A trader buys crypto assets for short-term, speculative purposes. A crypto investor makes long-term, strategic investments. This article deals with these long-term investments. The most common crypto investment formula is when someone buys Bitcoins and does nothing with them, just holds on to them. This is not a good idea, because the money does not make any profit. The crypto market offers you several ways to invest for the long term. The risk is always higher in crypto markets than in traditional bank investments, but the expected return is also higher. If you are looking for passive income, you should read on.
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Crypto Investments – Basic Principles
Thanks to blockchain technology, many terms have entered the public domain that were previously unknown. For example, Bitcoin, Crypto Wallet, Defi, etc. The meaning of these terms is now pretty much understood by everyone. However, there are terms that are still unknown to the majority of society. Staking, Yield Farming, Crypto Lending, Liquidity Mining, etc. But these are great investment formulas that help the most profitable investors around the world make a lot of money.
A crypto miner needs to know the latest hardware and get it if he wants to make money. A trader needs psychological fitness and great expertise if he wants to be successful. Crypto investing also requires expertise, but the investor does not need to bother with expensive and high-powered hardware. Investors can think long-term, which is a great relief as they don’t have to make immediate decisions several times a day like a trader.
The first step in any crypto investment is to select the right crypto currency. Experience has shown that it is usually better to invest in a better-known crypto currency with a higher capitalisation. This involves less risk and is therefore safer. Only invest in smaller capitalisation coins or tokens if you have considerable professional experience. A major fall in the exchange rate could get you into serious trouble. Unfortunately, this cannot be ruled out for larger coins. On crypto markets, you should only invest as much money as you can afford to lose. But if you get it right, you can win big. In this case, you’ll get both the exchange rate gain and the return on your investment.
long-term crypto investments promise higher returns…
The crypto owner locks up part of their money in exchange for a reward. This reward is most similar to bank interest, but it is not. A lock means that the investor cannot convert the locked amount into other crypto currencies and cannot spend it until the lock is released. The return is predictable and guaranteed. It is a safe and passive way to earn income.
There is one risk, as always. As long as the cryptocurrency is locked, its exchange rate can and will change. It is therefore worth investing in cryptocurrencies whose price will rise in the long term. Staking safer crypto assets with higher capitalisation can yield lower returns. Staking less secure crypto assets with smaller capitalisation can give you higher returns, but also a higher risk.
A lender lends money to a DeFi startup, in return for which it later gets back more money than it invested. In short and simple, that’s what Yield Farming is all about. It is probably the most profitable way to invest if you really know how. Professionals are constantly moving their capital between different Yield Farming investment options in order to make more profit.
Yield Farming is a fast-growing, fast-changing, innovative sector with a huge future. Within the sector, profit-making methods are changing rapidly. If you’re a beginner, it’s worth trying it with little money at first. Only invest more capital in a project if you are an experienced investor. Again, the biggest risk is currency fluctuations.
Rug Pulls: This is a form of fraud where the cryptocurrency developer collects the investors’ money and then leaves with it. He simply steals the invested capital. This is another risk of yield farming. You can protect against this by registering and investing on larger, long-established investment platforms.
It is very similar to traditional bank lending. The crypto owner provides a loan to the borrower and in return receives interest. The borrower must pay interest. This is payable daily, weekly or monthly, depending on the facility. Crypto lending became popular after 2020 and the market has been growing intensively since then. Different platforms are constantly coming up with newer and newer schemes, and competition is becoming fiercer.
The biggest risk in the Lending sector is the constantly fluctuating price of crypto assets. When exchange rates fall, the liquidity of market participants may be reduced. This can put investment at risk. The best investment platforms seek to reduce lending risk. It is therefore worth signing up to the larger, more reliable platforms, which are listed in the table above.
If you are interested in short-term options, you can read about crypto exchanges in the Crypto trading section.