Cryptocurrencies – Basics of Investing

For some time, mainly from 2015 until the end of 2017 – it used to be an extremely trendy and readable topic. As in the case of many online trends, the interest in cryptographic currencies has also triggered the creation of many blogs and websites which want to monetize the fuss generated on the web. And although the cryptocurrency boom is over now, many people want to learn the basics of investing in cryptocurrencies.

1. Start by choosing the right currency. At the moment, there are as many as several thousand various coins, from the most popular ones like Bitcoin or Ethereum, to novelties that have practically no capitalization. Choosing the right currency gives you 90% of the trading success, so it’s worth devoting most of the theoretical preparations to that.
2. Don’t believe the opinion of every expert on the Internet. Acquiring and developing appropriate theoretical knowledge about what cryptocurrencies are and how they work will allow you to avoid a situation in which you would entrust your savings to a person claiming to be a specialist. For instance, between 2015 and 2017, the Polish Financial Supervision Authority disgraced itself at least a few times, issuing announcements such as:

“We treat cryptocurrencies as a commodity. You buy Bitcoins in the same way as you buy tulip bulbs. If the valuation of plastic beads suddenly went up and everybody bought them – could we ban the sale? We inform the public; we warn the people. We see no grounds why this commodity should have such a high value. We inform the public that we suspect price increases driven by speculation. Customers should make their own decisions based on the data they have.” Professor Marek Chrzanowski, Chairman of the PFSA.

1. It’s quite easy to notice that the Chairman doesn’t show here any in-depth knowledge of the rules governing the world of cryptocurrencies, nor does he suggest a solution to the problems that an investor in Poland must face. So, such opinion about cryptocurrencies is worthless.
2. Carefully choose a method of buying the cryptocurrency. Having chosen the right coin, you have a yet another decision to make – how you want to buy it. You can do this on a crypto exchange or at a cryptocurrency exchange bureau. It’s likely that a majority of the investors will choose this method, but there are also other, less popular options.

One of them is to buy a cryptocurrency voucher. That’s an option for people who for some reason – such as a requirement to confirm their identity – avoid crypto exchanges. When you buy a cryptocurrency voucher, the purchased coins remain at the disposal of the broker until the buyer decides to redeem the voucher. This is a purchasing method that is completely offline and doesn’t require any verification of your identity. A method similar to a voucher is a cryptocurrency certificate. In both cases, however, you are dealing with a fairly large margin of a broker – around 10% – and low liquidity of the funds. So, these are not solutions for everyone, and not every single cryptocurrency can be bought this way either. Vouchers and certificates will probably remain niche solutions for some time to come – treated rather as a curiosity or an exotic method of buying cryptocurrencies which doesn’t require Internet access at all.

Almost three thousand cryptocurrencies have already been launched and there is no indication that this number will suddenly dwindle. We can only expect a certain slowdown in capital growth caused by sharp falls of rates of cryptocurrencies with the highest capitalisation. However, new altcoins are still being created. That’s why a novice trader needs to keep up-to-date, constantly monitoring recent market developments. So, before making your first investment, it’s good to realize that investing in cryptocurrencies is associated with continuous training and development.