By Femi Babatunde
Co-Founder, Savecoins Technologies.
Crypto savings and investment basically entails saving and investing in crypto-assets and crypto financial products in the short term or long term.
When starting out your crypto assets savings and investment journey, Dollar Cost Averaging [DCA] remains the most effective way to mitigate the volatility of the crypto market.
Dollar-cost averaging is an investment strategy that seeks to reduce the impact of volatility on asset purchases. It involves purchasing the asset in equal fiat(Usd, Ngn) amounts at regular intervals.
Crypto volatility can be menacing and a possible way to reduce your risk in investing in crypto.
The premise is that by entering a market like this, the investment may be less volatile than if it were made in a lump sum (i.e., a single payment). In what way? Buying at regular intervals, on the other hand, can smoothen out the average price. In the long run, this strategy mitigates the negative impact that a bad entry may have on your investment.
So What options do you have when you want to save or invest in Cryptocurrency?
When considering investing in cryptocurrency, you may consider purchasing and holding one or more crypto coins. Buying cryptocurrency directly is probably the most common way to expose one’s portfolio to crypto, but there are a few different ways to invest in cryptocurrency;
I. Buy cryptocurrency directly: You have the option of purchasing and storing one or more cryptocurrencies directly. Your options range from the most well-known digital currencies, such as Ethereum and Bitcoin, to relatively unknown coins that have recently been released in an initial coin offering (ICO), initial exchange offering (IEO), initial dex offering (IDO).
II. Invest in cryptocurrency-focused funds (Crypto Index Funds): A crypto index fund is a financial product designed to give investors access to a diversified basket of digital currency assets that weighs and rebalances itself. If you don’t want to pick and choose between individual cryptocurrencies, you can instead invest in a cryptocurrency-focused fund. You can choose from a variety of exchange-traded funds (ETFs), including index funds and futures funds.
III. Staking: If you own a cryptocurrency that supports staking — currently, Tezos, Cosmos, and now Ethereum (via the new ETH2 upgrade) — you can “stake” some of your holdings and earn a percentage-rate reward over time. This is usually done through a “staking pool,” which is similar to an interest-bearing savings account.
The blockchain puts your crypto to work, which is why it earns rewards while staked. Cryptocurrencies that allow staking use a “consensus mechanism” known as Proof of Stake to ensure that all transactions are verified and secure without the involvement of a bank or payment processor. If you choose to stake your cryptocurrency, it becomes a part of that process.
Staking is one of the low-risk ways of investing/earning in crypto.
IV. Liquidity provider (LP); Being a Liquidity provider has been embedded in the crypto market from time, as p2p form of exchange was primarily the first way to exchange your fiat for crypto. With crypto regulations and the advent of Decentralized Finance, providing Liquidity for users to be able to trade/swap among different cryptocurrencies have monetary incentives to them. Providing Liquidity is one of the best ways to invest in the crypto market if you have a low risk appetite.
V. Yield farming; Yield farming is a method of generating extra cryptocurrency with your existing cryptocurrency. It entails you lending your money to others through smart contracts, which are computer programs. You receive fees in the form of cryptocurrency in exchange for your services
image credit — challengly.com
