The blockchain technology underpins cryptocurrencies such as Bitcoin, Ethereum, and Dogecoin. Blockchain technology tracks the creation and trading of bitcoins and other digital assets in a transparent manner. You are already a blockchain investor if you hold any cryptocurrency.
If you know how to acquire, sell, and store your digital assets safely, you can invest in blockchain assets. It’s also a good idea to be aware of the hazards involved with blockchain investments. Continue reading to discover more about cryptocurrency and other blockchain assets.
5 Steps to Investing in Blockchain
Buying cryptocurrencies that utilise blockchain technology is the most direct way to invest in the blockchain. If you wish to invest in cryptocurrency, start with these five steps:
1.Create a list of your blockchain-based assets.
Begin by looking into the numerous blockchain investment opportunities available. Bitcoin and Ethereum are now the most popular cryptocurrencies, but there are over 6,000 alternative cryptocurrencies and many non-fungible tokens to choose from (NFTs). 1 Choose the digital asset that best fits your investment objectives and risk tolerance.
2. Select a bitcoin exchange or brokerage service.
Many other cryptocurrencies may be purchased through renowned cryptocurrency exchanges like Coinbase or brokerage firms like Robinhood. The cost structure and assets provided vary by exchange and brokerage.
3. Use fiat dollars to fund your bitcoin account.
The next step is to deposit money into your cryptocurrency account using your local currency, such as US dollars. Depending on what your account accepts, you can do so by linking your credit or debit card or even your PayPal account. Because of the inherent risks associated with cryptocurrencies, it’s recommended to invest only what you can afford to lose.
4. Purchase the coin of your choice
You can click the buy button for any cryptocurrency accessible on the exchange once your money clears, which could happen instantly.
5. Choose a storage location for your cryptocurrency.
While you can save your cryptocurrency in a wallet provided by the cryptocurrency exchange, it is safer to keep it in a wallet that is less accessible. Hardware wallets that are not connected to the internet are the most secure crypto wallets.
Before You Invest in Blockchain, Here’s What You Should Know
Cryptocurrencies, which are blockchain assets, are a relatively new asset class. Most cryptocurrencies are still in their infancy, despite the fact that Bitcoin has been around for a decade. As a result, many people consider investing in blockchain assets to be dangerous.
It’s vital to note that if you chose to hold or transfer blockchain assets outside of a big exchange, you’ll need a place to store them. A crypto wallet is a crucial aspect of investing in blockchain assets, whether you retain your holdings on a crypto exchange or in an external hardware wallet.
Know the Consequences of Investing in Blockchain Assets
Cryptocurrencies, like blockchain assets, are fundamentally risky and not appropriate for all investors. The price of bitcoin, for example, is exceedingly volatile. Bitcoin dropped half of its value in May 2021, compared to the previous month’s highs, which isn’t the first time the cryptocurrency has seen such a dip.
While it’s exceedingly unlikely, the US government might declare Bitcoin and other blockchain assets illegal or impose new, stringent rules. It’s possible that investors will abandon the industry. Because of these dangers, you should never spend more than you can afford to lose. That means you shouldn’t put your life savings, retirement funds, or other important cash in such a risky asset class.
What Is the Best Way to Start Investing in Blockchain Assets?
If you’re ready to begin investing in the blockchain by purchasing cryptocurrencies, take these steps to make your first cryptocurrency purchase:
Create a User Account
You’ll need access to a cryptocurrency exchange or brokerage, such as Coinbase or Robinhood, to acquire bitcoin. Most major cryptocurrency exchanges and brokerages need you to provide personal information such as your name, address, and Social Security number, as well as answers to questions about your investment experience and income source.
To hold and trade cryptocurrencies, you don’t need an account with a centralized brokerage or exchange. You may purchase, sell, and trade blockchain assets more privately and independently via a decentralized exchange like Exodus or PancakeSwap. To use this form of trading, you’ll need your own cryptocurrency wallet.
Choose which blockchain assets to invest in.
Bitcoin appears to be the obvious choice for many new blockchain investors. Bitcoin is the first digital asset, and its secure operation is based on blockchain technology. In the years after Bitcoin’s introduction, tens of thousands of additional blockchain assets, many of them cryptocurrencies, have entered the market.
You can invest in public firms or funds with considerable exposure to blockchain technology instead of or in addition to buying cryptocurrencies directly. Through standard investing accounts, companies like Riot Blockchain, a Bitcoin mining company, provide significant exposure to Bitcoin and other cryptocurrencies. 6 You can also invest in blockchain-focused funds, such as some exchange-traded funds run by ARK Investment Management, which has crypto phile Cathie Wood at its head.
Make Your First Purchase
Purchasing Bitcoin or any blockchain asset on a cryptocurrency exchange is as simple as purchasing a stock, bond, or mutual fund. To purchase your selected blockchain asset, follow the instructions on the exchange’s website or mobile app.
The transaction may go through quickly or take more than an hour, depending on the exchange where you buy, the blockchain asset you buy, and how you buy it. Wait for your transaction to complete after you click the buy button. After that, your new cryptocurrency will appear in your account or wallet.
What to Look Out For After You Make a Blockchain Investment
Once you’ve decided to invest in cryptocurrency to gain access to the blockchain, it’s important to consider your investment risk, potential security concerns, and tax repercussions. Let’s take a look at each of these in more detail:
Risk: Cryptocurrency markets are always fluctuating. It’s not uncommon for the value of a blockchain asset to fluctuate by more than 10% in a single day. A single remark from a celebrity or government official could be enough to cause a significant price shift in a cryptocurrency. If you’re investing in bitcoin, pay close attention to the risk profile of any blockchain asset you possess, and be prepared for a wild ride.
Security: Keeping your accounts as safe as possible is critical, even if it makes accessing them more difficult. You might not be able to recoup the value of your blockchain assets if you lose them. The most secure approach of keeping cryptocurrency is to use a hardware wallet.
Taxes: You must pay capital gains taxes on blockchain investment profits when you sell, even if your bitcoin gains are not reported to the IRS in the same manner that your employer reports your income.
8 Failure to disclose crypto income and pay taxes on the profits, like other types of income, can result in penalties, interest, and even jail time for egregious violations. 9
Is it a good idea for me to invest in blockchain assets?
Making the decision to invest in blockchain assets is a personal one. It’s entirely up to you, and it should be based on your risk tolerance. Only you can decide if Bitcoin and other blockchain assets are right for you.
Blockchain investing should be viewed as speculative and should only be undertaken by individuals with prior investment experience.
What are the best ways for newcomers to get started with blockchain?
A cryptocurrency exchange is a good place for beginners to start investing in blockchain assets. Coinbase, Binance, Gemini, FTX, and Robinhood are some of the most popular cryptocurrency exchanges in the United States. To make your first blockchain investment, you’ll almost always require a funded, confirmed account. If that’s not for you, consider buying shares in firms or funds that specialize in blockchain technology.
Is it necessary for me to have a large sum of money to invest in blockchain assets?
Investing in blockchain assets does not require a large sum of money. Most cryptocurrency exchanges allow you to make fractional purchases of less than $10 worth of cryptocurrency. The minimum investment on Coinbase, for example, is $2.10.
What is the most effective strategy to invest in blockchain technology?
A big cryptocurrency exchange may be the ideal option to invest in blockchain assets, depending on your investment goals. Some bitcoin investors may prefer to use a decentralized exchange in conjunction with a hardware wallet. You could also explore buying stock in firms or funds that specialize in blockchain technology. Understanding how the blockchain works will assist you in making the best investment selections possible.
