Citizens’ interest in digital assets is growing worldwide. According to the Central Bank of Russia, in 2023, Russians invested RUB 4.78 trillion in cryptocurrency. In the first half of 2024, the number of investors increased by another 20% and reached 3.02 million people – about 3.6% of all Internet users in the country. The digital market attracts high returns, but, as in traditional finance, requires a balanced approach. This article will tell you how to invest in cryptocurrencies for beginners. Instructions and recommendations of experts will help to avoid many mistakes that can lead to the loss of funds.
Features of investments in cryptocurrencies
Unlike fiat money, digital coins have no physical expression. In fact, it is a record in a decentralized database – blockchain. When buying or selling cryptocurrency, the transaction is fixed in the network, it cannot be canceled or disputed.
Digital assets are issued by companies and individual developers.
Prices are determined by supply and demand. Compared to the traditional market, the cryptocurrency market is dominated by private investors, so the emotional component has a great impact on asset prices. The reason for a fall or rapid growth can be anything from the decline in unemployment in the United States to the publication of a new post of Ilon Musk.
Yield
In July 2024, the monitor tracks the market performance of 15,016 digital currencies. The market trend is set by bitcoin. In the long term, the price of the main cryptocurrency is constantly rising. It is followed by the major coins, so it is worth including them in the basic investment portfolio.
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In the table, you can track the semi-annual returns of the top-11 cryptocurrencies by capitalization. The data is as of July 25, 2024.
As you can see from the table, asset prices are growing unevenly and are not always correlated with each other. To properly invest money in cryptocurrencies, you need to diversify your portfolio with other promising altcoins.
The cryptocurrency market is highly volatile. On short distances, earnings can be higher. However, investors need to correctly calculate the entry and closing points of a position.
Risks
Profit from investments in digital currencies often exceeds the profitability of traditional financial instruments. However, there are also more risks. The main ones include:
- High volatility. Coin prices can change by tens and hundreds of percent in a short period.
- Speculativeness. Asset rates are tied to demand, so large purchases or sales can move the market in one direction or another.
- Hacking attacks. Attackers are constantly hacking into crypto exchanges and stealing users’ funds.
Methods
The cryptocurrency market offers many opportunities to make money. The main ways to invest:
- HODL – buying coins and holding them for a long time. It is recommended to invest in several assets to diversify risks.
- Investing in early-stage projects. Such transactions can bring profits in the tens of thousands of percent. But the risks here are also higher.
- Stacking. To support blockchain networks, users block their coins in wallets and receive interest income for this.
- Mining. You can invest in buying equipment and independently mine coins. This is a classic way of investing in the crypto market.
- Trading – buying and selling coins on crypto exchanges. Profits are formed from short-term changes in rates.
How to start investing in cryptocurrencies in 2024
Long-term investments in digital assets are considered the simplest and safest. Coins can be bought on exchanges and transferred to a cryptocurrency wallet. Instructions for a quick start of investments in cryptocurrencies:
- Create a wallet. For long-term storage, it is recommended to use a desktop or hardware wallet.
- Choose a trading platform.
- Create an account, go through verification.
- Make a deposit.
- In the trading terminal, place an order to buy coins.
- After the execution of the order, go to the exchange wallet.
- Transfer cryptocurrency to a personal account.
Choice of coins
Beginners are better to consider for investment assets from the top 20 by capitalization. They have proven themselves in the market, so the risks of investment are minimal. Long-term such assets will grow. A conservative portfolio should include:
- Bitcoin.
- Ethereum.
- Solana.
- Binance Coin and other coins.
Investment timeframe
Investments in digital currencies give different returns depending on the period chosen. For example, speculative trading brings 1-10% per transaction.
In a day, you can conduct several such operations and earn 50-100% to the deposit.
In staking, the rates are 2-30% per year. Simply holding a crypto asset for the same period in a rising market can bring 100% profit and more. For example, bitcoin has appreciated 156% over 2023.
What are the difficulties faced by novice investors
Frequent problems of beginners when entering the crypto market:
- Lack of startup capital. You can start earning with a small deposit. Many exchanges open transactions from $1.
- Fear of losing money. Any investment is risky. To minimize the risks, you need to take a conscious approach to investments.
- Lack of experience. To invest in cryptocurrencies, you need to study the market. The first profit will bring knowledge, experience will come with time.
Advantages and disadvantages of investing in cryptocurrencies
The digital market offers many opportunities for earning. But beginners most often buy coins to profit from the growth of the price. The pros and cons of investing in cryptocurrencies can be compared in the table.
| High income. Coin rates change quickly. Within a month, the price can grow by tens and hundreds of percent. | High volatility. The price can fall sharply under the influence of many factors. |
| In the long-term trend, coin prices rise. | Security risks. If hackers break into an exchange or wallet, users will lose assets. |
| Crypto coins are more liquid than traditional assets. In many countries, they are used for settlements. | Lack of full-fledged regulation. The current law in the Russian Federation does not cover all areas. However, the government is working on supplementing the document. |
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Author: Saifedean Ammous, an expert in cryptocurrency economics.
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