Every year the number of people looking to invest their money is increasing. They look for investment options to prevent their savings from stalling with little or no income, in their checking accounts or savings accounts.
And one option that came up with dream profitability was Cryptocurrencies.
However, there are still many doubts about what this type of investment is, how it works, what sums of money are needed for initial investments and the respective risks.
In our article we will talk about the care that people who want to invest in them have to take and the risks, so that you can decide if you are going to invest in cryptocurrencies
What are cryptocurrencies?
Despite being recent – they appeared only 11 years ago, in 2008 – the way to invest in cryptocurrencies follows the same precepts of traditional investments. That is, before making any move it is very important that you know what a cryptocurrency is. Especially because, as we will see in a next topic, there are several of them available on the market.
This investment alternative is a digital currency, but it is convertible into real monetary value. That is, yes, you have “real” earnings.
Since any and all transactions are made entirely over the Internet, whenever an investment made with a cryptocurrency occurs it is protected by encryption and a system called a blockchain.
This system is as if, in the “real” world, a record book, like the one used in accounting. It is not located on any particular site, so it is decentralized, public. It also allows anyone and everyone to check all operations that are in progress at the time they want.
What are the main cryptocurrencies?
As we mentioned earlier, let’s now talk about some alternatives for you to invest in cryptocurrencies. It is very important to know all of them, because in 2019 the sector experienced moments of ups and downs. That is, as in other investments, they are subject to fluctuations.
We will start to introduce you to cryptocurrencies talking about the most famous and oldest among all those available on the market. It is already public and notorious that this virtual currency dominates transactions made involving cryptocurrencies.
But Bitcoin is also the cryptocurrency that has the highest profitability for investors. Currently Bitcoin’s market capitalization is $ 153,872,393,908. As of November 16, 2019, its price in U $ D was $ 8,550.
Every four years a phenomenon called halving occurs. It’s a scheduled event that halves the reward for Bitcoin mining (we’ll talk about that later). Since the year the cryptocurrency was created, the reward has dropped from 50 BTC to 12.5 BTC, the current value. Next year, therefore, the reward will be 6.25 BTC.
This will cause the supply to fall next year and prices to rise. These steps are taken because the supply of Bitcoin is limited.
Since the value of 1 Bitcoin is very high it is very difficult for anyone to be able to acquire one of them. However, it is possible to buy fractional amounts, up to 0.00000001 BTC, which is its smallest unit, called Satoshi, in honor of its creator.
Although it was not even the second cryptocurrency to emerge, Ethereum provided a boom in the market. And like any currency that appeared after Bitcoin, it is called Altcoin.
Thanks to it, it became possible to develop new tokens based on contracts considered “smart”. Tokens are digital assets, useful in transactions. For example, mileage program points and air miles can be associated with a token within the blockchain structure to enable business.
It is currently traded at US $ 180.00 and its market capitalization is US $ 19,927,423,717 with each token worth US $ 187.
Considered a “pirated” version of Bitcoin, its current market value is $ 3,678,915,353. Its unit value is US $ 57.60.
Created in 2014, it was developed to hide the identities of investors. When making a transaction using Monero, the addresses of returnees, recipients and values of the transaction are kept confidential.
Its quotation is currently R $ 217.32 and the market value is R $ 3,764,849,994.
Also from 2014 it was created to be easy and accessible. Transactions involving it involve mining.
Its value is US $ 52.31 and its market capitalization is US $ 476,036,692.
What are the risks of investing in cryptocurrencies?
Knowing your investor profile and the risk that each investment offers is paramount in deciding which one to choose. In the case of cryptocurrencies it is very important that you know that the risk is medium to high.
So, to invest in cryptocurrencies there are some peculiar facts to be careful about.
In practical terms, this already demonstrates that it cannot make up a considerable part of its investment portfolio. Recommendations range from 1% to 5% of equity in virtual currencies.
This is due to some characteristics of this type of investment. Cryptocurrencies are something new. Despite Bitcoin, the oldest, being 11 years old, it only offered results in 2017.
Furthermore, the oscillation of cryptocurrencies is absurd. That same year, for example, it saw an increase of 2,000% followed by a decrease in almost the same proportion.
It is an investment that has a nature that is called disruptive. This means that the way in which they are traded (through the blockchain) has no reference to something previous, making it difficult, for example, to analyze historical series that predict the behavior of investments.
Another detail is that they are not regulated by any authority in any country, which can cause huge problems for investors in the event of negative situations.
Miraculous and plentiful yields should also be viewed with caution. In the case of the Brazilian economic reality, where the Selic rate has been showing a downward trend, an investment that presents returns of 1% per day on a regular basis is pure fantasy.
How to start investing in cryptocurrencies
For you to invest in cryptocurrencies there are several ways available:
Exchanges: They work as a “broker”. As soon as the investor defines the value of the currency, it brings the parties interested in doing the business together. As mentioned earlier, there is no regulation by the CVM.
Cryptocurrency fund managers: They look like exchanges, but require that clients’ cryptocurrencies be delivered to them. From then on, they act as traditional brokers seeking the lowest prices to withdraw them and the highest prices to sell them;
Fund managers who invest in cryptocurrencies: New figures in the market, unlike the others, are under the supervision of the CVM. Here the customer does not need to buy the cryptocurrencies directly. He transfers money to the manager to buy shares belonging to a fund, which, in turn, makes the investment.
Mining: The most traditional way to invest in cryptocurrencies. Its mechanics involves doing searches on the blockchain, where the investor finds information about purchases, sales and others that are relevant to the business.
The people involved in offering computational resources for these operations receive new bitcoins every ten minutes, proportionally. It requires more advanced specialization.
P2P: It is when you buy the currency without intermediation. There are reliable lists of players and escrow, a system that ensures that those who buy will receive the money and vice versa, is highly recommended.
Very well, dear investor. As you can see, investing in cryptocurrencies requires a lot of caution, study and, of course, resources for you to achieve good results.
As this is a new form of investment, prudence, analysis and care must be part of the daily lives of investors who place their resources in a virtual currency. With patience, skill and intelligence the results can arrive.