Cryptocurrencies Vs. Mutual Funds
Cryptocurrencies are the digital currencies in which transactions are verified and records maintained by a decentralized system using cryptography, rather than by a centralized authority. Governments have no control over the creation of cryptocurrencies, which is what initially made them so popular.
Most cryptocurrencies as well as Bitcoin begin with a market cap in mind, which means their production will decrease over time, which make any particular coin more valuable in the future.
On the other hand, mutual funds are managed by the fund manager as to where the money needs to be invested and what will bring more profits.
Mutual funds work in a way as investment vehicles where many investors pool in their money and this money is invested into various financial instruments such as stocks, shares of companies, bonds, and debt instruments, which will generate more wealth depending on the market situations.
In this article, we will discuss everything about cryptocurrencies, Bitcoin, and mutual funds in detail!
How to Invest in Bitcoin and Mutual Funds?
There are two ways to make investments in Bitcoins:
Investing in Bitcoins
Buy BTC (Bitcoin) and hold them until you make a profit and simply sell them. This can be done through various platforms such as ZebPay, uncoin, coinsecure. It’s no doubt that whoever invested in the initial coin offering of the Bitcoins are now millionaires and have gained millions by a mere investment of ₹50,000 or less. It is said that whoever invested in Bitcoin is now a millionaire. You can also start investing in altcoins by using different exchanges and platforms. There are few trusted platforms in the market such as Poloniex and Coinbase, which help you start investing in the coins.
If you have old computers that are lying around without any use, you can convert them into mining machines and start earning crypto coins. Depending on your hardware capacity, coins can be collected to make profits. But, there is an issue with that. First of all, you need to be familiar with the basics of computers. You need to analyze the capabilities of your hardware and see if there is any profit that you can earn after deducting monthly operating costs and electricity bills. Each of the coins requires a different set of hardware. For Bitcoins or Litecoins, there are some specifically tailored machines that can mine the coins at a much faster speed than an average computer. On the flip side, a powerful computer with good graphics cards is required to mine the coins in the Ethereum network. If you are not comfortable with setting up your own gear at home and start mining, there are some online companies as well that help you set up your mining system instantly in the cloud, to which you pay monthly subscription charges depending on the computation power you have rented.
Investing in Mutual Funds
Mutual funds can be purchased directly from a mutual fund company, a bank, or a brokerage firm. Before you can invest, you will need to have an account with one of these institutions before placing an order. The process of buying a mutual fund can be done over the phone, online, or in-person if you are dealing with a financial representative. To place an order, you would indicate how much money you want to invest and what mutual fund you want to purchase.
Should you invest in Cryptocurrencies or Mutual Funds?
Apart from the markets where we trade equities and other securities, there’s also an alternative capital market, where cryptocurrencies are traded. This market deals with widely known coins like Bitcoin (BTC), Ethereum (ETH), and others. Each of the coins has a price that depends on various factors such as demand, complexity, governing laws, and overall stability. Since these are the currencies that have no centralized systems and are basically virtual currency, their price fluctuates based on numerous factors such as demand, the algorithms used, overall network capabilities, and technology.
How to get Profits out of Cryptocurrencies?
These are called cryptocurrencies or crypto coins as they have an algorithm attached to help avoid the re-spending of the same coin and also make sure that everybody in the network is aware of the transaction that occurred.
How Cryptocurrencies stack up against Mutual Funds?
Greater the risk, greater the return and so are chances of loss. With cryptocurrency the same principle is applicable. If you want to try your luck and hope to become rich overnight, or in a week, then cryptocurrencies are your best bet.
The extremely high-risk nature of these coins is what sets them apart from mutual funds, or any other similar investment instruments.
Mutual funds are much safer compared to virtual currencies and only have one market affecting the overall performance. Even the high-risk mutual funds are much safer than an investment in Bitcoins.
Where to Invest in Bitcoin?
You can use an online broker to invest in Bitcoin. Investing in Bitcoin is similar to investing in stocks, but it is far more volatile due to the daily swings in Bitcoin. Here are the steps to invest in Bitcoin:
Open a brokerage account with a company that allows crypto investments.
Deposit funds into your brokerage account.
Later sell the crypto for a gain or loss.
These steps depend on the exchange or trading platform you are using.
Here are some top brokerages to invest in Bitcoin:
1. eToro: Trade popular cryptocurrencies, explore professionally managed portfolios, and connect with traders. eToro currently supports the purchase and sale of 15 unique coins, including:
Bitcoin Cash (BCH)
Ethereum Classic (ETC)
Stellar Lumens (XLM)
TRON coin (TRX)
2. Coinbase: Coinbase makes it safe and simple for you to buy, sell, and hold Bitcoin. You can buy a portion of bitcoin with a $0 account minimum. Pay for purchases conveniently using your debit card or by connecting your bank account. Owning Bitcoin on this brokerage is as simple as creating an account, verifying your identity, and buying your cryptos. Take control of your Bitcoin investment everywhere you go through the Coinbase mobile app. The brokerage allows you to hold onto your bitcoin, convert it into another crypto, spend it on expenses, and transfer it to anyone, anywhere in the world.
3. BitcoinIRA: BitcoinIRA’s proprietary platform enables you to self-trade crypto anytime so you can take action right when the market moves. Here’s how it works:
Create an account: Get your customized dashboard and digital wallet after you create an account. Fund your account, access LIVE to price, and learn more with a knowledge base.
Transfer funds: Transfer your IRA in 3 easy steps. Simply research and ask your helpers how much you want to invest, how you want to fund your account, and your profile information. Most accounts will be ready to trade in just 3 to 5 days.
Start trading: Trade digital assets inside your self-directed retirement account using our proprietary platform. Buy, sell, or swap anytime, anywhere by visiting the self-trading area within your dashboard.
Advantages of Bitcoin Investments
The overwhelming performance of Bitcoin, as a currency and investment, has attracted traditional and institutional investors alike. Bitcoin as an investment tool provides you with the following advantages over traditional investments.
Liquidity: Bitcoin is one of the most liquid investment assets due to the worldwide establishment of trading platforms, exchanges, and online brokerages. You can easily trade Bitcoin for cash or assets like gold instantly with incredibly low fees. The high liquidity associated with Bitcoin makes it a great investment vessel if you are looking for short-term profit. Digital currencies may also be a long-term investment due to their high market demand.
Lower inflation risk: Unlike world currencies, which are regulated by their governments, Bitcoin is immune to inflation. The blockchain system is infinite and there’s no need to worry about your cryptos losing their value.
New opportunities: Bitcoin and cryptocurrency trading is relatively young, new coins are becoming mainstream on a daily basis. This newness brings unpredictable swings in price and volatility, which may create opportunities for massive gains.
Minimalistic trading: Stock trading requires you to hold a certificate or license. You must also go through a broker to trade a company’s shares. But Bitcoin trading is minimalistic: simply buy or sell Bitcoin from exchanges and place them in your wallet. Bitcoin transactions are also instant — unlike the settlement of stock trading orders, which could take days or weeks.
Disadvantages of Bitcoin Investments
Bitcoin may be the future of monetary exchange, but it is equally important that you are aware of the concerns surrounding cryptocurrency investing. Here are some serious risks associated with Bitcoin investments:
Volatility. The price of Bitcoin is always rippling back and forth. If you happened to buy Bitcoin on December 17, 2017, the price was $20,000. Weeks later, you couldn’t sell your investment for more than $7,051. The Bitcoin market is constantly changing. With such an unpredictable market, you can hardly get a good return on your investment. To avoid huge loss, keep a close eye on the market.
The threat of online hacking: Hacking is a big threat facing a Bitcoin investor. Bitcoin exchanges let you buy and sell your cryptos using a mobile app or website. This leaves them susceptible to hacking and theft of all your investment. And Bitcoin held on exchanges isn’t insured by the FDIC.
Little or no regulation: The Bitcoin market operates with no major regulations. It is not taxed and governments have no clear stance on it. As a result, you could stand exposed to fraud and malpractice.
Limited use: Many companies don’t recognize Bitcoin as a legitimate exchange, making it an unfeasible investment vessel.
Wallets can be lost: If your hard drive crashes or a virus corrupts your wallet file, you lose your Bitcoins. You can go from a wealthy to a bankrupt investor within seconds with no way to recover.
The approach for investing in financial instruments is much different than investing in cryptocurrencies. Everything that happens in the coin market is in one way related to the demand and supply, and also other factors such as legalization, the technology behind a coin, popularity, and what future it holds. Whereas, in the mutual funds, the performance is calculated based on the type of resources it is investing into, the top holdings, age, and how the overall performance has been for the past three to five years. It also depends on a person, if, for example, the person is in his old age and wants to invest his savings in regular income schemes then cryptocurrency investment is not an option for him.
On the other hand, if the person doesn’t want to take too much risk and invest in schemes that give really good returns, he/she may consider the option of investing in equity mutual funds, in which if remain invested for a longer period give a good amount of returns.
Of course, there are pros and cons of investing in mutual funds as well. So, the smart thing is that you should research where you want to invest before investing your assets.
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