Cryptocurrencies help you to exchange goods and services not just in your locale but globally. The concept of decentralization is giving rise to many opportunities. Investors and ever spectators are willing to invest in crypto for better returns in the coming future.
Crypto is a new concept for everyone, as it has been around just since 2007. Times indeed decide what happens to every newborn industry. In such a short period, cryptocurrency went from nothing to the total market cap of $2.10 trillion.
Investing is a way old technique to keep your money safe by also getting returns simultaneously. Crypto investing is undoubtedly newer than other financial markets. If you are looking to invest in crypto for maximum profit, an article can help you do it right.
What is a cryptocurrency?
It is a decentralized digital or virtual currency based on blockchain. Like any other currency in the world, crypto is a medium of exchange. Crypto takes the form of a token or coin, and its holders can use this to trade goods or services by exchanging real currency. Crypto uses an online ledger, and the transactions are secured with strong cryptography.
People are familiar with names like Bitcoin and Ethereum, but only a few know how it works. The value of every crypto coin varies based on demand and other factors like mining and availability.
There are approximately 5900 altcoins with a total market cap of $2.10T.
How to invest in crypto to make a maximum profit?
Let’s understand, making money from crypto is not as easy as you think. The number of investors increases daily, and it doesn’t mean that everyone invested is making profits. A single error can cost a considerable loss, and this happens when strategies do not back up your investment.
Investing in any form is an art, and you get better at it when you learn and practice it. To invest in crypto, it’s always better to understand how the market works and consult experts if needed.
Few strategies can help in maximizing profit in crypto.
Eliminate emotions of greed and desire
Firstly, you must always set realistic expectations when aiming for profits from crypto. The results are uncertain in crypto, as its price depends on external factors and participating communities. It’s always better to take calculated risks in terms of crypto investment.
Diversify your investments
The declining traditional economy is helping in increasing the value of crypto. The crypto market inversely correlates with the fiat economy. Fiat money is nothing but government-issued currency like the dollar, euro, etc. The fiat economy is trying to make a comeback slowly, and the government has plans to revamp the economy.
Once the fiat economy stabilizes, people will move their money into stocks, and it might hit the crypto market. Hence, it’s better to diversify investments into crypto and fiat to make a profit from either.
Buy and hold on to your coins
The crypto market is more volatile. The environment is made up of supply and demand. Significant people tend to buy the coin when there is demand and sell when the value goes down. Only a few get benefited when they play with short volatility. Playing in short volatility might result in buying coins at a high price and selling at low.
However, holding a coin for the long term can provide safety to investors as they don’t get exposed to short-term volatility. At times, there are chances that the crypto coin value might go too low, and one might end up in loss. The best practice is to start analyzing the market before making any decision while holding a coin for the long term.
In the above chart, you can see the price of BTC came near $30k, and in just such a short period, it went to the $50k mark. If you had invested and even held it for just a month, you would have seen a good return on your investment.
Arbitraging
This trading style is nothing but buying at a low price and selling at a high price. The price of a crypto coin can go up or low anytime. Most successful traders follow this trading method to make maximum profit, which minimizes the risk of loss.
Pros and cons of cryptocurrency
There are some amazing benefits and reasons to dive into the cryptocurrency space, but at the same time, as we all know, everything has some cons, and so do cryptos. It is always better to know the pros and cons of cryptocurrencies before investing in them.
| Pros of crypto | Cons of crypto |
| The transaction fee is very negligible Unlike other traditional transaction methods, crypto transactions often have no transaction fee. The transactions are facilitated through blockchain, and there is no intermediary or central authority. | No recovery once lost We must take care when we transfer crypto coins to some other wallet, cross verify the address before initiating the transaction. Once sent, you can trace it but won’t be able to recover it. |
| The transaction speed is high As we know, when you make transactions/payments using a credit card or debit card, it takes about two-three days to reflect in the ledger, but crypto transactions are real-time, and it happens in less than five to ten minutes. | Crypto is subjected to market fluctuations Yes, the crypto values are influenced and subjected to market fluctuations. The value fluctuates for various reasons, including media speculation, availability, and media coverage. |
| It has the potential to give high returns Buying and holding crypto for the long term has more probability of giving high returns. At times, short volatility can fetch good returns. | High volatility may result in loss The price volatility is the most considerable risk of cryptocurrency as it makes values unpredictable. High volatility leads one to buy crypto at high value and less at low value resulting in a loss. The best practice is to hold crypto for the long term to avoid losses during uncertain volatility. |
| It is decentralized The crypto transactions are decentralized and transparent. No one has the authority to demand, charge or freeze your coins. The best part is it is safe, immutable, irreversible, and the wallets are protected with 2-layer authentication. | It has limited acceptance The number of places where one can exchange crypto to buy goods and services is very much limited. This is due to regulations issues and price volatility. |
| It is unregulated and unbacked up The crypto market is a construct of private sectors. It is not official and regulated by the government, leading criminals to scam unwary investors. Cryptocurrencies are also a part of illegal activities. Now the government and central banks are keen to get involved in it. |
Final thoughts
Cryptocurrency is now a hot topic in the financial system. There has been a steady growth as millions of people get involved in this platform every day worldwide. As of 2021, there are about 5000 crypto coins in the world. The goal of the crypto community is to replace banks and other centralized financial intermediaries. Blockchain integration helps in safe and faster transactions.
By looking into the current crowd weightage, it seems In the far future, decentralized cryptocurrencies may replace government-backed fiat coins and may be used as the primary means of conducting financial transactions.
One must do the required research about the crypto coins and consult the experts before investing to avoid or minimize losses. As users, it is vital to understand how this currency is growing and your country is pro or against it. Last but not least, the crypto market is very volatile, risky, competitive, and you must play safe.