People, because of their deep conviction in the success of virtual currencies or to try this new type of investment, can diversify their assets by investing in cryptocurrencies.
Previously an ultra-niche market reserved for the majority of geeks among geeks, access to cryptocurrencies has been widely democratized thanks to the emergence of online brokers and web platforms that allow the purchase of Bitcoin and other cryptocurrencies to build your portfolio. Be careful though, it is not because access to token investment is now relatively easy that it is less risky.
Discover in this article several mistakes made too often by newbies and the right attitude to adopt when you want to start trading virtual currencies.
Neglecting the technology on which cryptocurrency is based
First, you should never invest in cryptocurrencies if you don't understand what they are. In fact, it's better not to invest in cryptocurrencies if you don't understand what they're for and, above all, how they work.
The purpose of virtual currencies, like any currency, is to be used to buy products and services. And the enthusiasm around these new means of payment is very real. However, speculation, very present in the cryptocurrency market, is also a reason for many investors to invest.
The truth is that virtual currencies are still looking for their balance, between means of payment and financial assets. We've seen the possible uses of cryptocurrencies, now see how these tokens work. Most virtual currencies are based on blockchain technology.
The initial goal is to create a currency not controlled by central banks. Tokens are put into circulation by the computer protocol that defines both the number of tokens in circulation and their speed of circulation and their storage capacity. This protocol can be modified by any developer, as long as it has the agreement of the entire community.
They allow dematerialized financial transactions to be carried out quickly, easily and therefore cheaply; but also securely and anonymously, without a trusted third party. As such, they may represent the future of payment methods.
Investing in a single virtual currency
Diversification is a golden rule of investing and cryptocurrencies are no exception. You don't put all your eggs in one basket. So if you are convinced of the arrival of cryptocurrencies, it is better not to settle for investing in just one, but to spread the risk, buying different tokens.
It may be convenient to vary the characteristics of the assets held in the portfolio and opt, for example, for currencies with a restricted supply, that is, the quantity is limited and defined from the beginning such as Bitcoin (21 million units in 2140), with currencies backing them, an inflationary model such as Ethereum, for which no limit has been set on its money supply.
Be careful, it is better to choose relatively well-known and recognized currencies to avoid serious disappointments. Therefore, preference should be given to cryptocurrencies with a relatively high market capitalization.
Bet a lot of money on cryptocurrencies
Hypervolatile, hyper-risky, investing in cryptocurrencies is not recommended for the most cautious and risk-averse profiles, and others would also do well to dedicate only a very small part of their assets to it.
Virtual currencies fall into the investment category of atypical investments or alternative investments, sometimes also called exotic investments.
These atypical investments refer to investments in art, books, wine, wood, collectibles, virtual currencies, etc. These are diversification investments, relatively risky and, as such, should never represent more than 5% of your assets.
Invest in cryptocurrencies with your eyes closed and with confidence
As we have seen, virtual currencies are risky assets. But also be aware that there are many scams in this field. Thus, you can find on the web, fake cryptocurrency trading platforms or virtual currency wallets that offer to buy or exchange various cryptocurrencies but that, in reality, take your money and never return it to you.
It can be tempting in this context to want to be accompanied by an atypical investment specialist. Please note that only professionals can offer you their services to buy and sell virtual currencies: digital asset service providers and brokers offering derivative products based on cryptocurrencies.
Digital asset service providers (DSPs) are financial intermediaries that offer various services related to investing in cryptoassets, including the purchase/sale and custody of cryptoassets.
You can also invest in cryptocurrencies by positioning yourself in derivative products whose underlying is a virtual currency. Therefore, you can buy cryptoassets through an online broker that offers this type of derivatives. Be careful, before investing, check that the service provider is approved and really safe.
