How cryptocurrency can save you money
The financial markets are never simple. There are always risks, so asset holders must have some means to protect themselves from risk. One such tool is cryptocurrency. According to renowned investment expert Bill Miller, cryptocurrency is one of the surest ways to protect capital. He compared cryptocurrency to an insurance policy that has no intrinsic value.
Cryptocurrency holders, in particular, resort to long-term investments in cryptocurrency to preserve and grow their assets. This type of investment is attractive because of its very significant returns. Particularly in 2021, different types of cryptocurrencies rose in price from 60% to more than 1000%. However, for those considering long-term cryptocurrency investing, it is important to know that appreciation is not a steady process, and an increase in value over a particular period is not a guarantee of an increase in value in the future.
Potential investors should therefore develop a trading strategy, stick to it and not react to price fluctuations. Also, they should take enough precautions to secure their investments. The best option is to use a hardware wallet, which is kept in a safe place. The same goes for the seed phrase, a set of 12,18 or 24 English words, which is a kind of code to recover the wallet.
Some cryptocurrency holders resort to a way of generating passive income such as stacking. It is an investment in a special smart contract. Stacking is used in blockchains running on the Proof-of-Stake (PoS) consensus algorithm. Asset holders can expect returns of up to 20% per annum. However, there are risks associated with this type of investment. In particular, the value of the tokens involved in stacking can drop catastrophically, and investors lose money.
Therefore, before investing, you should carefully understand the specifics of the PoS algorithm and the current offers on the market. And then you should place your funds on this or that crypto exchange.
Trading is also a very effective way to earn money. It is true, this way is probably the most complicated one among existing ones. Speculation on asset values is divided into short-term and medium-term. The main difficulty of this type of activity is that all risks need to be considered and responded to with maximum immediacy. This is especially true in the case of cryptocurrency fluctuations. Cryptocurrencies can change significantly over the course of a day. There was such a precedent in May 2021, when the daily fluctuation of bitcoin amounted to 33%.
This is why trading is only profitable if you have the right risk management in place. Then the number of profitable trades will keep profitability at an appropriate level and not go bust.
