BTC (bitcoin) is a digital asset characterized by its volatility. In the previous months, we have witnessed how the cryptocurrency went on its crazy swings resulting in hyper volatility. Experts and regulatory bodies have issued warnings on the risk involved in investing in BTC (bitcoin). But despite this, the digital asset has received overwhelming support from big names in different industries and even institutional investors.
In the crypto world, there is a famous saying that goes “Invest only what you can afford to lose”. Susannah Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdown commented on this.
“Given the huge volatility and that the use case of crypto currencies is far from proven, traders should only dabble with money they can afford to lose.’’
This is a general rule that applies to all digital assets regardless if it’s BTC (bitcoin) or other major cryptocurrencies like ETH (ethereum), BNB (Binance coin), LTC (litecoin), or even the one being backed by Elon Musk, DOGE (dogecoin). Keep in mind that an upward trend in crypto may change in a second or even in a nanosecond. But what are the different investments for BTC (bitcoin) available right now?
Bitcoin Investments for Crypto Investors
Let’s take a look at the different BTC (bitcoin) investments where crypto investors may opt to invest. Just don’t forget to examine it carefully and always consider the risk.
Trading
In the traditional markets, you can trade stocks to earn. This is also true for the crypto market. You can also trade cryptocurrencies particularly BTC (bitcoin) on different crypto trading platforms. In one of our articles, we have featured the top ten leading crypto exchanges worldwide in terms of trading volume. Inside these exchanges, you can either be a spot trader or join the throng of futures traders. What is the difference between these two traders? Here’s a brief description of these two types of traders.
- Spot Trader
Spot trading is buying and selling digital assets using the current market rate called the spot price. This is popular among day traders since they can open short-term positions with low spreads and no expiry date. A trader can place an order for BTC (bitcoin) on his desired price, the lowest possible of course after considering the charts. After the order is completed, he can sell it at the highest price possible depending on the current market rate. But here’s what you have to watch out for as a spot trader. Be careful not to be overwhelmed. Most spot traders have fallen victims to FUD and FOMO resulting in money loss.
- Futures Trader
Futures traders in the US receive a whopping salary that ranges from $32,680 to $1,119,284, with an average salary of $203,812. But if you are a newbie in the crypto market, this kind of trading is definitely not for you. These traders can buy and sell the futures contract, with no intention of taking delivery of the underlying commodity. They’re just in the market to “gamble” on price movements. Futures or futures contracts are agreements to buy or sell an asset at a later date for a fixed price. Futures trading is a derivative crypto product that has been banned by several countries including the US and UK due to the high financial risk caused by BTC (bitcoin). Unlike spot traders, futures traders do not possess actual BTC (bitcoin). How does futures trading works? Here’s a simple explanation from a posted blog by Binance.
“Say John and Sarah entered a Bitcoin futures position at $40,000 each. In this scenario, John has a long position while Sarah took on an opposing trade. Upon expiration, the Bitcoin futures price settled at $45,000 for each contract. In this case, Sarah, who is holding a losing position, will have to pay the exchange the deficit loss ($45,000-$40,000 = $5,000). John, on the other hand, will receive a profit of $5,000 from the exchange.”
You can only choose from either long or a short position. Seems very simple right but honestly, it’s not that simple as it may seem as futures trading is known for its complexity. But due to its high leverage, many bitcoin investors were enticed to try even if they do not have the expertise and eventually lose their money. When Binance launched its futures trading, it offered its has offered up to 125% leverage of the trading amount to traders but was later was reduced to only 20% in July 2021.
Mining
BTC (bitcoin) mining remains to be one of the most lucrative markets in the crypto industry today. Bitcoin mining is the process of creating new bitcoins by solving a computational puzzle. The massive adoption of BTC (bitcoin) has increased the demand for the digital asset. Hence, the need for new bitcoin miners has also grown. China is the home to the largest bitcoin mining farms in the world. But the recent crackdown by the Chinese government created a need to develop a new bitcoin mining hub with renewable and clean energy resources.
As an investor, how do you invest in bitcoin mining? There are different ways to mine BTC (bitcoin). You can become a bitcoin miner as an individual or join collective mining pools. If you have limited resources and you do not have money to buy hardware mining equipment, you can also invest in cloud mining. But you always have to be wary of scammers lurking in the market. Always do your homework before investing. Make your research and always remember that if the “offer is too good to be true, it must be a scam”.
Although there are different methods that are being used in mining cryptocurrencies, you can only mine BTC (bitcoin) using ASIC-based mining. So, if you are planning to buy your own bitcoin mining hardware, always keep that in mind so as not to waste your money on something you cannot use for its intended purpose.
Crypto Hedge Funds Investment
With the growing adoption of cryptocurrencies worldwide, the number of hedge fund hedge funds investing in crypto assets has immensely grown. Crypto hedge funds invest directly by buying altcoins during ICOs or indirectly by investing in blockchain-related startups and technologies.
In recent data by Crypto Fund Research, there are 355 crypto-focused hedge funds currently operational worldwide. Most of these hold less than $10M AUM while a few have more than $100M worth of AUM. Ranked as number one amongst these crypto hedge funds is a subsidiary of Barry Silbert’s Digital Currency Group (DCG), Grayscale Investments. Here’s a list of the top ten crypto hedge funds you can choose from.
- Grayscale Investments
- Pantera Capital
- Polychain Capital
- Alphabit Fund
- Galaxy Digital Assets Fund
- Altana Digital Currency Fund
- BlockTower Capital
- BitSpread
- MultiCoin Capital
- CoinCapital
But again investing in crypto hedge fund companies is not for everyone since there is a required minimum net worth for each investor. CoinCapital for instance requires individual investors to have at least $2.1M net worth before they can invest in the platform.
There are certainly other ways to invest in BTC (bitcoin) given the wide range of products being launched every day in the crypto world. For beginners, you can check other investments in your respective exchanges. But as a rule of thumb, always be very careful before investing. Always do your research. Consider the pros and cons of any crypto investment. If you are new in the crypto market, be more prudent and always manage your expectations.
