Top 3 ways to invest in cryptocurrency
Cryptocurrencies are a rapidly developing market: the emergence of crypto as a new form of money has had a massive impact on societies all around the globe. Even though crypto is volatile with many ups and downs, it will definitely maintain its strong position in our modern, digital world for quite some time. Some people believe that crypto will become a convenient means of payment for everyday basic needs very soon.
Investing in cryptocurrency is just like investing in anything else: there are several ways you can profit from the growth of this digital innovation. The first thing to do is to decide whether to invest directly or indirectly. Direct investment involves purchasing the actual cryptocurrency itself, whereas indirect investment provides fewer options, such as investing in a crypto IRA or working with crypto derivatives. Choosing which one suits your investment portfolio the best will primarily depend on your own requirements.
Investing directly in some particular cryptocurrency requires you to open a crypto wallet, which can be quite complex. Truth be told, there are many services out there that can guide you through the whole process. The most common way of directly purchasing crypto is through two currently available exchange options: a decentralised exchange (DEX) and a centralised exchange (CEX).
A CEX has a ‘central’ authority that controls the exchange, making sure transactions are executed correctly, while a DEX only involves matching a buyer to a seller and allowing both parties to deal on a price. However, both expose you to a counterparty risk: in the case of a CEX, your funds sit in exchange-owned bank accounts, while a DEX might refuse to take any responsibility for the loss of a private key or wallet.
When it comes to indirect investment, the most common ones are the Grayscale Bitcoin Trust (GBTC), Bitcoin Futures, and private funds. All of these tools have been around for some time and are proven to have both pros and cons. For example, a private fund requires a person to be an accredited investor with a certain amount of capital. Possible disadvantages of investing in GBTC include paying high premiums along with the annual fee, as well as the risk factors associated with investments vehicles that aren’t required to register with the SEC. Plus, GBTC and Bitcoin Futures are limited to Bitcoin investing only. However, the obvious advantage of indirect investing is the opportunity to speculate on the price of the crypto coin without an actual need to own one.
And the last, but definitely not the least, is a revolutionary way of investing in crypto: tokenised securities.
With old investment methods, cryptocurrency holders had no access to regulated financial markets unless they exchanged their crypto coins for fiat. As a result, they could not trade the world’s most popular indices, equities, and commodities. So, tokenised securities, a version of digital ownership governed by smart contracts for any kind of public or private assets, were created. This new technology is developing at a crazy pace – more platforms are emerging to make it easier for issuers, regulators, and investors to adopt the new concept. Wrapping a traditional asset in a tradeable piece of code, tokenised securities offer greater transparency as to movement and ownership and provide a way to broaden access to investments by lowering barriers such as high entry points, steep costs, and illiquidity. They also allow more detailed configurations with return opportunities tailored to the investor’s specific objectives. The crypto exchange dedicated to tokenised securities trading enables anyone with Bitcoin or Ethereum to freely trade the world’s most popular indices, commodities, and financial assets through tokenised securities, without putting their crypto holdings under price pressure or exchanging to fiat.
With all that said, the best way to invest in cryptocurrency is defined by you and your personal goals. Each method of investing in cryptocurrency has its own considerations and will require some skills and experience.