Should you start investing in cryptocurrencies and how much to put in? If that question has made you curious then this article is exactly what you’re looking for.
First of all, before investing in anything whether it’s stocks, rental property or cryptocurrencies it is absolutely essential to have good knowledge in the field you’re investing in. This has been repeated over and over again by many investor heavyweights like Warren Buffett, Charlie Munger, Peter Lynch and Donald Trump.
What happens when you invest in a field which you don’t truly understand is you become a part of the mass that follows the rest of the market, and being part of that mass means that it is highly possible for you to become a victim in the case of crash.
So you want to be the one that can analyze whether the thing you’re invested in is overvalued and can get out before it’s too late or undervalued so you can get in at the right time for max returns. The other mistake people make though is that many are so afraid to do something with their money in terms of investing that they just procrastinate for so long that in the end they just forget about the opportunity and leave all the money on the table for others to come.
If you want to start investing in something but don’t have enough knowledge about it then one way to do it is to start investing small portions of your money that you can afford to lose and in the meantime fill up your brain with as much information as possible about the industry or field that you’re investing in.
Definitely don’t put your life savings at the beginning, throw in a couple of hundred bucks, two hundred, five maybe thousand dollars if you can afford it. By using online wallets which would be okay for these amounts of money, it is actually very simple to do so. Your benefit from this won’t be as much from the profits you made than from being actively involved in the market which means that you have so much more interest to follow every single swing in the market. You will clearly remember how much the market has gone up or down because you know how much money you can earn. From the date you started investing it will be much more easier for you to remember facts and dates that have impacted the market, and for beginners’ that’s the most important part here.
Another reason why you should invest only a part of your savings apart from not being an expert in the cryptocurrency market is that it’s very volatile. There have been 25% downswings for Bitcoin in a period of a couple of days in 2017. Of course no one promises us that there can be even harder downswings. Cryptocurrencies is an investment with a potential of very high returns, and typically all investments with the potential of high returns are more risky than the traditional investments like stock market or rental property. You may invest 5%, 10%, 20% or maybe even 50% of your money if you are really an expert in cryptocurrencies and have a true faith in that the price of cryptocurrencies in the long term is going only upwards.
But in what cryptocurrency should you invest? Today there’s undoubtedly a big hype around cryptocurrencies but especially around Bitcoin. Whether for a reason or not but when talking cryptocurrencies Bitcoin usually takes the most attention in general public. Some reasons for that include that Bitcoin is the first cryptocurrency ever and the first one to utilize blockchain technology. Bitcoins are also limited. Their maximum supply is of 21 million unlike some altcoins like Etherium, Etherium Classic, Monero and Nem. Also there has been established a very big and powerful mining Network for Bitcoin all around the world. No altcoin has so much mining power.
But there are some downsides for Bitcoin as well as blockchain is so overloaded with pending transactions for the past month that the average transaction cost is about $5 worth of Bitcoin with an average waiting time around one hour. On the other part altcoins like Etherium and Litecoin have average transaction costs about 10 to 30 cents and the time it takes for their transactions to complete are also shorter. For Etherium it’s only about five minutes and for Litecoin 15 to 20 minutes.
So it makes no sense for someone new to cryptocurrencies to buy Bitcoins to transact let’s say hundred dollars because of the high transaction fee. Instead transactions with Etherium and Litecoin look more attractive.