How to invest in cryptocurrency in 2020

Cryptocurrencies appeal to users due to high volatility. In 2017, there was a real crypto boom. In less than a year, Bitcoin has grown by almost 2000% from $969 to $20,000 for 1 BTC. But after the hype, the cryptocurrency continues its price correction, and for more than 2 years it has not been able to restore its maximums. However, this does not stop investors, and their number continues to grow steadily. So far, they see the investment potential of digital assets and consider them a valuable virtual resource.

In fact, cryptocurrency is compared to precious metals, and crypto enthusiasts call Bitcoin “digital gold”. Digital Bitcoin and physical gold have a lot in common: the volume of both assets is limited and are not tied to any political and economic factors. Of course, this is not quite true, they are just less affected by the economy than stocks or national currencies. Let’s look at whether it is profitable to invest in cryptocurrencies in 2020, as well as where to buy and sell Bitcoins for dollars or euros.

Why it is profitable to invest in cryptocurrencies

Before you understand why it is worth it to invest in cryptocurrencies, you have understand what properties make them such valuable assets. Let’s list the key properties of cryptocurrencies that can contribute to the growth of digital assets rates.

Limited issue

The number of Bitcoins and many other cryptocurrencies is limited by the software code. Bitcoins are created by mining based on the Proof-of-Work algorithm. Miners mine new coins using their computing power, receiving a reward in the form of said coins. In this aspect, Bitcoin is also similar to gold. Cryptocurrencies require users to spend huge resources on mining, which makes the asset quite valuable and rare. The only difference is that electric resources are used for mining BTC. Just look at the dynamics of the price of gold and compare it with the quotes of securities and currencies to notice a significant difference.

But there are other, no less significant difference between Bitcoin and gold: it is not completely known how much gold exists in nature. And we know for sure that the number of Bitcoins is limited to 21 million coins, not taking into account the fact that more than a million bitcoins have already been lost forever. To date 18.34 million bitcoins have been extracted, including lost ones.

The structure of the Bitcoin ecosystem is based on the halving principle: approximately every four years, the reward for a block is halved, which protects the system from deflation. This mechanism contributes to a supply deficit, which, if demand is kept at least at the current level, will cause price growth. The last bitcoin will be mined in 2140. This year, the third halving will occur, and the block reward will decrease from 12.5 to 6.25 BTC.

Decentralization

Cryptocurrencies such as Bitcoin or Ethereum do not have a single access center. In other words, it is a peer-to-peer distributed network where none of the participants has more rights than the others. Users themselves manage their funds, unlike a bank account where all operations are controlled by the bank. In a decentralized system, transactions are confirmed by all participants (miners) together. This protects digital assets from third-party interference and gives finance freedom.

Fast and cheap transactions

The average fee in the Bitcoin network is about $1 with a moderate load on the network. Therefore, if you transfer more than $35, then Bitcoin will be more profitable than bank wire transfers. In addition, bank transfers take up to 3 days, and BTC transactions take less than a day. Bitcoin is much inferior to more modern blockchains in terms of bandwidth and fees, but it is still more profitable than bank transfers. There are even cryptocurrencies with zero fees or fees so low that they are negligible. For example, the fee in the Stellar or Tron networks is much less than 1 cent.

Privacy

Data privacy is an important factor in the modern world. Every user wants to be sure that their personal information is securely protected. Of course, Bitcoin is still vulnerable in this regard, since all transactions are transparent, which means that they can be traced. But there are cryptocurrencies whose developers have focused on anonymity: Zcash, Monero and Dash

What to invest in

It is necessary that the digital assets comply with the key criteria for investors. Here are the main ones:

• High liquidity. Investors should show interest in the coin. For them, it is important that you can quickly buy and sell an asset without delays in order execution. Low-liquid assets carry high risks since only small amounts are required for the collapse of the exchange rate;
• Applicability. Projects should solve a specific problem and be applicable in the real sphere. For Bitcoin, this will be a value, for Ethereum — smart contracts that are applicable in business, etc. Most cryptocurrencies are empty coins that do not have any real value. No less important is the developers’ reputation, which indicates that they can create a valuable product that solves fundamental problems: centralization, speed, and cost of transactions, versatility, ease of conversion, etc.;
• Stable growth. Crypto assets should demonstrate positive dynamics of the exchange rate in the long term and not one-time price jumps.

Disclaimer. We do not give recommendations for buying specific cryptocurrencies, but only show which assets are suitable for investment. Any investment in volatile assets carries high risks of losing funds.

If we talk about investing, the most attractive cryptocurrencies may be from the top 10 or top 20 list of CoinMarketCap. These coins are the leading ones in terms of capitalization and liquidity that has earned the trust of investors. Please note that the more assets your portfolio contains, the higher the risks will be, so it is optimal to select up to 10-15 coins, but it all depends on your investment goals. For example, Bitcoin and Ethereum are more suitable for long-term investment, but if you are looking for short-term investments, then less liquid assets can be better over short distances, but the risks will be higher. Here are some coins that may be of interest to investors:

• Bitcoin;
• Ethereum;
• Ripple;
• Bitcoin Cash;
• Litecoin;
• Binance Coin;
• EOS;
• Tezos;
• Stellar;
• Tron;
• Monero, etc.

How to buy and sell cryptocurrency

Select and install a cryptocurrency wallet. We wrote in detail about the best wallets for storing cryptocurrencies in 2020 in our other article. You can find it here. We described the differences between wallets, and what wallets are the most safe for the holders there. Let’s briefly list reliable and convenient crypto wallets:

• Ledger Nano S;
• Trezor;
• Exodus;
• Electrum;
• Jaxx;
• Blockchain.com, etc.

The next step is picking an exchange platform. At this step, you should be guided by convenience, rates and fees. Through exchanges, you can purchase cryptocurrency at market value, but the conversion process will be inconvenient. In addition, you will incur pay fee not only during the exchange process, but also when you withdraw coins from the exchange. The best option will be exchange platforms. In this case, you buy Bitcoin, and it is sent directly to your wallet. But it is important to find a reliable crypto exchange platform, to be sure that you will not be deceived.

There are many ways to buy Bitcoin using credit cards or e-payment systems:

• Cryptocurrency exchanges;
• Cryptocurrency exchange platforms;
• Wallets that support asset exchange.

The choice of method depends on the purpose of the purchase. If you want to buy bitcoin or altcoins for long-term storage, then exchanges are suitable: this way you can immediately buy cryptocurrency, which you will receive directly to your wallet. But it is necessary to avoid scams, so it is important to find a service that allows you to safely exchange currency for bitcoin.

Another important step is selling cryptocurrency. After all, you want to sell cryptocurrency at the highest rate and get a profit. The HiRiBi service allows you to do that. It is an online exchange platform that provides the opportunity to sell bitcoin for USD using PayPal. The main feature of the platform is that they offer the highest rate on the market. The service achieves this by regularly monitoring major cryptocurrency exchanges, which allows you to sell bitcoin higher than the market rate. The profit margin can reach 10 percent or more. If you are looking for a way to sell bitcoin at the best exchange rate, then pay attention to HiRiBi.