Investing in Cryptocurrency has been all the rage over the past two to four years. Many people swear it will be the future of finance and that it is the Internet 3.0. Others swear off it, calling it rat poison (Warren Buffett and Charlie Munger) and a fraud (Jamie Dimon). Regardless of your stance on the crypto industry, we cannot deny that many young investors have been made millionaires (and a few billionaires) by investing in cryptocurrencies just a few short years ago. This will pique anyone’s interest, so let’s talk about what are the best ways to invest in cryptocurrency!
** Keep in mind that I am not a financial advisor and nothing in this post constitutes official financial advice. Always conduct your own research before making an investment. Never invest more money than you can afford to lose. **
Before we begin, there are numerous cryptocurrencies you can invest in, a little over 2000 to be precise, according to CoinMarketCap.com. I would consider the vast majority of these to be either scams or destined to fail due to lack of interest and team talent/skill and connections.
Part of what makes a cryptocurrency valuable is its use and user base in a network (Metcalfe’s law). If a cryptocurrency does not have enough people using it then it is not valuable. If a cryptocurrency does not solve a real-world problem, then it is not valuable long term. Moreover, I imagine that there will be yet unimagined use cases for cryptocurrencies. However, right now, there are probably less than 100 real use cases for today’s infrastructure. Even if there were 5 solid competing cryptos for each use case (which there isn’t) then there would still be too many to justify.
My point is… do your own research and seriously consider whether or not you think a cryptoasset is:
- (i) solving a real-world problem;
- (ii) is widely adopted enough;
- (iii) is technologically sound;
- (iv) has a skilled and dedicated team/organization
There are a few basic ways to invest in the cryptocurrency industry:
- Buy cryptocurrency
- Earn cryptocurrency: mine, or get paid in crypto.
- Develop your own cryptocurrency
- Invest in publicly traded, crypto-related companies on the public stock exchange (anyone can do this).
- Invest in private crypto-related companies (must be a sophisticated investor).
- Sell adjunctive crypto-related equipment/tools/information.
What Is The Best Way To Invest In Cryptocurrency?
1) Buy Cryptocurrency
The easiest way to invest in cryptocurrency is to buy cryptocurrency. You can buy and hold your crypto for prolonged periods of time (generally over 12 months). This is known as HODL-ing (hold on for dear life, a play on ‘hold’ used in traditional finance). Or you can trade (buy/sell) your cryptocurrency on a short-term basis (over minutes, hours, days or weeks).
There are many ways to purchase cryptocurrencies, the best way to buy is via an exchange. There are over 200 exchanges worldwide at the time of writing this article. They are currently all crypto-native exchanges (meaning they were built specifically for cryptocurrencies). There are generally a few notable cryptocurrency exchanges in each large country. Most exchanges follow KYC (know your customer) and AML (anti-money laundering) laws in their respective countries, so you will likely have to provide a few different pieces of ID and it may take a few days to a week to be registered and verified.
I will create a post on the top cryptocurrency exchanges in more detail sometime in January 2019. Briefly, some of the top exchanges are listed below:
- Coinbase/Coinbase Pro
Other ways to purchase cryptocurrencies are local bitcoins ATMs, they are located all over the world. However, to my knowledge, you can only buy BTC with them. Since true cryptocurrencies are peer-to-peer, without the need for an intermediary, you can actually purchase any cryptocurrency directly from someone you know (or ask online). Always take safety precautions when meeting someone from online to buy/sell crypto.
2) Earn Cryptocurrency – Mining
There are two main ways to earn cryptocurrency: (i) mining and (ii) getting paid in cryptocurrency.
The days of easy mining for cryptocurrency are over. People used to be able to set up a mining rig with just a laptop, or you could buy/create your own small private mining rig to keep in your basement/attic. Run it all day long, or only during certain hours. Collect cryptocurrency and sell it to pay for the electricity used to mine. Or HODL it and just pay out of pocket.
However, today mining cryptocurrency is done on industrial scales. There are massive “mining farms” worth millions of dollars of computer chips. You would need to set up an organization or corporation with investors/startup capital in the millions of USD to mine any significant amount of cryptocurrency. That being said, there are mining pools that you can join, although the amount of crypto earned is menial, but still something.
3) Earn Cryptocurrency – Get Paid in Cryptocurrency
Alternatively, in today’s day and age it is becoming less weird, and more common, to ask to be paid in cryptocurrency, especially if you do freelance work, and especially if that freelance work is online (i.e. freelance writing, web design, photography, research, video editing etc). Your pay would settle instantly into your cold/hot wallet. You can exchange part of your pay into fiat to pay for daily living expenses and HODL the rest if you’re bullish.
4) Develop your own Cryptocurrency
If you have the technical skills, knowledge and an idea with a problem that a decentralized value network can help to solve, then have at it! There are a reasonable amount of resources out there now on how to develop a cryptocurrency asset, from websites to books/eBooks. The best way to ensure the success of your cryptocurrency is to actually solve a real-world problem. You will likely need a solid team and some start-up capital to make it a success.
5) Invest in Crypto Related Companies
Alright, so you want to invest in the cryptocurrency industry, but you’re not sure how to best do that. Perhaps you’re not sure about your risk tolerance either. Perhaps you have barriers to entry into the cryptocurrency industry: you think its a lot of work to buy cryptocurrency directly and/or you do not trust an exchange company to hold your private keys, but you also do not trust yourself with your own private keys (wise insight if you came to this latter conclusion).
Luckily, there are other ways to invest in cryptocurrency. In fact, some would argue that buying stock in companies that work in the cryptocurrency industry is better than buying the actual cryptocurrency. Cryptocurrencies are much like holding onto cash, or gold/silver or some other commodity such as oil or cobalt. The product itself does not produce an income or generate returns itself. If people are willing to pay more for it later then its value grows, but not due to actual returns/production on/of investment. This is an important distinction.
For example, if there is a company that has a crypto advisory service, then everytime someone goes to them for advice, they receive income. They are productive because they produce an inflow of money. Another example: a cold wallet company such as Ledger, they sell a hardware cold wallet for cryptocurrency. It is directly related to cryptocurrency, but if you were to buy Ledger stock, the value goes up based on sales and expansion of the company, not on the value of cryptocurrency (at least not directly). If the prices of cryptocurrency rise, its likely that more people will buy cold wallet storage. Moreover, an actual cryptocurrency exchange, such as Binance or Coin Base make money on services such as trading fee commissions (which are quite low) and any other financial advisory services or investment products they provide. Regardless of whether or not cryptocurrency valuations are skyrocketing or crashing, if people are buying and selling (which they must be if the prices are changing) then the exchange makes money.
You can quite literally have a piece of this by investing in these types of companies (as a stock is a representation of ownership in a company and one can expect returns based on the efforts of the corporation, unlike cryptocurrency itself). There are four types of companies you can invest in: (i) publicly traded or (ii) privately traded; or (iii) directly involved with cryptocurrency, (iv) indirectly involved with cryptocurrency.
Publicly traded companies are found on a public stock exchange such as the NYSE, NASDAQ, TSX (Toronto Stock Exchange) or some venture exchanges for early startups. Privately traded companies have not yet had an IPO (initial public offering) and require that you be a “sophisticated” investor (net worth >$1million dollars not counting personal residence, and/or income >$200k/year).
Companies that are directly involved with cryptocurrency usually came into existence because of cryptocurrencies, such as crypto mining companies, cryptocurrency exchanges, investment companies, crypto wallet companies and crypto application companies. Whereas companies that are indirectly involved with cryptocurrency already existed and are now expanding their interests and activities into the crypto industry.
I provide a chart below to give some examples. The table below is not an exhaustive list, there are hundreds of companies out there, these are the more well known ones. Remember that you must always do your own research before purchasing any investment, whether its a private/public stock or actual cryptocurrency.
I will explore some of these companies further, later on in the development of MarkshireCrypto.com
6) Sell Adjunctive, Crypto-Related Products
In addition to the above methods of investing in the cryptocurrency industry, you can invest or earn cryptocurrency and/or fiat money by selling crypto-related products. Many crypto-enthusiasts with an entrepreneurial spirit are doing this. They have created a crypto-platform whether it is a YouTube Channel, Twitter Account, Website, Reddit page etc, usually, some combination of those and they promote crypto-related products.
Many of these products are info-products, such as guides on “how to…X” (such as ‘how to buy cryptocurrency’, ‘how to safely store your cryptocurrency’, ‘how to develop a cryptocurrency’, etc). Other products range from T-shirts to stickers, pendants/necklaces, books, socks, hats, mugs, phone cases, crypto-art work/posters, flasks, and even crypto-jewelry. There is quite the consumer environment built around the cryptocurrency industry. You can have a chunk of it by selling your own products or affiliate marketing others.
In conclusion, there is no single best way to invest in cryptocurrency. Everyone is unique and in different situations; therefore, people will be able to invest in cryptocurrencies by taking advantage of their own situation. Personally, I find that the easiest and most effective way to invest in cryptocurrency is to simply buy off an exchange, invest in crypto-related public companies and/or earn cryptocurrency by being paid in cryptocurrency. However, that is due to my own personal situation.
Please comment below and let us know which way you would think is the easiest or best way to invest in cryptocurrency! Would love to hear from you!