Cryptocurrency has exploded in popularity over the last few years, with more and more people looking to invest. However, like any investment, it’s important to educate yourself beforehand on the key factors that can lead to profitable crypto investments.
In this comprehensive guide, we’ll explore everything you need to know for cryptocurrency investment, from choosing the right currencies and exchanges to understanding what impacts currency growth and value.
Choosing Currencies with Long-Term Potential
With over 10,000 different cryptocurrencies to choose from, deciding what to invest in can seem overwhelming. Bitcoin remains one of the most popular options, as it has proven to stay in power over the last 13 years and functions as a reliable store of value akin to “digital gold.” However, bitcoin also requires hefty capital with the current high rates.
For investors with less capital, focusing on younger altcoins can provide huge upside potential. The key is identifying projects that demonstrate real-world utility and user growth that signals future mainstream adoption.
Top altcoins like Ethereum provide smart contract and dApp development platforms that power entire sectors of the crypto space. Meanwhile, meme coins like Dogecoin lack inherent utility but benefit from community momentum and social media influence.
Researching the real-world applications, community, founder credentials, and supply dynamics of any altcoin projects is key to determining if they are solid long-term investments or fleeting hype-driven bets.
Choosing the Right Cryptocurrency Exchange
To purchase and trade cryptocurrencies, investors need to select crypto exchange platforms that align with their priorities:
User Experience: Look for easy account setup, intuitive site/app navigation, available self-help resources, and responsive customer support. Exchanges like Coinbase excel in the user experience arena.
Security Protections: Given cybersecurity threats, only choose reputable exchanges that implement robust measures around wallet storage, account access, transaction verification, infrastructure monitoring, and asset insurance to protect your investment.
Fees and Payment Flexibility: Pay attention to trading commissions, account fees, payment thresholds, and options to connect bank accounts or payment cards. Places that enable fee-free deposits like ChangeHero can save costs.
Supported Currencies: Certain exchanges only support buying and selling the major coins like Bitcoin and Ethereum. To access up-and-coming altcoins at early stages, you’ll want an exchange like Binance that lists hundreds of options.
Tools and Features: More advanced traders benefit from exchanges providing features like margin trading, staking rewards, lending programs, derivatives, automated orders, institutional accounts, NFT marketplaces, and more. For example, some platforms facilitate arb to eth trades – allowing users to exploit temporary price inefficiencies between Ethereum and connected networks like Arbitrum.
By balancing factors like security, costs, and functionality based on your needs as an investor, you can select the optimal platform.
Understanding Market Dynamics
Unlike traditional stocks or assets, cryptocurrencies are highly volatile, with prices that can fluctuate wildly day-to-day. But massive upswings and corrections are not random – they reflect underlying market dynamics.
Being aware of these dynamics is key to making informed crypto investment decisions and managing profit expectations.
Some key factors that can influence cryptocurrency values include:
• Economic Trends: Issues like high inflation, market crashes, national debt crises, or recessions can spur more investment in non-sovereign digital assets.
• Technology Innovation: Crypto prices often surge based on technical roadmap achievements, network upgrades, new feature launches, or partnership integrations that enhance utility.
• Supply Changes: Due to transparent blockchain ledgers, changes in crypto circulation supply via mechanisms like coin burning, mining rate adjustments, or lock-ups can greatly impact values.
• Adoption Rates: Prices tend to rise with increased user adoption, transaction volumes, business support, and mainstream media attention as indicators of real-world cryptocurrency traction.
• Geopolitics: Government stances and regulations on crypto, from stimulus policies to legal tender support or China-style trade bans dramatically move market sentiment.
• Influencer Commentary: Opinions from crypto billionaires, project founders, or high-profile investors frequently trigger reactionary price movements.
While short-term, speculative trading is always an option, evaluating projects based on these value drivers enables informed positions. Have conviction, but also brace for volatility by accounting for these external factors.
Mitigating Risks
Beyond betting on the right coins and exchanges, managing cryptocurrency investment risks is critical for sustainable returns. Some tips include:
• Secure accounts via two-factor authentication and avoid public WiFi for transactions.
• Research exchange hack histories, custody practices, and insurance safeguards (like FIDC coverage) to protect holdings.
• Maintain portfolio diversity across assets like stocks to balance exposure, with coins representing <5% of net worth.
• Utilize dollar cost averaging tactics rather than all-in gambles to ease volatility, buying at intervals.
• Keep detailed records of cost basis, transaction dates, exchange fees, and crypto-to-crypto trades for taxes.
• Set staggered price target exit points or stop-loss orders instead of emotional reactions.
Staying informed on project momentum, avoiding greed, and mitigating the downside through smart security and portfolio tactics will help maximize the upside while minimizing the pitfalls.
Top Altcoin Projects to Watch
Given their massive growth potential compared to already-peaked options like Bitcoin, altcoin newcomers deserve investor attention. Based on impressive 2022 traction and developments in key utility areas like decentralized finance (DeFi), infrastructure, governance, and Web3 services, top rising altcoins include:
Solana – As an ultra-fast payments and smart contracts platform capable of 50,000 TPS, Solana empowers the next generation of crypto projects.
Polygon – Working to scale Ethereum infrastructure with sidechains, Polygon facilitates super-cheap, near-instant transactions critical for mass adoption.
Avalanche – This high-speed, eco-friendly smart contracts network could displace Ethereum over time as issues like congestion and carbon footprints plague competitors.
Chainlink – As “blockchain middleware”, Chainlink provides critical off-chain data integrations and blockchain interoperability infrastructure other dApps rely on.
Uniswap – The leading decentralized exchange and liquidity protocol has proven the viability of automated market making and trustless swaps.
Stellar Lumens – With fast, low-cost cross-border payments to compete with Ripple, Stellar aims to be the premier remittance token. Though currently at $0.09, 2025 Stellar Lumens price prediction range as high as $5 based on increased mainstream traction.
Polkadot – Offering a “multi-chain” framework for connecting external networks instead of siloed platforms, Polkadot aims to power an open web.
AAVE – For decentralized lending, AAVE empowers crypto collateralized loans and yields earnings on deposits to bank the unbanked.
Shiba Inu – As a meme coin ecosystem centered on an NFT metaverse and DAO governance play, Shiba Inu has cultivated a rabid community.
Cryptocurrencies represent a paradigm shift in how we store and exchange value. While still carrying risk for investors, proper strategy around blockchain utility trends, tokenomics, exchange tools, and risk management can unlock generational wealth.
Stay judicious identifying projects primed for mainstream ubiquity and exponential returns in the years ahead.
Cryptocurrency Investment article and permission to publish here provided by Eshnomia. Originally written for Supply Chain Game Changer and published on February 27, 2024.
Cover photo by Bastian Riccardi on Unsplash.