reduces the cost of gas in the chain.
Is there a good time to buy?
Is there a good time to invest in cryptocurrencies? Today's market situation shows that yes. And it has already passed, or rather, the best moment has passed, but a great time is still here. The best was the time when Bitcoin and other cryptocurrencies reached their bottom, and, most importantly, they were able to gain a foothold at that level. The minimum price of Bitcoin then was $3,200. And the period from December 2018 to March 2019 was the best to invest. Now, when the market rushed up, you need to have time to buy the last ticket for the departing ship. But the question is, is the ticket really the last, and where is the ship going, up or down? No one will answer this question, even the technical analysis of charts is often powerless in front of the pump.
Anyway, there are a number of criteria that say you need to buy! Consider the main:
News background. If the cryptocurrency is widely spoken in the press and the information is positive, it inflames the interest of the cryptocurrency community. It attracts the attention of investors and increases the demand for cryptocurrency.
A good example of bad PR can be called the statements of Trump and US authorities about the dislike of Bitcoin and cryptocurrencies. They caused a strong correction in the main cryptocurrency price. On the contrary, the news of the intensification of the trade war between the United States and China literally raised the price of Bitcoin. If the first cryptocurrency is so sensitive to the news background, there’s no need to talk about altcoins.
Technical analysis. For those, who understand the intricacies of the analysis, should not be told about the usefulness of oscillators and moving averages when choosing a potential asset to invest in. If you don’t understand crosses, hammers, double tops and candles, use the knowledge of experts who generously share their opinions and analyzes. A good source of such information will be the site TradingView. Just choose wisely!
Access to the market. When a cryptocurrency is at the ICO stage, and its tokens are only released, the best time to invest comes. The only thing is that cryptocurrency should be of value to society, it should have a clear development plan and a sensible development team. If at least these criteria are in order, it has every chance to soar upwards. And you will be among the first to collect all the cream.
Historical lows. In the case of the popular altcoins, it happens that for one reason or another they lose in value. When one of these tokens reaches the bottom and it succeeds in fixing itself and not going lower, this can be a great chance for profit. The fact is that if the project has been on the move for a long time and there is no reason to panic, the price of the token will necessarily rise. If not independently, then with the help of Bitcoin. In this case, the losses are unlikely.
We understand that following the entire cryptocurrency market at once is unrealistic. But you need to do the maximum so that your investments are conscious. That's why we talked about the most popular and reliable tokens to invest in. Select a few cryptocurrencies of interest to you at the preliminary analysis stage and delve into it, trying to consider the prospects for the development of the project.
How to store cryptocurrencies?
Imagine that you have become the owner of a Bitcoin or another cryptocurrency, a fairly large number of cryptocurrencies. And all is well, your portfolio brings profit and growth continues, but suddenly all your assets go in an unknown direction. It's a shame undoubtedly. This can happen if you store personal data without protection.
We think you've heard about a dozen and hundreds of millions of dollars that were stolen from popular crypto exchanges. In such cases, nothing will help, but this happens very rarely. And for your part, you can protect your cryptocurrency by choosing the right storage. In principle, there are 2 options for storing cryptocurrency: hot and cold wallets.
It’s very easy to distinguish them, all the wallets that need to be present online are hot. Conversely, those cryptocurrency storage methods for which actions on the network aren’t needed are cold. If everything is clear in the case of the first ones, these are familiar platforms like Blockchain.info, then the second is much more serious. There are cold wallets in the form of software on a PC, portable devices and even paper crypto wallets. We will deal with all in order.
Hot Wallets vs Cold Wallets
As in any business, one cannot say that hot wallets are definitely better than cold ones, or vice versa. In different cases, it is best to use different wallets.
Online platforms may differ from each other; they may be exchanges and various services. But the essence remains the same, all the information about the assets is contained in the database of the platform, and operations are carried out only online. Although it is convenient, in terms of speed, the level of security can be quite low. Pros and cons:
- medium security level
- the ability to quickly perform operations
- quick access to cryptocurrencies
Cold crypto wallets allow you to store Bitcoin on your computer, portable device or in paper form. The method is more secure than in the case of hot ones, but the risks of information loss in case of problems with the carrier increase significantly. Advantages and disadvantages include:
- high level of security
- cryptocurrency is always at hand
- work slowly
In the light of recent events with hacking exchanges, portable cryptocurrency storage devices and software for offline storage on a PC have become popular.
Portables wallets allow you to download several dozen cryptocurrencies to special hardware devices with pre-installed software. You can configure and flash drive, but it’s a less reliable way, although cheaper. The alternative is special devices created specifically for storing money, such as the Ledger wallet.
There is a storage option cryptocurrency on the PC. In this case, you need to download the entire blockchain of the selected token (for Bitcoin, for example, about 200 GB) and sweat with the settings, but the safety of tokens in your wallet depends only on the security of your system. Advantages and disadvantages are:
- high level of protection
- portability of the device
- the inability to use the money instantly
- buying a device
- installing the blockchain on a PC
The last option is a paper wallet. In essence, these are combinations of symbols printed on sheets of paper that are cryptographic money. For ease of use, they are often formed as a QR-code. This method is safe from equipment damage and lost passwords. Pros and cons are:
- maximum security level
- difficulty in using cryptocurrency
- paper fragility and possible code damage
If you invest in small volumes of cryptocurrency, the first option with online wallets is also suitable. But if you manage large amounts of tokens, you may need to think about more serious methods of storing your assets.
In a conversation about Bitcoin’s security and e-wallets, it would be wrong to miss such a popular and useful thing as two-factor authentication. With the help of 2FA, the data before entering the platform is confirmed. It looks like a set of periodically changing numbers that must be entered at the entrance along with a password. These numbers themselves are in the mobile application and change every 30 seconds.
This is really a good means of additional protection of your data. In addition, many exchanges don’t allow operations without 2FA. The most popular apps today are:
- Google Authenticator
- LastPass Authenticator
What’s with taxes and so on?
Do you wonder if you need to pay taxes on Bitcoin and other cryptocurrencies? This is a very controversial issue. The thing is there’s no common understanding of cryptocurrency as electronic money. Each country treats crypto assets differently. And it all depends on where you live.
However, tax regulation is well underway around the world. The overwhelming majority of the crypto community has the same position — there can be no taxation of anonymous sources of income. Since this is contrary to the very idea of decentralization, on which Bitcoin and so as any other cryptocurrency are built.
Nevertheless, it should be understood that in the conditions of fierce regulation of cryptocurrency turnover, sooner or later you have to pay taxes. How soon, it is hard to say, but it will be for sure.
What data is important in calculating taxes? Only data on the sale and trade of tokens. The calculation of income and outcome looks quite simple:
The present asset’s value - the initial asset’s price = capital gains and capital losses
Where the present asset’s value is the price at the time of sale, the initial asset’s price is the value at which the token was purchased.
With the high volatility of cryptocurrency, calculating taxes correctly will be a difficult task. There are even special programs designed to make life easier for crypto asset owners.
Given the urgency of the issue and the mood of the governments of most countries, in the near future, we can expect that the tax issue for the Bitcoin will be finished. Already, laws obligating to pay taxes are being issued everywhere, and this trend is only gaining momentum.
The latest events show that Bitcoin has become so popular that it has been widely spoken by top politicians. Not so long ago, the president of the United States of America, Donald Trump spoke about his attitude to Bitcoin and cryptocurrency.
I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity....— Donald J. Trump (@realDonaldTrump) July 12, 2019
His words were quickly picked up by the media and colleagues. Therefore, now the issue of regulation has become even more acute than before.
On the other hand, even state services such as SEC began to cooperate with crypto startups, which indicates positive progress in the regulatory process.
How to control investments?
If you are to invest in a cryptocurrency fund or cloud mining, little depends on you, but in other cases, you should always keep your finger on the pulse. Especially for these purposes, there are portfolio trackers, and their main advantage is that they have the form of mobile applications. There are also desktop versions, but they are less relevant in today's realities. Most popular trackers for today:
- Circle Invest
In combination with a simple and convenient interface, the programs carry many useful functions. They help track online cryptocurrency changes, create a portfolio and track its success, synchronize work with other devices, receive notifications when certain values are reached, and other useful functions.
Let’s dig a bit deeper and stop on one of the trackers, for example, on Blockfolio. This tracker can be called the most famous tool in the market of mobile applications for crypto portfolio tracking. It has a user-friendly interface that can be customized, as well as the appearance of the application.
Blockfolio supports more than 3 thousand coins, and also allows you to check order books on various exchanges directly from the application. Another useful feature is a block of news about Bitcoin and cryptocurrencies from two popular sources: CoinDesk and Cointelegraph. This is a great way to keep track of your assets.
Only trackers won’t be enough to be in charge. Control of Bitcoin and cryptos goes far beyond the boundaries of mobile applications. It’s important to keep records of changes in the course of a particular cryptocurrency for certain periods of time. For example, the price change by month. Now it’s much easier to do any analyzes than before because there are services such as TradingView. They allow you to analyze any cryptocurrency charts and even give automatic recommendations for actions based on important indicators. We will talk about this in more detail later.
The cryptocurrency market is only gaining momentum. It’s unpredictable, but today it is the most profitable, if you know how to earn on it. The future of Bitcoin and another cryptos looks bright, the governments in all countries are trying to regulate the use of tokens. All are interested in the prosperity of the market, but legally.
You can invest in Bitcoin or another cryptocurrency but it’s a complex process that can both earn and leave with nothing. Although, such a statement would be correct for any investment. To make a profit, you need knowledge and a fundamental approach to business.
We told how to invest in cryptocurrencies profitably, where to start and how to achieve success. We have presented you with the right to choose because there is more than one way to invest in Bitcoin and alts. Then the choice is yours, and we can only wish good luck!