How to Invest in Cryptocurrencies: The Definitive Guide [2021]

Investing in cryptocurrencies is one of the most popular ways online in 2021 in order to generate income, with this being as a result of the myriad of different ways that investors are able to open up profit generation opportunities, and the historically-large revenue that can be generated by investing in cryptocurrencies as well.

While there are already millions of cryptocurrency investors around the world that interact with the market every day, there are thousands of new cryptocurrency investors that are joining the market every week, and as they delve into the world of cryptocurrency investing it is important for them to get effective information on the best ways of generating profit with cryptocurrencies.

While there is already a large amount of information online about how to invest in cryptocurrencies, much of that information is outdated and every month there are new tools and new services that can be used by cryptocurrency investors in order to optimize the way that they interact with the market, with it being important to understand these opportunities before beginning investing.

With this in mind this guide takes a look at how to invest in cryptocurrencies in 2021, starting with a look of what cryptocurrencies actually are and what crypto investing is, before moving on to look at a comparison between cryptocurrency investing and crypto trading, then looking at three of the best crypto investor platforms on the market in 2021 and finishing off with a number of the most effective cryptocurrency investment strategies as well.

What are Cryptocurrencies?

Cryptocurrency Basics

Cryptocurrencies are an asset class like stocks or foreign currencies, except that for many years cryptocurrencies have been at the fringe of the internet and have been seen by many people as a way of being able to make large amounts of profit, but that also are in an industry that has significant amounts of risk as well.

Times changed over the last 10 years in the cryptocurrency market and today the levels of risk that have been posed by hackers and scammers is dramatically reduced, while the market itself has built significant amounts of infrastructure where there are multibillion-dollar trading platforms at the top of the cryptocurrency market that provide the services each day to millions of traders and investors.

Cryptocurrencies themselves are digital assets that are based on a technology known as blockchain which allows for the control of the creation and management of cryptocurrencies by algorithms instead of central banks, and this leading many to conclude that cryptocurrencies are a fair less corrupt form of financial system.
Cryptocurrency as a technology and as a new financial asset has developed a lot over the last decade and the infrastructure within the cryptocurrency industry has also come a long way from being a few relatively rudimentary trading platforms and a single form for everybody to interact.

Today there are thousands of cryptocurrency-based blogs that are active online and that provide advice for new crypto traders and investors to be able to understand how cryptocurrencies work and how to take advantage of them, as well as that being tens of thousands of developers globally working on Bitcoin based projects and solutions which is leading to 2021 becoming a year of significant innovation within the cryptocurrency market at an almost unprecedented level.

As the cryptocurrency market developed in its early years, the increase in traders and investors and the capital that they brought to the market saw the price of different cryptocurrencies increased significantly, which then led to even more new people joining the market in order to make some crypto profits, which completed the feedback loop.

This same feedback loop is still present in 2021 except that the size of the loop is thousands of times bigger than it was originally and today there are hundreds of millions of people globally that have use cryptocurrencies in one way or another, and tens of millions of people globally that are using cryptocurrencies on a daily basis either fully or partially to supplement their income.

While it is unsure exactly what will happen this year, one thing that is for sure is that the growth of the cryptocurrency market is not slowing up anytime soon and if anything seems to be increasing in the speed at which cryptocurrency spreads throughout the world with the anticipation that was in the coming 5 to 10 years cryptocurrency will essentially become the backbone of the global financial system.

Why Does Cryptocurrency Retain Its Value?

The reason that cryptocurrencies gain and retain value is because of the unique benefits that they provide users that are not found within the legacy financial system, with that being a few predominant benefits that occur when users buy, sell, and trade cryptocurrencies.

First of all, cryptocurrencies have the ability to be able to allow users to make faster transfers of value from anywhere in the world to anywhere else in the world, with it taking three days or more to make an international bank transfer often, and with many cryptocurrencies being able to do the same in less than 15 seconds.

Secondly, making payments with cryptocurrencies can be much cheaper than using banks or payment processes, with the best example of this being a large cryptocurrency exchange making a transaction of hundreds of millions of dollars of Bitcoin in 2020 for a total cost of $0.69.

Third, cryptocurrencies allow users to manage their own finances and to do so in a private way, with cryptocurrencies all being either anonymous or pseudo-anonymous, and this meaning that instead of having to use a bank or a payment processor and have their financial details stored on the server forever, users can make private transactions that are not connected to their identity directly.

All of these factors compound along with others in order to ensure that many millions of people around the world have been able to use cryptocurrency in order to dramatically improve the lives, to be able to make transactions globally to the family, friends, and business associates at faster and cheaper, to be able to self manage the financial interest without the need for a bank in a private way, and in general to get a greater amount of control over their financial situation than generations before have had while having to rely fully on the mainstream financial system.

One of the best examples of the clear benefits of cryptocurrencies is looking at two regional economic crises that have happened in the past decade, the first being the Cyprus financial crisis in 2013 and the second being Venezuela's financial demise over the past 10 years.

In both situations when the mainstream financial system collapsed in these countries it led to a huge influx of citizens taking their fiat funds and putting them into cryptocurrencies, in particular into Bitcoin, with this having a huge impact on Bitcoin's price in both cases and providing those users with a lifeline during a time of extreme financial stress.

It is predicted that if the same was to happen on a global scale in the coming years, and that the global financial industry suffered a severe crash that many people around the world would also follow suit and transfer the funds into cryptocurrencies en masse.

What is Blockchain?

The underlying technology that allows cryptocurrencies to operate is known as Bitcoin and it is truly one of the most revolutionary technologies to be created over the past 50 years, with it revolutionizing the financial industry and also being used in a wide range of other non-financial applications as well such as supply chain management and hospital inventory management.

Blockchains are a data structure that are a chain of blocks of transaction data that are time stamped and that are cryptographically hashed in order to ensure that attackers are not able to modify the data stored within a Bitcoin in order to give themselves free cryptocurrency.

Unlike the mainstream financial system, cryptocurrencies built with blockchains at the decentralized meaning that the Bitcoin allows for the creation and dispense men of new cryptocurrency without having a central group that will make that decision, but it instead being given out randomly to different minors when they are able to dedicate their computer resources to solving algorithmic puzzles.

Cryptocurrency Investing 101

What is Cryptocurrency Investing?

Cryptocurrency investing is the process of creating trades that are long-term and that have the goal of generating profit from the progressive increase in the price of a cryptocurrency over a relatively sustained period of time, with the way that it cryptocurrency investors will decide on which assets to buy being based on fundamental analysis.

Cryptocurrency investors will look at a range of different factors such as the strength of a project, the team behind a project, the tokenomics of the native cryptocurrency of a project, and the state of the cryptocurrency market in general before deciding on which assets of the best to invest into.

Cryptocurrency investors will typically leave their investments in place for a minimum of weeks and a maximum of years, and over this period of time will aim to see the price of the asset increase while not paying attention to the fluctuations in between the buy and sell point.

The Pros of Cryptocurrency Investing

Cryptocurrency investing is one of the best ways of generating an income online being that historically the price of cryptocurrencies have risen continuously over the past 10 years, and that this rise has been substantial in comparison to other assets, with the price of Bitcoin increasing by more than 30,000,000% over the past 10 years as an example.

Cryptocurrency investment is also something that can be done with a relatively low amount of time needing to be dedicated to it and a relatively low amount of stress as well considering that the aim is not to make losses but to cumulatively make gains over a long period of time, therefore crypto investing is perfect for setting and forgetting as a strategy.

Cryptocurrency investors can often generate significantly higher amounts of income from their activities in the market then they are able to from a 9-to-5 job, and this has led to the exponential growth of the cryptocurrency market over the past 10 years as a result of this.

Cryptocurrency investing is a relatively easy way to be able to take part in the global financial system and to open up new avenues for the generation of revenue, shedding the need for an employer employee situation in order to be able to pay bills, and potentially for many people opening up new sources of wealth that they would not have had access to without the cryptocurrency market.

While many people have seen success in the crypto space, there have also been a lot of people that have lost significant amounts of money and therefore one of the most important considerations before cryptocurrency investing is to ensure that you understand what cryptocurrencies are, how they work, and how investing and trading are done in a way that maximizes the potential for the generation of profit and minimizes the potential for the generation of loss.

This comes down to experience for a large part with it often taking months or years for traders and investors to be able to develop the experience and knowledge of cryptocurrency in order to be able to reliably generate profit, however once this point has been reached it is often a freeing situation for people who can then work in the cryptocurrency space without the need for a 9-to-5 job and have a better level of financial freedom.

The Cons of Cryptocurrency Investing

While there are many pluses to investing in cryptocurrencies, there are also a number of drawbacks and risks that should also be considered before any money is deposited and before any cryptocurrencies are invested into.

The first risk of cryptocurrency investing is the risk of scans and hacks which are ever-present in the cryptocurrency space, and particularly by leaving cryptocurrencies on exchanges for long periods of time the risk of having fun stolen increases, therefore it is important to only use trusted and respected cryptocurrency trading platforms.

Another risk of cryptocurrency investing is the risk of investing into cryptocurrency which actually loses value over time, with this being a common event following the creation of large numbers of new cryptocurrencies in 2017 and many of these cryptocurrencies turning out to be essentially vaporware where the value of the asset drops to nothing over time.

Cryptocurrency Investing vs. Cryptocurrency Trading

What are the Similarities of Crypto Trading and Investing?

There are a number of similarities between the cryptocurrency trading and cryptocurrency investing although both are distinct activities with their own advantages and drawbacks, however the main thing that is the same about investing and trading is that the aim in both cases is to create trades in the cryptocurrency market with the aim of those trades generating profit.

Both traders and investors will also use cryptocurrency trading platforms in order to be able to execute the strategies, and the kinds of assets that will be traded and invested in are also the same in both situations as well, with their being ideal cryptocurrencies for both trading and investing.

As well as this, traders and investors in the crypto space also experienced the same kinds of risk from scammers and hackers, and need to have the same kind of underlying knowledge and Bitcoin and crypto technologies in order to understand what it is that they are dealing with.

What are the Differences of Crypto Trading and Investing?

While there are many similarities between cryptocurrency trading and investing that are also many differences as well that are important to understand, with the first of these being the duration of trades in both cases can typically be dramatically different.

Cryptocurrency traders will often create trades that last anywhere as long as a few days or anywhere as short as milliseconds, with cryptocurrency investors creating trades that may last for a week or anywhere up to a few years, and the goal of investing typically being to create one or two long-term trades while traders may create multiple trades at once or many trades back to back in the strategies.

Also as well, another major difference is that while cryptocurrency investors will use fundamental analysis to look at the inherent value of different cryptocurrencies, cryptocurrency traders will often use technical analysis which is a way of looking at the historic movements and price and trade volume for an asset in order to try to predict the future movements of the asset and the market as well.

Which is Best - Trading or Investing?

The answer to the question of whether trading or investing in cryptocurrencies is best will come down to the unique circumstances of the individual that is considering this, with trading suiting many people and investing soothing many different people.

Primarily, if someone has a relatively short amount of time that they're able to dedicate to making money with cryptocurrencies then typically investing is a better way to go as many cryptocurrency investors are able to set and forget their investments, creating a long-term investment and then periodically checking it for his progress.

Conversely to this, cryptocurrency traders often have to dedicate large amounts of time to their trading activities, and for anyone that doesn't have a large amount of time available this will not be a possibility.

Another way of assessing whether trading or investing is best is to look at whether the person prefers to look at charts and understand patterns that form within them, or whether they would prefer to research the real world factors relating to each cryptocurrency project, with the former being more suitable for cryptocurrency traders and the latter being more suitable for cryptocurrency investors.

What are the Best Crypto Investment Platforms?

PrimeXBT

PrimeXBT is one of the world's leading cryptocurrency investor platforms and is the world's largest multi-asset margin trading platform, providing a wide and diverse range of different assets to invest into from cryptocurrencies such as BTC, ETH, LTC, and EOS to traditional assets such as stock indices like S&P500 and FTSE100, forex pairs like USD/EUR and AUD/CAD, and commodities like gold and oil.

PrimeXBT provides an intuitive user interface that is easy to get the hang of and for new users to be able to navigate, whilst also providing a bevy of different trading tools and investment tools that can be used in order to research different opportunities and to invest into them effectively.

Also, PrimeXBT charges the lowest fees of any major crypto trading platform in the market with a low flat rate of just 0.05%, with this counting the cost of being able to invest in cryptocurrencies dramatically.

Also, PrimeXBT is a secure and safe trading platform that has been in the market for many years without being hacked and that implements a range of bank-grade security features such as hardware security modules with rating of FIPS PUB 140-2 Level 3 or higher and cold storage of digital assets with multi-signature technology.

Kraken

Kraken is another security conscious trading platform that has been in the cryptocurrency space for many years and has built a root reputation for being able to provide a secure environment to be able to invest in cryptocurrencies.

Kraken also provides a wide range of different assets and its interface is also easy to navigate and a good place for new users and experienced users alike to be able to invest in cryptocurrencies.

Kraken has had some issues with its trading engine with this leading to glitches where traders have been locked out of their accounts midway through trading, and therefore it is important to research this platform fully before depositing assets.

Binance

Binance is a well-known crypto trading platform that has built a reputation for providing professional tools and that has used its native cryptocurrency, the BNB coin, in order to effectively grow and market itself.

Cryptocurrency investors that are considering using finance however should consider that the platform was hacked less than two years ago for more than $50 million, and therefore leaving large amounts of assets on this platform is not recommended considering the risks that are involved.

However, for cryptocurrency investors Binance does provides a wide range of different assets to invest into and is considered to be one of the better platforms from the point of view of the variety of investment opportunities.

Cryptocurrency Investment Strategies for 2021

Long-Term Buying and HODLing

One of the most basic yet most commonly used strategies for crypto investing is buying and HODLing, or buying cryptocurrencies and holding them long-term without taking any notice of the fluctuations in price.

The reason for the popularity of the strategy is the tendency for cryptocurrencies to increase in value reliably over a long enough period of time, and therefore by buying and holding them for a long enough period the generation of profit is eventually almost guaranteed.

While this is a simple and easy to execute strategy, it does leave a lot of profit on the table and there are better strategies that can be used in order to generate maximum profit in the cryptocurrency market.

Crypto Algo Investing

Another strategy that is popular in the cryptocurrency space is the use of bots and algorithms in order to be able to trade, however a lesson on variation of this is crypto algo investing, which is using algorithms in order to select investment opportunities.

This allows investors to be able to take a hands-free approach and let autonomous algorithms with many hedge funds and institutional investors using this strategy.

However, although it is institutional investors that use this strategy the most, it is still available to retail investors as well that have the resources to be able to create algorithmically-driven strategies.

Crypto Fundamental Investing

One of the best ways in order to find the right cryptocurrencies to invest into at any point in time is the use of fundamental analysis in order to break down the inherent value and likely growth of each cryptocurrency project.

This may take into account things such as the leadership and team behind a cryptocurrency, the potential impact that the cryptocurrency and the project can have on the world, the number of sectors and size of the sectors that relate to the cryptocurrency, and the historic performance of the cryptocurrency from a point of view of utility generation and delivery to users.

Fundamental analysis is something which can be learned throughout the internet with a large amount of information about this topic, and while it originally was applied to stocks and from currencies in the fish market today's fundamental analysis is commonly used for cryptocurrencies as well.

Final Thoughts: How to Invest in Cryptocurrencies

Investing in cryptocurrencies is easily one of the most rewarding ways of generating an income online, however it takes a significant amount of time to be able to learn to effectively invest in cryptocurrencies with that being many nuances compared to investing in other asset classes.

There are a number of powerful trading platforms in the cryptocurrency space that allow cryptocurrency investors to have direct access to the market and to use the tools present on these platforms in order to analyze different opportunities and to select which cryptocurrencies to invest into in order to maximize profit and reduce risk.

If you would like to learn more about the three platforms we have recommended in this guide, check out PrimeXBT, Kraken, and Binance.