The options for investing in cryptocurrency have seen significant growth over the past few years, causing many to wonder whether now is the right time to begin their decentralized finance (DeFi) endeavor.
Since crypto investments come in so many different forms, we at Vauld have broken down the benefits, risks, and expert investment tips to help you on your wealth-building journey. Let’s take a look.
Investing In Cryptocurrency
In the same way that traditional fiat currency offers a variety of methods for investing your money — such as stocks, bonds, and mutual funds — the world of crypto offers a range of investment options as well.
Each investment opportunity involves its own unique level of risk and reward. Some, like staking, require a bit more knowledge of decentralized finance than others. Crypto mining even requires additional equipment to invest properly.
But, in its simplest form, crypto holders can invest in crypto by buying tokens and depositing them with a crypto exchange. Once the assets are deposited, you can trade them, earn a fixed deposit rate, or earn a savings rate on the deposit, just to name a few possibilities.
There is an investment opportunity for the newest crypto enthusiast to the most knowledgeable Certified Crypto Expert.
Benefits Of Investing In Cryptocurrency
The advantages of investing in crypto are part of a new and continuously evolving industry. This allows you to take part in benefits that surpass anything available in traditional finance. Below, we’ll outline some of those advantages.
Growth Opportunities
The potential for DeFi to become the financial means of the future grows rapidly every day. A recent report indicated that the market size of crypto is expected to reach $2.2 billion by 2026.
With this regular growth comes chances for current users to benefit from an overall increase in crypto’s value as more people begin investing this way.
Take Bitcoin, for example. This token’s first value increase was in 2011 when BTC briefly rose over 10,000% from $0.30 to $32. At the time of this writing, one BTC is worth $48,144. The possibility for any number of tokens to see rapid growth increases daily.
Decentralized Market
The decentralized finance market allows you to coordinate trades directly with another individual rather than go through an intermediary. Decentralization uses technology to remove power from government and banks and put more control into the hands of the user.
Along with greater control, the trades made through this market cannot be changed or compromised by bad actors. The blockchain’s immutable ledger and open-source software ensure users that their data is secure.
Accessibility
Unlike with the U.S. stock market, crypto transactions can be completed at any time on any day. This 24/7 accessibility makes it easy to keep up with both short- and long-term goals.
If you notice the value of your DAI assets has increased significantly at 2:30 in the morning, you don’t have to wait six hours to trade. Here at Vauld, you can withdraw any amount with no hidden fees at any time while interest is earned.
Risks Of Investing In Cryptocurrency
While there are many advantages that come with crypto investments, they can also be risky.
Market Volatility
The rapid fluctuation of crypto that caused Bitcoin to become the gold standard of value increase can just as well happen inversely. Put simply, because the market is volatile, crashes in value are also possible.
Cyber Attacks
DeFi assets are also at a greater risk of cyberthreats. In recent years, bad actors have targeted crypto exchanges since they act as a middleman for many crypto transactions.
It does not help that some platforms trade strengthened security for higher profits. Selecting a quality exchange will ensure that all of your investments are safe, even when a breach occurs.
Users trust Vauld to protect their assets thanks to the coverage we provide our customers by moving funds from the investor’s wallet to a centralized lending pool that’s insured for $100 million in BitGo. That way, if a major breach does take place, stolen funds can still be recovered.
8 Expert Tips For Investing In Cryptocurrency
Investing in cryptocurrency is not something you should wake up one morning and decide to do. It requires research, strategizing, and a list of considerations to successfully make the most of these investments.
Here are eight expert tips to consider when investing in cryptocurrency.
1) Research
Before starting with any investment type, it is important to understand exactly what the options are and which ones make the most sense. Media coverage surrounding crypto often portrays it in a mystified light, but navigating the industry can be done through a bit of research.
The crypto exchange that you partner with will also make a noticeable impact on your investments. Different exchanges will offer a wider range of features, more available crypto to choose from, and heightened security to protect your assets.
2) Strategize
Depending on how you choose to invest in crypto, you may take a very different strategic approach than someone else. Two people who decide to trade crypto may look at short-term trading and HODLing — two opposite techniques — as equally viable options.
When developing an investment strategy based on your research and financial goals, always consider individual risk factors. A basic rule-of-thumb strategy is to only invest what you can afford to lose.
3) Diversify Your Assets
One way to avoid the negative effects of market volatility on crypto investments is to diversify your assets by using several investment strategies or by diversifying tokens. This is another reason why choosing the right crypto exchange makes a big difference.
At Vauld, for example, we offer an extensive list of crypto along with each token’s respective rates for lending and borrowing. The more variety of tokens you can choose from, the more you can diversify your portfolio.
Diversification helps you:
- Achieve long-term investment goals
- Minimize risk of overall portfolio loss
- Maximize return opportunities
- Protect savings
4) Set Long-Term Goals
The earlier you invest, the longer your money has time to grow. In fact, setting long-term goals has been proven to help investors accumulate a greater amount of money over a longer period of time.
These goals act as a target and extend beyond determining what you would like the worth of your crypto assets to be. Crypto investments can be used to achieve goals such as paying off student loans, buying a house, or retiring. Keep these things in mind when you invest.
5) Make Those Goals Realistic
Despite how crypto is often portrayed, it is not a get-rich-quick scheme. Crypto investments, just like any other investment, must be calculated as a single part of your entire portfolio, and making thousands of dollars overnight probably won’t be the case.
Set realistic goals and manage your expectations for when you see fluctuations in crypto value. Allow for flexibility, keep contributions consistent, and take pride in the little successes as well.
6) Avoid Emotion-Based Trading
Monitoring investments is a fine line to walk. While it’s important to stay up to date, regular check-ins can sometimes reveal less-than-ideal returns. In these instances, emotions can run high, which causes investors to exit their position.
To better handle the stress of the ups and downs in the market without making abrupt decisions, here are a few tips:
- Be patient and stick with your goals
- Prepare for some losses
- Avoid market chart obsessions
- Diversify, diversify, diversify
7) Invest Automatically
Even with years of research, selecting, monitoring, and trading crypto exactly when the time is right is both complicated and tedious. Features such as automated trading allow you to make the most of your trades without any hassle.
Our Automatic Investment Plans (AIPs) at Vauld allow you to select a basket of crypto assets or customize your own, then set parameters such as which intervals to buy at or when to use our “buy the dip” function.
Using algorithmic technology, AIPs know the best times to buy and sell crypto so you can still get the best prices without having to dedicate so much time to the process.
8) Manage Risk
When it comes to managing risk when investing in cryptocurrency, there is no single right way to do so. Each tip on this list is a form of risk management in one way or another. What matters most is that you’re accounting for risk in whatever way makes sense to you.
Short-term risk management might entail setting strict rules for when to sell, such as when an investment falls 10%. Accounting for the long term could mean having the right amount of diversification.
Every investor is going to have a unique approach to high- or low-risk strategies.
Maximize Your Investments
The route you decide to take as an investor should be based on research, your tolerance for risk, and your own financial goals. While the tips we’ve outlined will apply to anyone investing in cryptocurrency, they’re simply guidelines to help you find your own approach to the crypto world.
To make the most of your investment strategy, choose Vauld. We offer features for every owner, lender, borrower, trader, and spender. Through our strong core values, you can be sure you are receiving quality customer service, regular updates, and an arsenal of security features.
Start investing today, and sign up with Vauld for the best experience.
