How do I invest in blockchain and make a profit: proven ways and 3 tips for startups

Looking for alternative sources of passive income? This article will tell you how to invest in blockchain and make money from it.

What is blockchain?

Blockchain is a data storage technology first used for cryptocurrency transactions. It is characterized by a decentralized structure: the system regulates itself, without the intervention of an administering node.

In practice, it works like this: user #1 transferred a coin to user #2. The details of the transaction are then stored in a large database, forming blocks and then a chain of information. The name of the technology is based on this feature.

Blockchain is distinguished by its anonymity, security, and high speed of information processing. Transactions do not require a name and passport information - only a wallet address.

In the future, it can be used not only for payments but also in other niches: logistics, credit or even medicine.

And the most important aspect: every user has access to the information.

Why invest in blockchain?

In early 2021, Bitcoin renewed its historic high, hitting the $40,000 mark. Blockchain and cryptocurrencies are of interest not only to ordinary investors but also to large companies.

The investor's goal is to make a profit. For this purpose, liquid markets are selected, which are developing now and will continue to develop in the next few years.

Blockchain Investing can be highly profitable because: 

1. Rapid growth in market capitalization.

2. New projects and ways of making money are appearing on it.

Whereas in the past there was scepticism, in 2021 the interest of institutional investors is hard to ignore.

How to invest in blockchain technology?

Investments in blockchain projects can be:

1. Short-term.

2. Long-term.

There are 5 ways to put money into technology.

Investing in cryptocurrencies and tokens

At the beginning of February 2021, Bitcoin had a capitalization of $697,476,056,137 according to Coin Market Cap: the statistics for other assets are also impressive. This is one of the most common ways to interact with crypto.

You should not confuse:

1.  Cryptocurrencies - are a full-fledged unit of payment, functioning on the market;

2. Tokens - are a unit for attracting investments, also used for accounting or use of internal blockchain services.

Tokens are often compared to securities and can be bought directly in the cryptocurrency ecosystem (e.g., Ethereum).

How to invest in cryptocurrency: buy on an exchange (suitable for trading) or buy in exchangers or privately (suitable for long-term investment).

Popular markets: Binance, EXMO, Poloniex, Kraken, Coinbase. Most of them require verification.

Investing in companies’ stocks.

There are companies somehow related to blockchain. These are:

• NVIDIA - making graphics cards for mining.
• MasterCard - working on a new cashless payment system.
• Amazon - Amazon Web Service allows users to create their blockchain structures.

Their shares are listed on the stock market - you can explore indices and add assets with better performance to your investment portfolio.

In English, there is the term Pure Blockchain Play. It means investing in companies that promote technology development, invest in cryptocurrency and release their innovations.

Investing in cryptocurrency investment funds

Trust management funds use clients' investments, make a profit and charge a percentage for providing services.

• Pros: guaranteed profit + no need to search for liquid instruments and learn to work with them. Packages with different investment portfolios and investment amounts are developed.
• Disadvantages: difficulties in finding a reliable hedge fund. There is always the risk of running into fraudsters.
  
  
  

Long-term investments

Long-term investing is defined as the purchase of assets for a period of 2 to 3 years. It can be cryptocurrencies and shares of companies, gathered in an investment portfolio and left until better times.

We recommend you to follow some simple rules:

1. Diversify your risks. Investing in one or two assets is dangerous: if they fall in value, your loss will be tangible. A diversified portfolio allows you to smooth out losses.

2. Find liquid assets with a perspective. This does not include tokens of new projects or unknown digital startups.

3. Revise the contents of the portfolio, removing and adding new directions depending on the market situation.

It is recommended to focus on a budget of $ 500 - a smaller amount will not bring significant income.

Investing in startups and crowdfunding

Startups are new projects. The cost of their creation is impressive, so developers often organize investment fundraisers (ICO) to implement the idea.

Working with startups is not suitable for a person who encounters cryptocurrencies for the first time. There are several reasons: first, not all projects have development prospects. Second, there are still a lot of fraudsters on the market.

If you have enough experience, you have a chance to discover a gold mine and profit after the new asset is introduced to the exchange.

Principles of Effective Investing and Market Perspectives

Promised tips for startups.

№1. The sector is rapidly evolving and involves risks - use a risk management strategy.

Why are investments in cryptocurrency considered risky? That is because of the volatility of the assets and the legislative regulation of the market.

№2. The market is regulated - keep an eye on it.

Laws and regulations can affect currency rates and entire projects.

№3. Choose liquid assets.

These are currencies that are in demand and will be sold at a high price: for example, Bitcoin. The costs of buying coins are high, but so are the potential profits.

In May 2020, Fortune Business Insights prepared a report on the prospects for the blockchain industry. The prognosis is positive: by 2025, the market capitalization will be $21.07 billion. This means that there is plenty of time for investors to capitalize on the development of technology.