How to Invest in Crypto in Nigeria

How to Invest in Crypto in Nigeria

Considerations for Nigerians who want to invest in Cryptocurrency

👉 First, if you want to invest in cryptocurrency, you must have your money in order. This requires an emergency fund, a reasonable amount of debt, and, ideally, a diverse investment portfolio.

👉 Your crypto assets can be added to your portfolio, ideally helping to increase your overall returns. Nigerians must pay attention to a few additional factors before they begin investing in cryptocurrency.

Never invest more than you can afford to lose

👉 It is crucial to avoid investing necessary funds in speculative assets. If you cannot afford to lose it all, you cannot afford to invest in risky assets like cryptocurrencies or market-based assets like stocks or ETFs.

👉 Whether it is for a down payment on a home or an anticipated major purchase, money that you may need within the next several years should be maintained in secure accounts, and if you want a guaranteed return, your best choice is to pay off your debt.

👉 Never disregard the security of any exchange or broker that you use. Even if you legally possess the assets, someone must still protect them, and that protection must be stringent.

👉 If they do not believe their cryptocurrency is protected, some Nigerian traders prefer to purchase a crypto wallet to store their coins offline, making them unavailable to hackers and other parties.

Make sure that you manage your risk

👉 Short-term trading of any asset requires risk management, and this may be particularly true for volatile assets such as cryptocurrencies.

👉 Subsequently, as a novice investor, you will need to grasp how to effectively manage risk and build a method for mitigating losses. And this procedure may differ from person to person:

➡️ A long-term investor’s risk management can consist of never selling, regardless of price. The long-term perspective enables the investor to maintain the position.

➡️ Risk management for a trader with a short-term horizon may include establishing rigorous standards for when to sell, such as when an investment has declined by 10%. The trader then follows the rule mechanically so that a little fall does not become a devastating loss in the future.

👉 At least initially, novice traders might consider putting aside a specific amount of trading capital and spending just a fraction of it. If a position swings against them, they will still have funds available for future transactions.

👉 The final argument is that if you do not have money, you cannot trade. Keeping some funds in reserve ensures that you will always have sufficient funds to fuel your trade.

Remember that volatility is an inherent risk with crypto investment

👉 The values of cryptocurrencies are as volatile as an asset can be. They might fall precipitously in a few seconds if a report that turns out to be false spreads.

👉 This could be advantageous for knowledgeable investors who can execute transactions quickly or who have a firm understanding of the market’s fundamentals, its current trend, and its potential direction.

👉 It is a minefield for novice investors who lack these abilities or the high-powered algorithms that guide these deals. Volatility is a game played by affluent traders, each of whom attempts to outgun other wealthy investors, and volatility could easily overwhelm a beginner investor.

👉 This is because volatility scares away traders, particularly novices. Meanwhile, other traders may purchase at a discount. In summary, volatility could aid professional traders in “buying low and selling high,” whereas naïve investors will “buy high and sell low.”

Realize that the past cannot indicate future outcomes

👉 Numerous novice investors commit the error of projecting the past into the future. Bitcoin was formerly worth pennies, but its value has since increased significantly.

👉 The crucial issue revolves around whether the growth will continue, albeit at a slower rate. Investors focus on the future, not the previous performance of an asset.

👉 Nigerians must consider the factors that could influence future returns. Therefore, Nigerian investors who purchase a cryptocurrency today must seek tomorrow’s returns, not yesterday’s performance.

Make sure that you understand your investment

👉 As you would with any other investment, you should know precisely what you are investing in. When purchasing stocks, it is essential to properly study the prospectus and research the company.

👉 Plan to do the same with all cryptocurrencies, since there are hundreds of them, they all operate differently, and new ones are formed daily. You must comprehend the investing rationale for each transaction.

👉 In the case of several cryptocurrencies, they are supported by neither tangible assets nor cash flow. Many crypto assets depend on the market growing more enthusiastic and bullish for you to benefit, as opposed to stocks, where a firm could expand its earnings and provide returns for you.

Explore the diverse Ways that You can Invest in Cryptocurrencies

👉 While investing directly in cryptocurrencies may be the most common method, there are other methods for traders to enter the crypto market, some of which are more direct than others.

👉 Each of these techniques differs in terms of exposure to cryptocurrencies and risk, so you will need to understand what you are purchasing and whether it meets your requirements. Alternative crypto investment venues include:

➡️ Crypto Futures

➡️ Crypto Funds

➡️ Crypto Exchanges or broker stocks

➡️ Blockchain Exchange-Traded Funds (ETFs)

Crypto Futures

👉 Futures are another opportunity to speculate on crypto price fluctuations, and futures enable you to employ leverage to earn large gains (or losses). Futures are a fast-moving market that exacerbates crypto’s already unpredictable fluctuations.

Crypto Funds

👉 A few crypto funds (such as the Grayscale Bitcoin Trust) enable you to speculate on the price fluctuations of Bitcoin, Ethereum, and a few other cryptocurrencies. Subsequently, they might be a simple method to acquire cryptocurrency through a fund-like product.

Crypto Exchanges or broker stocks

👉 Buying the shares of a crypto exchange or broker that is positioned to benefit from the development of bitcoin regardless of the winner might also be a viable strategy.

👉 In addition, there is the possibility for an exchange like Coinbase or a broker like Robinhood, both of which get a substantial portion of their income from cryptocurrency trading.

Blockchain Exchange-Traded Funds (ETFs)

👉 A blockchain ETF enables you to invest in firms that may benefit from the development of blockchain technology. The leading blockchain ETFs provide exposure to some of the industry’s most prominent publicly listed businesses.

👉 However, it is vital to remember that these firms often engage in activities unrelated to bitcoin, which dilutes your exposure to cryptocurrencies and reduces your potential gain and loss.

How to choose a digital asset for your investment portfolio

👉 Before buying coins or tokens just because someone thinks they are a sound investment, Nigerian investors will find that they must do thorough research into the coins they wish to purchase.

👉 Initially, it is essential to recognize that selecting a good cryptocurrency differs from selecting a good stock. A stock signifies ownership in a corporation that has the potential to generate money for its shareholders. Possession of a cryptocurrency signifies ownership of a digital asset with no inherent worth.

👉 The price of a cryptocurrency increases or decreases according to supply and demand. If there is an increase in demand and a decrease in supply, the price will rise. If the supply is constricted, the price will rise, and vice versa.

👉 Consequently, while analysing a cryptocurrency, the most significant issues to address are:

➡️ How does the supply grow?

➡️ What will raise the coin’s demand?

👉 These questions can be answered by:

➡️ Reading the white paper that a cryptocurrency team releases to generate interest in their product. Check the project’s road plan for anything that might stimulate a rise in demand.

➡️ Determine if the team behind a project has the capabilities to accomplish its vision via research.

➡️ Find a network of individuals who have previously invested in cryptocurrency and measure the investor sentiment.

👉 Consider the amount of money that has previously been invested in a cryptocurrency. If the market capitalization is already big, there might not be much room for expansion. In addition, a high price will reduce demand and raise supply as early investors seek to withdraw their funds.

How to start investing in Cryptocurrencies

👉 Once you have identified a cryptocurrency that you believe would be a solid investment, it is time to begin purchasing. There are several exchanges to choose from, with Coinbase, KuCoin, Gemini, Huobi Global, Binance, and Kraken being the most popular.

👉 Many exchanges permit debit card purchases of cryptocurrencies such as Bitcoin and Ethereum, while others allow you to purchase using crypto.

👉 You could purchase fractions of a coin with many common currencies, including Bitcoin, so you do not need to spend hundreds of dollars to enter the game.

👉 Probability dictates that you will require Tether, Bitcoin or Ethereum to acquire altcoins. You cannot purchase altcoins using fiat currency (this is how crypto fans refer to paper money such as dollars and euros).

👉 Exchanges generate revenue via transaction fees, but there are other platforms where you may engage directly with other individuals wishing to trade Bitcoin, and LocalBitcoins is a popular illustration of this.

👉 The procedure will certainly be more time-consuming than an exchange, and there is the extra danger of dealing directly with an unknown individual whose money cannot be verified. You will want to utilize an exchange if you are still new to cryptocurrency.

👉 An alternative way to invest in cryptocurrencies is using a Bitcoin ATM, and there are presently two Bitcoin ATMs in Nigeria, which is a method that is growing more widespread, and they could be used to acquire Bitcoin and transfer it to a wallet.

👉 Purchasing cryptocurrency is simple. As a cryptocurrency investor, you must anticipate volatility. In general, cryptocurrencies are more volatile than conventional asset types like equities. Price fluctuations of 10% or more within a few hours are quite usual.

👉 In addition, you should assess how much of your portfolio you eventually want to devote to a particular cryptocurrency and the asset class overall.

👉 Because of the inherent volatility associated with cryptocurrencies, make sure to provide yourself with broad acceptable allocation ranges, and if your assets fall outside of these ranges, you should rebalance them.

How to store your Cryptocurrencies

👉 Sending anything to your wallet does not always entail putting your Bitcoin in a physical wallet. A cryptocurrency wallet is required to safely store the code that makes up your portfolio of cryptocurrencies as well as to keep your money.

👉 A hardware wallet or a software wallet are also options. Software wallets are essential for active trading since they simplify access to funds. For instance, you can get a native Coinbase software wallet once you register for a Coinbase account.

👉 Hardware wallets are more secure than software ones since they are real, tangible devices that resemble USB drives. They could be used for funds that you do not anticipate using often or have access to with ease.

👉 To make it simple to understand this, Nigerians can compare a hardware wallet to a savings account, and a software wallet to a transaction bank account.