The number of financial assets you can invest in as of 2022 is enormous. You can choose between different types of shares, stock indices, startups, and even digital coins, also known as cryptocurrencies. In 2022, cryptocurrencies aren’t just investment options, they are widely used as payment services and utility instruments in different digital decentralized ecosystems. Cryptocurrencies are becoming more widely used for big reasons – they are safe, fast, and efficient.
Choosing crypto projects that might be good investment options isn’t an easy task. There is a huge diversity of them. Among over 20,000 tokens, not all will grow in price and provide you with any gains. The market is extremely volatile so you can never predict precisely whether a certain investment will cause losses or profits.
Nonetheless, despite the volatility, it would be a silly decision to miss an opportunity to invest in cryptocurrencies. Some risks are worth taking because the rewards might amount to millions of dollars! If you’re curious about such prospects, let’s find out how to invest in cryptocurrencies and which projects to choose right now. Let’s figure out the battle between different projects – Solana vs Ethereum: which one is the better investment? Here we go!
The concept of cryptocurrencies
Foremost, we have to understand the basic concept of these investment products. So, cryptocurrencies are referred to as digital coins mined and operated within their blockchains. These tokens might have different functions, depending on their founders’ goals stated in white papers. As of today, the whole market is worth more than $950 billion.
Cryptocurrencies are so volatile financial instruments because their prices might depend on many unrelated factors. For example, coins might suffer surges or declines because of increasing/falling supply, blockchain technical issues, hype, usability, and so on.
How to invest in cryptocurrencies
We have 3 basic recommendations for those who consider digital coins to be added to their investment portfolios:
1. Consider your budget
We don’t recommend entering the game of cryptocurrency investments if your investment budget isn’t strong enough to resist potential risks, uncertainty, and losses. Due to the extreme volatility of the market, the risks of losing your investment are extremely high, so you should risk all money you have. Evaluate the available savings and decide how many funds you can afford to lose.
If your investment portfolio includes other financial products except for crypto, you can calculate the amount that can be spent on this asset class. We recommend allocating not more than 5% of your total investment budget.
2. Choose a good platform to invest in crypto
Beginners might not know how to find a reliable platform through which they can safely invest in the market of digital coins. There are two basic ways:
- The traditional way is to invest in cryptocurrencies through brokerage platforms. Investors choose these options because brokerage companies provide them with the possibility to invest in a diversity of assets from other markets as well. Thus, you can make your portfolio more diversified and exclude the risk that the crypto investment will cause significant losses if the declining movements start. PrimeXBT and eToro are some of the most well-known brokerage services that allow trading cryptocurrencies.
- The widest selection of cryptocurrencies to invest in is available on special cryptocurrency exchanges. You should have heard about such platforms as Coinbase, Kraken, Binance, and others. With them, you can access all the available and reliable cryptocurrency projects you can just think of. Also, they are focused specifically on trading cryptocurrencies, so you can use highly technological specialized tools. With such an exchange, you can acquire ownership over your investments. They offer instruments that allow making seamless peer-to-peer transactions between different crypto wallets.
3. Diversify your investments beyond crypto
Diversification is one of the best ways to avoid risks in whatever market you choose to invest in. As we’ve already mentioned before, the safest way to add cryptocurrencies to your portfolio is to allocate a maximum of 5% of your general investment budget.
Other pieces of your portfolio you should allocate to more stable investment options, such as exchange-traded funds or indices. They include various shares, so investing in them gives you an opportunity to prevent the impact of crypto volatility.
In which cryptos you should invest?
Here are the four most reliable investment products in the cryptocurrency market:
1. Bitcoin (BTC)
Inexperienced users associate cryptocurrencies with the name Bitcoin because it was the first project that managed to attract the attention of a global audience. We know why. Bitcoin offered a brand-new concept of money that has all the capabilities to substitute fiat currencies. Today, this project is evaluated at more than $370 billion. It’s the most expensive cryptocurrency. Its price record is more than $68,000, while currently, it’s available at $19,402 per token.
2. Ethereum (ETH)
Ethereum is the second biggest crypto project by market capitalization. It also gained huge popularity because of innovations. Ethereum became highly appreciated by developers because of the introduction of the technology of smart contracts.
According to the technical analysis conducted by experts, thanks to the upcoming launch of Ethereum 2.0, ETH can exceed its all-time-high price of about $4,500 in 2024. Today, ETH is priced at around $1,300.
3. Binance Coin (BNB)
Launched by one of the biggest crypto exchanges, Binance, BNB quickly managed to become one of the biggest cryptocurrencies in terms of trading volumes and total market capitalization. We believe that BNB is greatly devalued today since it’s worth $270 per token, while at the beginning of the year it was priced almost 50% higher.
4. Solana (SOL)
Solana is one of the projects considered the Ethereum killer. Its market capitalization amounts to around $11 billion, making it the ninth-biggest cryptocurrency. Solana has great prospects as a crypto project because of its unique hybrid of proof-of-stake and proof-of-history consensus mechanisms. During the general market fall in spring, SOL dropped to $30. Experts expect SOL to exceed $55 by the end of the following year.