For the past ten years, thousands of cryptocurrencies have entered the market. While some have earned quite a reputation, not every project makes it. This is because not all cryptocurrencies are the same; they all differ in the kind of technology, features and characteristics offered to investors.
But hey! If you have already picked a digital asset to add to your portfolio, you just need to find the best way to do that.
While there are many ways to potentially profit from cryptocurrency, including mining, crypto marketing, hodling, and purchasing stocks from a crypto company, in this article, we present four popular methods to invest in crypto.
An exchange-traded fund (ETF) is like a mutual fund, or a company that pools money from investors and invests it in different assets. Unlike mutual funds, though, ETFs are more flexible.
Investing in a cryptocurrency ETF would often involve future contracts. In a future contract, your fund manager will buy an asset at a price that’s predetermined to a future date.
Note that if you choose to explore crypto ETFs, this type of investing does not mean you own any cryptocurrency. Usually, the money earned will be used to reinvest, gradually increasing your initial investment.
Crypto Index Funds
Crypto index funds are another way to invest in a group of digital assets. Index funds usually are based on benchmark indexes.
Note that, unlike ETFs that can be traded at any time of the trading day, index funds can be traded at a price set at the end of the day. Thus, for day traders, ETFs may be more suitable.
Again, using crypto index funds does not grant you ownership of any cryptocurrencies. If you want to own cryptos, then you should buy via an exchange – you can even hodl a crypto until its price increases enough to help you eventually sell and profit.
The third type of crypto investment is buying a cryptocurrency. This is the process in which you purchase a token and store it safely. You have to first select a crypto exchange of your choice or a broker to do that on your behalf.
Do not forget that a broker and an exchange are two different things and that you should be aware of their differences. A cryptocurrency exchange is a platform or a marketplace used to trade cryptocurrencies. Nowadays, there are also decentralised exchanges. One advantage of using an exchange for buying a digital coin is that some charge very low fees.
On the other hand, a cryptocurrency broker will be an intermediary between a marketplace and you, which can spare the hassle of dealing with crypto on your own.
If you prefer to avoid the hassle of buying and selling cryptocurrencies and then storing them, then choosing an online platform might be the most suitable option for you.
So if you’re looking to invest in crypto, there are many online platforms, such as Bitcoin Profit or eToro that can help you connect with a broker.
As said above, the broker will execute trades on your behalf and provide different tools to help you get started, establish the best risk management strategies and find a way to tolerate the volatile market emotionally and financially.
The cryptocurrency market is more than exciting, and nowadays, even individual traders can choose from different ways to invest in crypto based on their trading goals.
Just remember that while lucrative, the cryptocurrency investment sector is highly risky. Always do your research before getting started!