What Is the Safest Cryptocurrency?
Cryptocurrency is an electronic means of payment that exists only in the virtual space. With the help of digital currency, you can buy goods and services, transfer a virtual asset to third parties, open cryptocurrency deposits, etc. Before starting to invest in digital currency, it is important for an investor to draw up an investment plan, find a safe exchange, get a wallet for storing virtual coins and take into account all the risks of investing in cryptocurrency.
Most cryptocurrencies are not backed by anything: neither gold nor real investment assets (stocks, bonds, real estate, etc.). The main value of such digital coins is the trust of users. An example of such a cryptocurrency is Bitcoin.
Before buying a particular cryptocurrency, an investor should study a digital asset. The financial market distinguishes between fundamental and technical analysis.
Fundamental analysis of a digital currency is a method of identifying the true value of a cryptocurrency and is used when making long-term financial investments. For a complete understanding of the electronic coin market, this type of analysis includes an assessment of the political and economic situation in the world, the prospects for the development of cryptocurrency, user interest in a virtual asset, and other factors.
There are three parameters for cryptocurrency analysis:
On-chain metric. Helps to form the characteristics of an electronic asset using data taken from the history of cryptocurrency financial transactions. Such information may include: the number of transactions, their market value, the size of the commission, etc.
Project indicators.They imply an analysis of the purpose of creating a cryptocurrency. To do this, they study the technical documentation of the virtual coin and check the presence of competitors in the digital currency market.
Financial indicators. Data from this category is needed in order to find out the history of exchange trading in an investment asset. Parameters that an investor needs: the market capitalization of the cryptocurrency, its liquidity and the volume of daily trading.
Today, there are many platforms in the digital currency market that offer communities ready-made research on each virtual coin.
The technical analysis of a digital coin is based on predicting the future movement of the cryptocurrency market price in the short term (up to one year). The main idea of technical analysis is that the market value of an electronic asset reflects everything that can affect its value. Therefore, investors are only interested in the price movement of the virtual coin.
Basic methods of technical analysis:
Trend lines. Presented as slanted lines to reflect the maximum (resistance level) and minimum (support level) price of an asset. The moment for buying a digital currency is the situation when the price of the coin is near the support level. Accordingly, the resistance level is the point at which it is worth selling the cryptocurrency.
Fibonacci levels. They are presented as a set of horizontal lines and are used to find a profitable entry point into a deal with a digital asset and make a short-term investment.
Elliott waves. Due to the fact that prices on the stock exchange move in waves, this method of technical analysis allows you to find recurring trends on the charts and make a forecast about the future movement of the stock exchange rate of an asset. There are more methods in technical analysis that reveal the direction of price movement. However, none of them are suitable for investors who buy crypto for the long term.
There are several promising options for investing in virtual coins.
This option of earning is based on conducting financial transactions with cryptocurrency according to the principle “buy low, sell high”. As a rule, the period of time between buying a digital currency and selling it lasts from a couple of seconds to several hours, so trading is based on technical analysis.
Trading is considered a high-risk way of investing for novice investors. High volatility of coins affects profitability. There are frequent cases of complete loss of financial capital. However, in a period without strong price fluctuations, you can get up to 30% profit and more.
Long term strategy
People who make long-term investments in cryptocurrency are guided by the principle of earning "buy and forget". The essence of long-term investing is to study one or another crypto token using fundamental analysis, then find a digital asset that is promising for growth and buy it.
The essence of long-term investing is to study one or another cryptocurrency using fundamental analysis, then find a digital asset that is promising for growth and buy it. If the market value is below the present value, the electronic currency is undervalued, it can be bought. With the right analysis of the cryptocurrency, the amount of income, as a rule, can exceed the investment several times.
It implies the process of mining new virtual tokens. The rate of emergence of cryptocurrency depends on the power of computing equipment (processor, video card, etc.)
How to earn money from mining? Buy computer equipment and install mining software on it. Then the computer begins to solve a complex computational problem that is put before it by a network of cryptocurrencies. After successfully solving the problem, the owner of the computer is paid a financial bonus, which consists of a certain number of electronic coins of the mined digital currency.
The profitability of such investments in cryptocurrency is 50–100% per year of the amount invested.
If an investor bought a crypto, then he can open an interest-bearing cryptocurrency deposit on the exchange and receive passive income. For example, investments in cryptocurrency at interest are offered by the Binance exchange.
According to its terms, an investor can open a deposit with the possibility of returning cryptocurrency assets at any time and with a yield of 3% per annum.If the owner of a digital coin wants to make a deposit for a certain period, then the rate of return will be 6-8%.
Virtual assets will then become unavailable for withdrawal for the duration of the deposit.
An affiliate program is a way of cooperation with the exchange, in which the trading platform pays the participant in the transaction a cryptocurrency for bringing new investors to their digital currency market.
For example, the BitMex exchange pays customers up to 20% of the commission on transactions of investors they have invited. Interest is paid in bitcoins.
Decentralized Finance (DeFi) is a set of financial applications built on blockchain technology and offering various services to customers using cryptocurrencies.
You can earn money in DeFi, for example, through yield farming. The investor lends his cryptocurrency in exchange for high interest on the use of his capital. The income of the owner of a digital asset can reach hundreds of percent per year.
What Are the Safest Cryptos to Buy Right Now?
There are about 17 thousand different cryptocurrencies in the world. Investing in cryptocurrencies comes with many risks that every investor should be aware of. These include:
high level of fluctuations in market quotations; prohibition of cryptocurrencies in many states; regular hacker attacks on exchanges; the inability to cancel the erroneous transfer of virtual coins.
Approaching investments in cryptocurrency with special responsibility and taking into account all possible risks, an investor can get high profits of tens or hundreds of percent per annum.
Profitable investment in cryptocurrencies is a complex process that requires the investor to comply with the rules that will not only protect against potential losses, but also provide an opportunity to earn in the future.
Cryptocurrency investment tips for beginners: make an investment plan; establish a mechanism to limit financial losses; invest only that part of the capital that you are not afraid to lose; approach the investment process without emotions; don't trade on margin. The most important thing when investing in digital currency is to buy only those virtual assets that you personally understand. Deep market analysis from various services can be a good help for learning about cryptocurrencies, but make your investment decision based on your own judgment.
Pros and Cons of Investing in Cryptocurrency
Buying digital coins, like other financial assets, has its advantages and disadvantages.
Pros of acquiring digital currency:
High yield. The widespread use of coins. Low threshold for entry into the cryptocurrency market. Quick deposit and withdrawal of money from the exchange. Lack of state control. An opportunity for everyone to mine a digital coin.
Cons of investing in cryptocurrency:
Increased volatility of the electronic asset.
Attempts to regulate cryptocurrency transactions by government agencies.
There are no guarantees for the safety of virtual wallets.
An increase in the number of mined digital coins reduces the subsequent profitability of mining.
As you can see, there are negative sides when investing in digital currency to be wary of such investments. Despite a significant increase in the value of some cryptocurrencies and the introduction of their use in various areas of society, do not forget that the acquisition of a virtual asset is a high-risk investment.
Is it Worth Buying Cryptocurrency?
The demand for cryptocurrencies will grow. The emergence of new online services and games that accept cryptocurrency as payment makes people buy an investment tool for their portfolio.
For the investor, there remains the opportunity to profitably buy cryptocurrency, since its growth in the digital currency market has not yet been completed. An additional reason to pay attention to the virtual coin market is the geopolitical tension in the world and the rapid growth of inflation. Cryptocurrency is perceived by investors as a protective financial instrument that must be purchased in case of the threat of loss of savings from external factors.