How to Invest in Bitcoin and Cryptocurrencies

Bitcoin may be one of the most popular coins to invest in, but it’s not the only one. Altcoins provide a great alternative when buying crypto that can increase the diversity of your portfolio.

Your choice of crypto should also take into account whether you are investing or trading, as well as your risk profile and the type of analysis you want to make. You could choose fundamental or technical analysis or even a mixture of both. With all this in mind, you’ll be ready to start investing or trading on Binance.

Introduction

Investing in Bitcoin and other cryptocurrencies is a great way to diversify your investments, but it also involves high risk. So before you jump in, it’s essential to understand some basic concepts and principles. There’s more to it than just buying some crypto and hoping for the best. An informed investment decision involves careful research and analysis. Ideally, you should have a strategy based on your risk profile, and you should never invest more than you can afford to lose.

Bitcoin or altcoins?

For newcomers to crypto, Bitcoin is usually the first stop when it comes to investing. It’s the most famous blockchain project and the largest cryptocurrency by market capitalization.

However, there are thousands of different cryptocurrencies (altcoins) out there. Some altcoins have their own blockchain, while others use a pre-existing network (such as Binance Smart Chain or Ethereum). Every project has a different proposal, each with its own potential risks and benefits.

Whether you want to invest in BTC only or multiple cryptoassets is totally up to you. Some prefer to stick to BTC; others prefer to diversify their holdings with altcoins.

On the one hand, asset diversification removes the risks of investing in only one project. If you have multiple assets, you are less likely to lose significant amounts if one of them fails. On the other hand, altcoin investments can be risky and, unfortunately, there are many scams around. So it’s very important to do your own research before taking risks.

With the massive amount of coins available, it’s hard to know where to start. Take a look at What Crypto Should I Buy Aside From Bitcoin? for more information on some of the different types of cryptocurrencies.

Should I trade or invest?

A decision on what to buy also needs to take into account if you are investing or trading. The two are easily confused, but there’s a difference. Put simply, investing involves picking assets that you believe in and holding over a longer time. Such a strategy involves a less active time commitment and usually carries much less risk.

In contrast, trading aims to make short or medium-term gains through regular buying and selling. Becoming a good trader takes a lot of time and practice. A trader needs to develop more complex strategies, dedicate more time to analyzing markets and trading platforms, and handle more risk. They also need to consider the money spent on trading and transaction fees.

Keep in mind that cryptocurrency markets sometimes present more volatility than traditional ones. While traders need volatility to make profits, high levels of volatility may also bring high risk.

For beginners, investing is by far the easiest and safest option. Investors are usually thinking in terms of years, so short-term price changes aren’t that important. A decision to invest is based more on the fundamentals of a coin (how solid is the project and how likely it is to succeed in the long run).

Some prefer to invest and not worry about short-term fluctuations. Others prefer to trade often in an attempt to maximize profits. Some even do both at the same time. It all depends on your strategy, profile, and risk tolerance.

Again, the decision is yours, but you should never invest or trade with funds that you cannot afford to lose.

With all that said, if you want to learn more about crypto day trading and swing trading, you can find more information in our Complete Guide to Cryptocurrency Trading for Beginners.

Fundamental analysis vs. technical analysis

Deciding on what will make a good investment needs some analysis work. The type of analysis will depend primarily on investing or trading, but both fundamental and technical analyses can be useful.

As mentioned, short to medium-term price changes aren’t so important when investing (or HODLing). In general, long-term investment is more concerned with the intrinsic value of a coin or project, which relates to fundamental analysis (FA).

Fundamental analysis involves assessing the potential of an asset based on the project as a whole, including its utility, team, whitepaper, development, marketing, management, reputation, long-term goals, and other factors.

In contrast, technical analysis (TA) considers previous price action and volume data to try and predict future price movements. The technique usually involves candlestick charts and TA indicators, such as moving averages and trend lines.

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