Digital Asset Investment: A Comprehensive Guide from A to Z

From Bitcoin to Ethereum, digital currencies are gradually becoming an inseparable part of the modern financial world. But are you ready to step into this field? This question is not just about money but also about knowledge, strategy, and investment psychology.

What Is the Nature of Digital Currency?

Digital currency (also called cryptocurrencies) is a type of digital asset secured by encryption, stored in electronic wallets through blockchain technology. Unlike traditional fiat money, digital currencies operate on a global decentralized network, allowing you to conduct transactions without intermediaries.

The outstanding advantages of digital currencies include:

• High security: Data stored on the blockchain network is protected by millions of nodes worldwide
• No physical loss worries: Even if you lose your phone, you can still recover your account via private keys
• Global liquidity: Usable in any country where it is accepted
• Fast transactions: No need for intermediary financial institutions

Currently, there are over 5,000 types of digital currencies on the market, but Bitcoin still holds the leading position with a market capitalization of $1772.59 billion USD, accounting for 55.11% of the entire crypto market share.

Bitcoin and Other Virtual Currencies: Basic Differences

Bitcoin was created in 2009 and marked the beginning of the digital currency era. As the first and oldest cryptocurrency, Bitcoin has a market value four times higher than Ethereum—the second-largest coin by market capitalization.

All other digital currencies besides Bitcoin are called Altcoins (virtual coins). These coins are developed based on similar technology platforms as Bitcoin but with improvements in transaction efficiency, security, or other specialized features.

Can Altcoins replace Bitcoin?

Although some Altcoins have superior features, so far, no virtual currency has surpassed Bitcoin in market capitalization or widespread acceptance. Bitcoin still plays the role of the “digital gold” of the crypto world.

Why Consider Investing in Altcoins?

If you view the digital currency market as a digitized version of the traditional financial market, then Bitcoin corresponds to gold, while Altcoins are like company stocks.

Many investors see Altcoins as tools to increase their Bitcoin holdings. The attractive points of Altcoins include:

• High volatility: During 2017-2018, many Altcoins increased tenfold or twentyfold within a few months
• Quick profit opportunities: Pairs like LTC/BTC once achieved 150% returns in 2 months, TRX/BTC nearly 100%
• Large price swings: Over 1-2 weeks, Altcoins can fluctuate 20-40%, which is rare in stock markets

However, there are clear disadvantages:

• Price manipulation risk: Smaller market caps make Altcoins more susceptible to large speculators
• High risk: Rapid increases also mean high risk of capital loss
• Deep knowledge required: Investors need to understand the projects behind each coin

Notable Altcoins Worth Considering for Investors

If you want to participate in the digital currency market but prefer lower risk options, consider these stable choices:

Ethereum (ETH) - Currently priced at $2.97K, up 1.86% in 24 hours, Ethereum is not only a cryptocurrency but also the platform for thousands of decentralized applications. Its market cap now reaches $358.57 billion USD.

Bitcoin Cash (BCH) - A fork of Bitcoin priced at $605.52, up 3.67% in 24 hours. Designed to improve transaction speed, with a market cap of $12.09 billion USD.

Litecoin (LTC) - Often called the “silver to Bitcoin’s gold,” LTC is trading at $77.33 (up 1.68% in 24 hours) with a market cap of $5.93 billion USD.

XRP - Developed by Ripple, XRP is currently priced at $1.88, up 1.18% in 24 hours, focusing on international payments.

Two Main Approaches to Investing in Digital Currency

Hold Coin - Long-Term Strategy

Hold coin is a method of buying and holding digital currencies with the expectation that their value will increase over time. This approach is similar to investing in gold or real estate.

Advantages:

• Less risk of capital loss compared to short-term trading
• Lower transaction costs
• Suitable for all initial capital levels
• High liquidity, easy to sell when needed

Disadvantages:

• Usually requires higher initial capital (buy on spot markets)
• Depends on long-term technological development and government policies

Trade Coin - Short-Term Trading

Trade coin is a form of speculation in digital currencies, where you predict price trends and profit from short-term fluctuations without actually owning the assets.

Advantages:

• Can generate quick profits
• Low initial capital thanks to leverage
• A 1% increase in XRP can yield 5% profit with leverage
• Easy to enter and exit positions

Disadvantages:

• High leverage risks losing all capital in one trade
• Requires constant market monitoring
• Deep technical analysis knowledge needed
• Higher transaction fees

Should You Start Investing in Digital Currency Now?

Before entering the digital currency market, ask yourself:

1. Do you have debts to pay? - Pay off debts first
2. Do you have an emergency fund? - Save enough for 3-6 months of living expenses
3. Have you invested in traditional channels? - Balance your investment portfolio
4. Are you passionate about technology? - If yes, it will be easier to follow developments

If you have completed these points, investing in digital currencies could be a step toward the future. Statistics show that in Q2/2020, cryptocurrency exchanges recorded a 165% increase in derivatives trading volume compared to the same period last year, demonstrating growing confidence in digital currencies.

How to Invest in Digital Currency: Step-by-Step Guide

Whether you choose hold or trade, the basic steps are similar:

Step 1: Choose a Reputable Exchange

A trustworthy exchange will help you:

• Avoid risks of losing money due to exchange scams
• Protect your rights
• Conduct transparent transactions with reasonable spreads

Step 2: Create an Account and Verify Identity

Most exchanges require:

• Register with email
• Complete KYC (Know Your Customer)
• Set up 2-factor authentication

Step 3: Deposit Funds into Your Account

Depending on your trading method:

• For Hold coin: Deposit money to buy digital currencies
• For Trade coin: Deposit margin funds to use leverage

Step 4: Make Your First Trade

• Carefully analyze market trends
• Start with small amounts to learn
• Place buy or sell orders based on your predictions

Step 5: Manage Risks

• Never invest all your capital in one coin
• Use stop-loss orders to protect profits
• Maintain discipline in trading

Conclusion

Digital currency is not just the future but the present. Bitcoin continues to affirm its position with a price of $88.77K (up 1.62% in 24 hours) and a market cap exceeding $1.7 trillion USD. Altcoins like Ethereum, XRP, and Litecoin also form a rich financial ecosystem.

Whether you are a long-term investor or a short-term trader, the digital currency market offers opportunities to grow your assets. However, remember: knowledge is your best weapon, and risk management is the key to success.