Cryptocurrencies are the focus of many investors’ attention today. Indeed, these digital currencies that work thanks to blockchain technology are on the way to revolutionizing our economy. Nevertheless, there are more than 10,000.
It is therefore not easy to find your way around, to know which are the most promising crypto-currencies and which to buy. Wondering what are the most promising cryptocurrencies and how to invest in them? To find your way around, in this article we offer you three strategies to apply according to your investor profile? You will know precisely in which crypto-currencies to invest.
Define your investor profile to know which cryptocurrency to buy
The first thing to do when you get into cryptos is to ask yourself about your investor profile. Indeed, your expectations will differ depending on criteria such as your age or your personal situation. You must therefore start by asking yourself questions to define your profile. Click here to get more information.
What is your financial situation? How much time and money do you want to devote to investing each week? What are your goals with cryptocurrencies? Do you want to generate passive income or do you want to make quick gains? Are you sensitive to risk? Are you ready to withstand drops of 10, 20 or 30% in one day? In short, you will understand, you must start by determining credible expectations based on your current situation before even looking for a promising crypto.
Another crucial question to ask yourself before investing in cryptocurrencies is which platform you can trust. Indeed, the crypto field is filled with malicious people and sites. If you are not vigilant, you can see your account completely emptied. To help you navigate this complex world, we present three strategies that correspond to three types of investors. In addition, we introduce you to the best cryptocurrency exchange platforms to be able to implement them.
The three investor profiles
There are generally three investor profiles: cautious, balanced and dynamic. First of all, the prudent investor is a person who will seek security above all. It accepts a moderate performance because its main objective is to preserve its capital. The balanced investor arbitrates between performance and safeguarding his assets. This type of investor accepts reasonable risk-taking.
Finally, the dynamic investor has a high tolerance for risk. In the context of crypto-currencies, this person seeks above all to identify projects that are still in the embryonic stage in order to achieve a significant return on investment when they are better known. We can speak here of so-called “promising” crypto-currencies. Indeed, it is possible to multiply your starting capital by two, ten or even more in this bubbling industry. However, it requires some research.
If you recognize yourself in one of the profiles mentioned, it is time to take an interest in the investment strategies that correspond to it in order to know which crypto-currencies are promising and which one to buy.
Which cryptocurrency to buy for a cautious investor?
If you want to discover the world of blockchain and crypto-currencies without taking too many risks with your capital, know that there are suitable strategies. Indeed, if the majority of crypto-currencies are very volatile and therefore necessarily risky assets, there is a category that escapes the rule: stablecoins (stable currencies).
Advice: to start without taking too many risks, investing in recent (and promising) cryptos is not necessarily the most judicious. This can indeed go very quickly in both directions, positively or negatively from a return on investment point of view.
What is a stablecoin?Stablecoins were designed to offer the best of both worlds, i.e. the technological possibilities allowed by crypto-currencies coupled with the stability of traditional currencies. Indeed, stablecoins are virtual currencies backed by underlying assets. These assets can be fiat currencies (such as the dollar or the euro for example) or commodities (such as gold) which ensures their stability. Each token is issued at the height of the underlying asset in a 1:1 ratio. They can thus represent a perfect entry point for the prudent investor.
Stablecoins have established themselves as an essential asset in the world of cryptocurrencies and blockchain. They were initially imagined as a safe haven in the face of market volatility. Indeed, they allow investors to secure their gains and protect themselves from fluctuations.
The cryptocurrency market is arguably one of the most volatile financial markets in the history of finance. If it is possible to realize impressive capital gains, the losses can also be dizzying. It can thus happen that certain values literally collapse in one and the same day.
Stablecoins then play the role of an umbrella and allow investors to secure their gains or minimize their losses. It is indeed much faster to convert cryptocurrencies into stablecoins than into traditional currency. This is especially the case during a bear market. In addition, capital gains tax does not apply when converting from a cryptocurrency to a stablecoin. They therefore allow you to manage your taxation more serenely. You can find more information about this in our article which explains how to declare your crypto-currencies.
Examples of stablecoins
USDC is a stablecoin pegged to a fiat currency, the US dollar. This token is issued by a consortium called “Centre” and made up of two major companies in the industry, Circle and Coinbase. For every USDC issued, 1 US dollar is kept in Center accounts. Launched in September 2018, the USDC has since been audited numerous times by financial institutions who have certified the existence of these dollars.
We can also cite Tether USD (ticker: USDT) as another example of a stablecoin backed by the value of the US dollar. USDT is issued by the company Tether ltd whose parent company is Bitfinex, a centralized exchange platform. Nevertheless, this stablecoin has already been the subject of several controversies. Indeed, some authorities have raised doubts that USDT is actually backed by dollars kept in the issuing company’s vaults.
Another example of a stablecoin is PAX Gold. Unlike USDC, PAX Gold (PAXG) is not backed by fiat currency but by gold. Indeed, each unit of PAXG is backed by a fraction of bullion stored in the vaults of Brink’s, a London company. This company is licensed by the London Bullion Market Association, the group responsible for the gold bullion market.
This group is notably supervised by the Bank of England. The goal of Paxos, the issuing company of PAX Gold, is to use blockchain technology to make gold more easily transferable. The company also wants to democratize this asset by allowing investors to buy it in very small quantities.
So would you invest in crypto and stablecoins?