Investing in Cryptocurrency Part 1 - How to Get Involved

Crypto

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As the cryptocurrency market continues to surge, more and more people from different sectors are gaining interest in its potential. A quick glance at the numbers shows why:

-   The value of the global cryptocurrency markets increased by almost 900 percent from March 2020 to February 2021. (Knoema, 2021)

-   The recorded total volume of transactions moved directly between cryptocurrency exchanges increased by about 78 percent between 2019 and 2020 to nearly $91.8 billion. (Crystal, 2021)

-   The blockchain technology market, a system closely linked to the proliferation of cryptocurrencies, is expected to reach $39.7 billion by 2025. (Markets)

For those who have been involved in or following the market for years, these numbers are hardly surprising. But for those who have only just begun to pay attention, the data could come as quite a shock. As the market continues to expand and generate growing interest among the general population, more and more people are wondering how to get involved.

Whether you’ve wanted to start investing in cryptocurrency but just haven’t known how, or have been considering it for quite some time but have been afraid it’s too complex (it’s not!), below are several options for getting involved in the cryptocurrency market.

Option 1: Publicly traded methods

If you’re interested in dipping your toe into the cryptocurrency market, you can use publicly traded methods to invest. For instance, Grayscale – a leading digital currency investing and cryptocurrency asset manager – has nine publicly traded cryptocurrency offerings on OTC Markets. The benefit of this is that it allows you to get involved in the cryptocurrency market by using experienced brokers instead of doing it yourself.

In addition to these offerings, Grayscale’s single-asset investment products provide exposure to Bitcoin (BTC), Basic Attention Token (BAT), Bitcoin Cash (BCH), Chainlink (LINK), Decentraland (MANA), Ethereum (ETH), Ethereum Classic (ETC), Filecoin (FIL), Litecoin (LTC), and Livepeer (LPT). As of October 15, 2021, Grayscale reports that it manages approximately $52 billion in assets.

Another investment option is with Riot Blockchain, Inc., a Bitcoin mining company in North America that trades on NASDAQ. As of October 2021, Riot Blockchain has a market cap of $2.68 billion. Estimates by analysts give the company expected earnings per share (EPS) of $0.24, with the EPS growth for the year raised at $0.87 for 2021 and $1.44 for next year. These figures represent 390.00 percent and 65.50 percent growth in EPS for the two years respectively.

If you like the idea of a more hands-off approach, there are also Cryptocurrency ETFs, which are professionally managed by fund managers and allow investors to indirectly participate in the cryptocurrency market. For instance, crypto ETFs mirror the price of cryptocurrencies and allow investors to buy into the digital currency without having to trade it itself. Because the ETF holders aren’t directly invested in the cryptocurrency itself, they can bypass cryptocurrency exchanges, eliminating the need to deal with crypto storage and security procedures. Putting your money behind crypto ETFs is a fast, safe way for new investors to get involved in cryptocurrencies; it also provides instant diversification to your portfolio without actually owning the assets themselves.

Furthermore, the first Bitcoin futures ETF (ProShares Bitcoin Strategy ETF) in the U.S. launched last week, generating strong demand from investors. ​​These funds invest in bitcoin futures contracts, or agreements to buy or sell the asset later for an agreed-upon price, rather than bitcoin directly. The new products bypass the cryptocurrency exchanges by allowing trading through regular investment accounts. The ProShares ETF raked in $550 million from investors, making it one of the biggest first days on record. While an actual physical bitcoin ETF likely won’t be approved anytime soon, the launch of a Bitcoin futures ETF is a significant milestone for the crypto universe.


Option 2: Buy cryptocurrencies directly through an exchange

Another option is to buy cryptocurrencies directly through a cryptocurrency exchange, which is a digital marketplace that allows you to exchange your money for the cryptocurrency you want to purchase (i.e. Bitcoin, Ethereum, Tether, etc.).

There are many exchanges out there, but a few we recommend are: Coinbase, Gemini, Kraken, and Robinhood, which are some of the most established, well known exchanges.

Once you choose the exchange you’d like to use, you’ll have to create an account and fund your account (typically by connecting it to your bank account or credit card) before you can make your first cryptocurrency purchase.

After choosing which cryptocurrency you’d like to purchase, it’s wise to buy a cryptocurrency wallet in order to keep your purchase safe. While exchanges typically allow you to store your crypto there, a wallet can safeguard against potential hacks and freezes on an exchange.

Ledger is considered one of the best, safest and most secure cryptocurrency hardware wallets, while MetaMask is the most popular software wallet. (Note that “hardware” wallets are more secure because they are not connected to the internet, thus making it impossible for hackers to access them. “Software” wallets, although more accessible and convenient, are connected to the internet and thus susceptible to hackers, malware or viruses).


Option 3: Cryptocurrency as a service

A third option for getting involved in cryptocurrency is using cryptocurrencies as a service. For instance, Helium, referred to as “The People’s Network”, is a decentralized, blockchain-powered network that allows users to earn cryptocurrency by running their own notes, which power connectivity for the Internet of Things (IoT) devices. Just recently, they announced the launch of a 5G version of its network, which will rely on a distributed network of user-operated nodes to provide connectivity for local users. As local users tap into the 5G signal provided by the nodes and calls are routed through them, the operators can mine Helium’s HNT cryptocurrency as a reward.

As Helium CEO Amir Haleem explained, “What Helium has so far done with telecoms in the wireless space is almost like Airbnb enabling people to monetize their real estate in the form of a mini hotel...we’ve learned there’s an enormous opportunity to build a 5G LTE network where every house can basically have a miniature cell tower that carriers can use to offload traffic anytime they’re near it.” Helium’s IoT network currently has more than 28,000 active nodes across 3,800+ cities worldwide, and they forecast having more than 600,000 nodes online within the next 18 months.

Similarly, StrongBlock is another service that generates widespread participation in the crypto universe by making it “possible for anyone to join the Blockchain Revolution.” In fact, their goal is to create an ecosystem where users without any technical abilities can launch full blockchain nodes on their own and, in turn, be rewarded with the protocol’s native tokens such as STRONG.

StrongBlock is the first and only multi-chain “Nodes-as-a-Service” platform to reward nodes for supporting their blockchain infrastructure. To date, StrongBlock has created about 77,000 nodes, with a participant count of over 11,500 on the platform.

In conclusion

While these are by no means the only options for getting involved in the cryptocurrency market, they are some of the more straightforward ways for those who have been eager to get involved but have been unsure of how. As cryptocurrencies continue to prove themselves as a strong asset, it’s wise to at least start considering the possibility of investing. After all, as data on the cryptocurrency market indicates, cryptocurrencies aren’t going away anytime soon.

Stay tuned for next week where we’ll look at some of the advantages and disadvantages of investing in the cryptocurrency market.