How to Invest in Cryptocurrency While Dodging The Market’s Volatility
The cryptocurrency market is one of the most volatile markets on earth. Anyone who has watched their portfolio drop in value by 50 per cent overnight knows this all too well, and it’s a scary place to be. The earliest adopters proved that resilience is key to eventually finding success in this sector, with Bitcoin’s recent fly to the $64,000 high—though with a huge risk involved. And that doesn’t sit well with most.
It’s natural to feel left out when everyone else seems to be pouring money into the ever-elusive cryptocurrency market—especially now after the huge sell-off has brought prices back down to “affordable” levels. Luckily, some workarounds can allow you to stay involved in this market without directly delving into its volatile sector. Read on to find out how!
Investing in Blockchain Technology
Cryptocurrency is only one facet of the overarching dominance of blockchain technology, which has turned the concept of decentralisation into reality. One of the biggest points of difference of crypto is that all transactions are peer-to-peer, allowing the community to participate in the network through mining or staking. This encapsulates one idea of decentralisation: a world without banks and financial institutions taking the people’s money.
But there’s more to decentralisation than meets the eye. In the world of blockchain technology, any digital application can become free from third parties with the help of smart contracts. The Ethereum blockchain is famously the first platform to utilise and allow anyone to develop smart-contract-based decentralised applications, a function that has found use in digitally-forward sectors, such as tech, gaming, and finance.
Many other blockchains, including Cardano, offer the same functionalities as Ethereum, making it more accessible than ever for anyone to create dApps. As a result, there’s plenty of blockchain-based applications online, from games to supply chain management systems and even financial services. These include NFT marketplaces like Pixura and Dapper Labs, government platforms like Voatz, and even marketing solutions like Madhive and social media platforms like Steem.
Blockchain technology has its place in the future, so if you aren’t keen on pouring money into volatile investments, supporting the actual product—in this case, blockchain-based applications—may be an optimal alternative.
Invest in Cryptocurrency Companies
While there’s no saying how much Bitcoin will be tomorrow and in two years, cryptocurrency isn’t expected to turn to dust anytime soon. A lot of companies were built to support crypto ownership, including exchanges, wallets, and even mining rig manufacturers.
Recently, a popular crypto wallet and exchange platform, Coinbase, went public with a $99 billion IPO—a testament to its relevance in today’s financial picture, which is drifting between the world of fiat and digital currencies. Cryptocurrency-related companies are expected to grow in tandem with the industry. While there are risks in terms of government regulations involved, it’s no different from a regular IPO, which generally comes with a fair share of uncertainties. It’s a great way to still be involved in the cryptocurrency industry without the risk of losing it all through volatility.
Stable & Anchored Coins
The world of altcoins has expanded far beyond the realms of Ethereum—there are thousands of coins on the market, each with a unique value proposition for every investor. In particular, people who aren’t huge fans of the market’s volatility might fall in love with stable and anchored coins.
Stablecoins are cryptocurrencies that are pegged to an external fiat asset, such as the USD or EUR. A reserve pool of funds backs each coin to ensure the credibility of its value. Because fiat money doesn’t experience extreme adjustments in value over a short period, stablecoins can retain near-permanent stability. A popular example is Tether (USDT), which investors often use to convert their coins as a hedge against the volatile market without leaving the crypto economy.
On the other hand, anchored coins follow a similar principle—they’re pegged to an external asset, but an algorithm may allow them to stay anchored to a particular price point. For instance, The People’s Reserve (TPR) is an anchored coin pegged to the last highest price of gold. So even if gold were to drop in value, TPR will not!
Due to the stability of stable and anchored coins, there’s very little to no risk in losing money by investing in these assets. But how do you earn profit? There are multiple ways, with the most popular being staking—a process where you leave coins on the blockchain for a period to gain interest over time. By doing so, you’ll be able to enjoy fixed annual returns without the nervous spells of playing into the volatility game through coins such as Litecoin (LTC) and Ripple (XRP).
Traditionally, investment funds are vehicles that pool together money from several investors and trade on their behalf. The profit is then shared across the board, depending on the strength of each person’s contribution. For instance, if your investment makes up 2% of the entire pool, then you can expect approximately the same share of the reward—minus the fees. There’s little to no risk of losing money because if one piece goes bankrupt, other pieces will be left to carry the team.
Due to the recent boom of cryptocurrency investments, many mutual funds have begun carrying cryptocurrencies as part of their portfolios. Joining one is a wonderful way to indirectly invest in coins without dealing with the volatility yourself. Naturally, crypto funds carry a little more risk than traditional funds, mainly because any dealings with crypto will be subject to unprecedented spikes and dips. But working with experienced traders should mitigate as much risk as possible.
The cryptocurrency market is a tempting one to jump into—but it isn’t for everyone. These alternative investment options will allow you to partake in the crypto boom while avoiding the emotionally draining volatility that plagues the industry. And remember—while these are less risky, they’re still investments; ample consideration is recommended before committing to one.