HOW TO INVEST PART OF YOUR SAVINGS IN CRYPTOCURRENCY AND GENERATE LONG-TERM INCOME?

“From gas station attendant to millionaire in 23 minutes by investing in cryptocurrencies: discover the incredible story of Jérôme!” 

You’ve probably seen a few headlines like this in the media. Stories of people who became very rich with an initial investment of a few hundred or a few thousand euros. 

It sure sells dreams. But these are exceptions.

You can’t base an investment strategy on luck. It’s like playing the lottery. You have a 1 in 19,068,840 chance of winning the jackpot (I’ll spare you the odds calculation). That’s very, very low. You have a much higher chance of being struck by lightning (a 1 in a million chance).

This article is not for you if you want to get rich with €20 in a few days. Investing in cryptocurrencies , like all other investments, requires time, know-how, rigor and method.

On the other hand, cryptos are an excellent way to diversify your savings . And they can offer very good returns over the long term. Provided you have a solid strategy.

Here’s how to invest in cryptocurrency wisely.

But first of all, I give you the outline of the article to make your reading easier:

Let’s go !

1) WHAT IS A CRYPTOCURRENCY?

To simplify, a cryptocurrency is a currency based on a computer program, shared on the internet and managed by thousands of people.

Concretely, this means that it does not depend on a central bank. The euro can be influenced by around ten people, those who run the European Central Bank. This decides the quantity of euros in circulation. It can thus create inflation or deflation.

This is not the case with bitcoin and other cryptocurrencies. We are therefore talking about a decentralized currency . There is no single entity that manages the issuance of this currency. 

More and more stores accept payment in bitcoin. It is now possible to pay in bitcoin everywhere thanks to the visa card issued by Coinbase or Binance. A first country, Salvador, has made bitcoin an official currency of the country since September 7, 2021. Brazil is thinking about it.

Today, there are thousands of cryptocurrencies (also called altcoins) like Ethereum, Cardano, Binance coin, XRP. And there are projects backed by these cryptos. Buying these altcoins is a bit like investing in startups hoping that they take off. 

Here are two examples of crypto projects:

Efforce, founded by Steve Wozniak (the co-founder of Apple) aims to boost investment in sustainable energy sources, allowing citizens to benefit from energy savings

iExec, a French project, offers the possibility for an individual to rent the power of his computer to a company so that it can carry out its computer calculations (big data, video encoding, simulation).

Namely ?‍?: in cryptocurrency, we talk about “tokens”, tokens issued by the company. It is the equivalent of a share: a token can give the right to a form of ownership (such as a share of the company), or it allows you to receive dividends; it can also give access to a good or service. It also allows you to vote on the direction that the project backed by the token can take.

In the LiveMentor personal finance training , there is a module dedicated to cryptocurrencies.

2) WHY INVEST IN CRYPTOCURRENCIES?

There is a fashion effect. As soon as the bitcoin pump (starts to rise again), the media gets excited. It makes headlines. This is not a good reason to invest in cryptos.

We invest in crypto because we believe in it. We bet that it could well be the currency of the future. Or we want to be part of a project that can succeed. 

The advantage: like the greatest innovations, cryptos and the technology that supports them make it possible to eliminate intermediaries or trusted third parties.

It allows us to free ourselves from the bankers who, in 2008, caused a major economic crisis by playing with people’s savings.

It was precisely following this event that the founder of bitcoin had the idea of ​​a decentralized financial system: what we call Defi .

But the world of cryptocurrencies also offers new applications.

For example, the Paris Saint Germain Token allows supporters to participate more closely in club life.

Token Paris Saint Germain - invest cryptocurrency

Fans who possess these “tokens” have a right to review certain decisions of the club that are not very restrictive, or even minor. For example, they can influence “the message that is displayed on the locker room wall to motivate players before a decisive match, vote for the goal of the season or even choose the winners of end-of-season prizes”.

This is just one example among many. Cryptocurrencies open up a world of new applications. They could revolutionize the economy by proposing a new, decentralized financial model. 

3) INVESTING IN CRYPTOCURRENCIES WHEN YOU ARE A BEGINNER

There are two profiles for making money with cryptocurrency. 

The first is that of the trader . Trading is a huge subject. It relies on technical indicators to predict financial movements.

Trading is very risky. It operates according to risk management rules and requires very specific know-how. It seeks short-term profit. 

The other profile is that of investors . The investor invests his money for the long term. We recommend that you start with this approach. It is less risky and requires less technicality. However, you should not invest in something that you do not understand. That is why in this article, we seek to teach you the basics of this new way of investing your money.

In reality, it’s very similar to stock market investing .

Here are the rules for investing in cryptocurrencies.

Rule #1: Only invest money you can afford to lose. Don’t invest money you might need to live on and pay your daily expenses.

To do this, you need to have a clear vision of your expenses. The easiest way is to take a spreadsheet and make columns by category (rent, food, travel, etc.). You write down in it each time you make an expense. It requires a little discipline, but if you do it every day, it doesn’t take more than 5 to 10 minutes. 

You will have a clear view of your expenses and the amount you can invest.

Optimizing your savings requires a little effort!

Rule #2: Beware of fear and greed . These emotions are bad advisors. They will make you lose a lot of money. Also avoid what is called FOMO, The fear of missing out , the fear of missing out.

“We’re not at a casino!” as a YouTuber who shares his analysis on cryptocurrencies repeats. You need to set up a strategy and follow it, without getting distracted by sudden price movements. 

Invest regularly. Decide on an amount you can invest each week or month. Buy the cryptocurrency(s) you are interested in.

Invest on a regular basis: for example, every 1st of the month. This allows you to smooth out the purchase points. You will have greater peace of mind. 

Cryptocurrencies are very volatile. Bitcoin can lose 40% of its value in a matter of days. It can also rise very quickly.

By investing on a fixed date, you avoid buying the peaks (the moment when the currency is at its highest level) and you limit your losses.

Take the long view. In the long term, the price of bitcoin keeps rising.

Rule #3: Don’t put all your investments in cryptos. They represent a high-risk investment.

They are used to diversify your portfolio. Consider having other investment products in your portfolio such as savings accounts, real estate investments , etc.

Diversification is key when it comes to investing.

Rule #4: Don’t invest everything in one cryptocurrency. 

It’s the famous maxim: “don’t put all your eggs in one basket.” This is not a lottery game. Choose 2 or 3 cryptocurrencies to start with. This allows you to spread the risk.

Rule #5: Be patient.

Investing is a marathon, not a sprint. Cryptocurrencies can really establish themselves over time in the financial landscape. We are at the very beginning. 

Invest patiently. Don’t expect to get rich next month. Or next year. But where will bitcoin be in 10 years? Who knows.

If you want to be conservative, which is understandable, invest only 10% of your investments in cryptos. Look for other investments and sources of passive income . 

4) HOW TO BUY CRYPTOCURRENCY WITHOUT BREAKING THE BANK?

Like investing in the stock market, there are cryptocurrency purchasing platforms and apps.

WHICH SITES TO INVEST IN CRYPTOCURRENCY?

A) COINBASE

This is one of the simplest. It is a mobile and web application. It allows you to buy cryptos with your bank card or with transfers. 

It is very simple to use and it is safe. Yoann Lopez recommends this platform to start. 

Coinbase

You can buy and sell major cryptocurrencies. You can also automate your investments. 

Setting up an investment strategy with automatic payments is a huge time saver. You don’t have to think about it. And you’re preparing for your future!

The only downside of Coinbase is the fees which are a little higher than on other platforms.

Coinbase fees are 1.49% on SEPA transfers and 3.99% for credit card payments.

COINBASE PRO

Once you become more comfortable with Coinbase, you can upgrade to Coinbase pro. The platform is more complex; but the costs are lower. 

CRYPTO.COM

Another interesting platform is Crypto.com. It is an application that offers a wide selection of cryptocurrencies. The fees are lower than on Coinbase. It also has its own cryptocurrency, CRO. 

BINANCE

Along with Coinbase, it is one of the giants of the crypto world. However, the platform is more complex than its counterpart. Navigation is less easy. 

The platform is more comprehensive: you can buy more cryptocurrencies on Binance. And the fees are lower.

Note that these three applications (Coinbase, Crypto.com and Binance) offer credit cards with various advantages. Crypto.com cards, for example, offer cashback on certain products or applications. 

SWISSBORG

If you want a super simple platform with decent fees, you can use Swissborg. It’s a good platform to start with.

ETORO

Another platform where you can buy cryptocurrencies is eToro . This is a trading application that also allows you to invest in the stock market.

Important clarification: cryptos purchased on eToro cannot be transferred outside the platform.

HOW TO INVEST YOUR MONEY IN CRYPTOCURRENCY?

Concretely, here is how to proceed.

1/ CHOICE OF PLATFORM

Among the important criteria to consider, there is first the user experience. Are you looking for a simple, clear and secure platform? Or are you looking for a complete platform with many features?

The other criterion is the amount of the fees and how they are collected. 

Coinbase takes a percentage of all transactions . This is not the case with eToro or Crypto.com for example.

2/ DEFINITION OF THE BUDGET

How much do you want to invest in cryptocurrencies and at what rate?

The ideal is to be able to automate your investments and invest regularly. 

3/ WHICH CRYPTO TO CHOOSE?

You will then choose the cryptocurrencies in which you want to invest. To start, we recommend that you choose the strongest cryptocurrencies: Bitcoin, Ethereum, Cardano… 

You can then delve into the world of altcoins, if you want to go further. 

4/ HOW TO MONITOR YOUR RESULTS WITHOUT BEING AN EXPERT IN FINANCIAL MARKETS?

All applications allow you to visualize the evolution of the amount of your investment. You therefore know the amount of your portfolio day by day, in real time.

Quick tip: keep a long-term goal. Cryptocurrencies are very volatile. There are sudden rises and sharp crashes. There is no need to panic. In the long term, the cryptocurrency market is rising. 

BUT: no one reads the future. So consider spreading your investment across other investment products . Cryptocurrencies remain a risky investment.   

I share my investment strategy with you. I am a micro-entrepreneur, so I do not have a regular salary. As I believe in it a lot, I invest 5% of everything I earn in cryptos. 

Every time a client pays me, I take 5% and immediately invest it in one of the platforms I use.

You can definitely use multiple platforms. It’s a way of spreading the risk. 

5) INVESTING IN CRYPTOCURRENCIES: WHICH ONES TO CHOOSE IN 2021?

The prediction game is always difficult. I don’t have a crystal ball. 

You can do your own research and learn about the projects and the teams behind the projects.

However, here is an overview of some cryptos.

THE MOST FAMOUS CRYPTOCURRENCIES

These are “safe bets” in the crypto universe in the sense that they are projects that have a high transaction volume. 

a) Bitcoin : it is the first cryptocurrency. 

Today it is adopted by companies, nations and investment funds.

b) Ethereum: This is number 2. 

The specificity of Ethereum is that it offers more advanced applications, such as smart contracts . That is to say, it offers the possibility of making digital contracts, without going through a trusted third party (banker, notary, auctioneer, etc.). A promising future is predicted for him.

c) Cardano: This is a cryptocurrency that competes with Ethereum. 

Cardano was developed by the co-founder of Ethereum. It is attracting more and more interest because it offers similar advantages to Ethereum.

d) Binance coin: this is the crypto of the Binance platform, the giant of crypto platforms.

Cryptocurrencies with high potential: beware of mirages!

Promising Altcoins? Some cryptos are of particular interest (at the time of writing the article). They can experience significant increases (pump). They can also experience strong corrections (crash).

So beware of: 

  • Solana
  • Polkadot
  • Chiliz
  • Axis Infinity
  • Avalanche
  • Tezos
  • Earth

You have to understand that there are thousands of altcoins. Among them, there are bogus cryptocurrencies. These are what we call “ shitcoins ”. However, cryptos that start out as a joke (like Dogecoin) can gain legitimacy.

It’s the Wild West again. 

Concretely, in my portfolio , I took care to invest in already established cryptocurrencies (bitcoin, ethereum, cardano); and I invested a small part in projects I believe in, like Vechain.

The goal of this project is to provide new tools for more efficient data transfer and better supply chain management. The initiators of the project have established major partnerships with large groups such as LVHM, but also BMW and Renault.

6) WHEN TO INVEST IN CRYPTOCURRENCIES?

Many beginning investors invest during major upswings. You take the risk of buying a top.

Opportunities in both the stock market and crypto are in correction phases: when the crypto has lost value. You then have the opportunity to buy more.

However, in long-term investing, price variations may be negligible.

We recommend investing on a regular basis. 

THE FINAL WORD :

The trap is to act on emotion. As an investor, I speak from experience. 

It is important to understand yourself and know the cognitive biases that come into play when it comes to money.

In the LiveMentor training on personal finances , Yoann Lopez, the mentor, insists on the importance of understanding your psychology, but also knowing how to manage a budget and develop a strategy adapted to your profile.

it can make all the difference!

If this article interested you, we have others on managing your personal finances or investing. Find out, for example, how to get started in Crowdlending .

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