How Bitcoin Can Be Part of Your Investment Portfolio

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Bitcoin and other cryptocurrencies have captured the attention of investors and the general public alike. These digital assets are not tied to any country or government and are not subject to any central banking authority. Instead, they are decentralized virtual currencies that operate on a peer-to-peer basis without a central authority, such as a bank or clearing house. Investors who are new to cryptocurrencies or who are looking to diversify their portfolios can consider adding a small percentage of their savings to a cryptocurrency investment portfolio. There are a variety of ways to do this and even fewer require that you own a particular cryptocurrency. Here is an overview of how you can invest in a cryptocurrency portfolio.

The Basics

There are a few basics that you’ll want to keep in mind when it comes to investing in cryptocurrency. First, keep in mind that these investments are extremely risky. The prices of cryptocurrencies can fluctuate widely, and sometimes unpredictably, making it difficult to predict how your investment will perform. It’s important to remember that the value of cryptocurrencies can go up and down, and past performance is not indicative of future results. These investments are highly speculative, and you could lose your entire investment.

Pick An Allocation To Your Portfolio

The second basic is to pick an allocation to your portfolio. This is an important step because some investors incorrectly believe that you can simply invest in cryptocurrencies 100% of your portfolio. This is not a good idea, and you’ll want to pick an allocation that is small enough to be manageable while still having an allocation to your portfolio that has high potential returns.

Centralized Cryptocurrency Exchanges

The most popular way to buy cryptocurrencies is through centralized cryptocurrency exchanges. You can find a list of cryptocurrency exchanges here. These exchanges provide a variety of services to investors, including the ability to buy and sell cryptocurrencies, create investment portfolios, and manage your portfolio. There are a number of popular cryptocurrency exchanges:

Each of these exchanges supports a variety of different cryptocurrencies, and you can trade a variety of different assets on these exchanges. If you want to buy a specific cryptocurrency, make sure you pick a cryptocurrency exchange that supports that asset. You can store your cryptocurrencies on any type of cryptocurrency storage service, including a digital wallet, a hardware wallet, or a software wallet. Most cryptocurrency exchanges provide you with a digital wallet. If you’re looking to store your cryptocurrencies offline (which we recommend), a hardware wallet like Trezor is best way to go.

Centralized cryptocurrency exchanges have been the target of hacking attempts. If this occurs, all of the cryptocurrency funds on the exchange would be at risk of being stolen. Centralized cryptocurrency exchanges are often highly regulated and are subject to regular audits by government authorities.

Decentralized Cryptocurrency Exchanges

Decentralized cryptocurrency exchanges are similar to p2p exchanges, such as LocalBitcoins. However, instead of operating like an exchange that holds funds and then matches buyers and sellers, decentralized exchanges act as a marketplace where buyers and sellers create market orders without the need for a third-party intermediary, such as an exchange. The advantage of decentralized exchanges is that there is little to no risk of hacking or theft. These types of exchanges do not hold funds and simply connect buyers and sellers. When a trade is completed, the marketplace returns the funds to the buyer and seller, resulting in no funds being held by the exchange. Investors who want to purchase cryptocurrencies on a decentralized exchange should keep the following things in mind:

  • Decentralized exchanges are not as widely used as centralized exchanges, so you may be paying a premium when you trade.
  • Decentralized exchanges don’t offer as wide a selection of cryptocurrencies as centralized exchanges do.
  • Decentralized exchanges don’t have the same level of regulatory oversight that centralized exchanges have.

Buying Bitcoin

Bitcoin is the most popular cryptocurrency and has the largest market cap. It is the blue-chip of cryptocurrency, so it is the “safest”. We recommend 50% allocation of bitcoin to your cryptocurrency portfolio. It can be purchased through a number of different methods, including through exchanges and through a number of peer-to-peer exchanges. It can also be purchased using a number of different payment methods, including credit cards, gift cards, and PayPal.

Final Words

Cryptocurrencies are an extremely new and exciting investment vehicle. While they are still in the early stages, they have the potential to radically change the financial landscape. Also, cryptocurrencies are completely decentralized, and there is no central authority that can shut them down or regulate them. This makes them a very attractive investment option from diversification point of view. The best way to get started with investing in cryptocurrencies is to pick a cryptocurrency exchange and pick a small allocation to your portfolio.