A helpful illustrated guide to profit from cryptocurrencies without the struggle of volatile drops. This article is brought to you by Digital Financial Market.
Last Updated: 3/22/2022
Investing in Cryptocurrencies
Cryptocurrencies are real technologies that vary across platforms. Some Cryptos are networks, websites, or even tokens that can be associated with art pieces or collectibles. Each cryptocurrency has its own unique approach to providing inherent value. The value can grow or diminish based on the popularity, community involvement, and both retail and institutional investment.
Choosing the Right Cryptocurrency Portfolio
The key success in any cryptocurrency always revolves around the underlying Technology. Ethereum (ETH) has gained over half a trillion USD in value because the basis of its blockchain network is on creating adaptable decentralized applications with great success. Bitcoin (BTC) is built upon its structure of network transaction through the blockchain by rewarding data processing (also call mining) that completes transactions through the blockchain.
These methods of using computers to create real transactions is what has propelled the cryptocurrency market to the fast approaching the $3 Trillion market cap, with Bitcoin alone reaching all time highs of over $1.1 Trillion USD in 2021.
We always suggest you do your own independent research when investing in Cryptocurrencies. Every platform is different with many varieties of blockchain technology. Look for key indicators for technological adoption.
Research Questions for Discovering Cryptocurrencies
Before investing in a digital asset, some questions you might ask could be:
- Is this a technology or website I would personally use?
- Is there room to grow for this technology? Would the greater public continue to adopt this Cryptocurrency?
- Are Major Corporations invested and involved in the development of this Crypto?
- What are the advantages of this Crypto over others?
Opening A Crypto Account
Opening a crypto account is a simple and easy process, there are a handful of brokers that offer Cryptocurrency services.
Cryptocurrency Brokers in the United States
The most popular and well known Crypto brokers are Coinbase and Binance US. Certain stock brokers like Robinhood and SoFi offer cryptocurrency as an asset, but you are unable to send any crypto through the blockchain transactions with these stock brokers.
Advantages and Disadvantages of Coinbase
We reviewed the largest and most popular Crypto broker in the US to provide you with the specific advantages and disadvantages that they have to offer.
Coinbase Advantages
- Coinbase has excellent banking transaction reliability.
- They offer account protection insurance of up to $1 Million in coverage.
- Coinbase has the best selection of Cryptocurrencies through an *Internal Exchange in the US.
- New users can earn over $70+ in free Cryptocurrency by participating in Coinbase Earn.
- New Cryptocurrency Assets are added to the exchange every month.
Coinbase Disadvantages
- Coinbase has high transaction fees.
- The Coinbase platform is not immune to errors, as they have had server troubles in December 2021.
- There are certain Cryptocurrencies that Coinbase does not offer, and we do not anticipate them joining the platform anytime soon. Specifically Binancecoin (BNB) and Elrond Gold (EGLD), which come from direct competitors.
*In Crypto, an internal exchange is a platform where tokens can be transferred through the companies own network, eliminating the need to pay gas fees for Ethereum based tokens.
Advantages and Disadvantages: Binance US
Binance US Advantages
- The Binance US exchange has exclusive tokens derived from Binance Coin (BNB).
- Their referral program provides rewards for users in BNB.
- The Binance (BNB) network has grown to be the Third Largest Blockchain Network in the world.
Binance US Disadvantages
- Binance transactions need a $20 minimum. If your investment falls under that value, you are unable to sell the investment without first adding an additional $20 purchase.
- Service outages have occurred on the platform, most recently in May of 2021.
What To Expect When Investing in Cryptocurrencies
The Cryptocurrency market has been known to be plagued by volatility and sudden, rapid price movements. However, you can maximize price movements to your advantage by following one of our guided strategies to profit from cryptocurrencies.
Keep in mind that Cryptocurrencies do not grow in a steady and predictable line. The vast majority of the time, any and all Crypto has a pattern of slow declines that can depreciate an asset; Followed by a wild and unforeseen burst of popularity that has many cryptocurrencies double or triple within weeks or even days.
Bitcoin (BTC) alone has doubled in the last year, regardless of volatility. As a market leader, Bitcoin can be interpreted as the “Index Fund” of cryptocurrency because it represents so much of the Crypto market as a whole. With the largest blockchain network in the world, Bitcoin dominates 33% of all crypto assets. Although BTC is rather stable in comparison to most of the cryptocurrency industry, other Altcoins can generate higher returns, with higher risk as well.
Some success stories have had assets that have 10x within months, or even 100x within the year, which was the case for Decentraland (MANA) due to their partnership with Facebook’s Metaverse. However, many cryptocurrencies have failed due to lack of adoption and support, leading to massive liquidation and rapid devaluation.
The uncertainty of the rise and fall of price movements is the reason why it is important to choose a guided strategy to profit from cryptocurrencies.
Strategies To Maximize Crypto Returns
We review some of the best ways to maximize your cryptocurrency profits.
Taking Profits on Cryptocurrency “Spikes”
Cryptocurrencies have an interesting pattern of sharp, fast growth, sometimes called a “Spike”. Followed by a consistent drop that sometimes halves the value of the digital asset. This is seen in even the most popular cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), and other Altcoins.
In our example, we will be looking into the November – December 2021 Price movements of Gitcoin (GTC).
Gitcoin (GTC) sees rapid growth, tripling in only a few days, followed by a tapering fall to December 13th, 2021
As the chart details, Gitcoin (GTC) proved to be a cryptocurrency with major potential. This rise of over 300% occurred in late November of 2021 is likely a huge influx of investors and institutions buying GTC by the millions.
An important detail to note, the price falls almost as quickly as it went up for a brief period. This creates this “Spike” shape. Although it may be a good idea to take profits as it rises, it may be more profitable to use patience and look for that spike pattern.
Once you see a confirmation that the price is dropping more than 10% from the highest point, pay attention to the speed in which the Crypto Price drops and liquidate based on how fast the asset depreciates.
If you see a slow dropping in price, it could be a sign of additional investor support. In this case, may mean that the asset may grow more before dropping, such has been the case for spikes in Dogecoin (DOGE), Shiba Inu (SHIB), and Decentraland (MANA).
Saving All Cryptocurrency: The HODL Model
The word HODL became an internet meme for cryptocurrencies because it is a misspelling of the word “Hold”.
Much like a stock portfolio, your goal for a Cryptocurrency investment is to gain the most profit from your investment over an extended period of time. Reflecting on the crypto market, history has shown that staying invested in the largest and most popular digital assets has proven to provide a higher certainty of returns.
This strategy means ignoring that all consuming sell button and holding for the long run, regardless of volatility.
The HODL model is adopted by many Bitcoin miners and major corporations. Michael Saylor’s famous MicroStrategy corporation is well-known for hoarding almost 1% of all Bitcoin (BTC).
Earning Interest on Your Crypto Investment
Much like Stock dividends, certain Cryptocurrencies have developed methods for allocating interest earning in the form of the underlying crypto. Interest rates vary across platform. These are the specific rates provided by Coinbase.
Full List of Cryptocurrencies To Earn Interest
- Ethereum (ETH) 5% APR Return – In the form of Ethereum 2, a new protocol
- Cosmos (ATOM) 5%
- Tezos (XTZ) 4.63%
- Algorand (ALGO) 4%
- USD Coin (USDC) 0.15%
- VeChain (VET) <0.1% – In the form of VeThor (VTHO)
Note: Higher interest rates are available on some Cryptocurrencies on Binance US.
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