Investing in digital assets has become very popular in recent years. That said, while many people have been quick to invest, many old skool investors have been more hesitant to get involved.
This hesitancy comes from the fact that digital assets are still relatively new. They’re not as heavily regulated as other instruments and they’re often a lot more volatile. On top of this, many people don’t really understand exactly what they are. A digital asset isn’t tangible in the same way that real estate or gold is – many people find it hard to visualise what they’re investing in.
But what if this ignorance is stopping people from making money? What if digital assets are the future? This post offers a brief guide to some of the most popular forms of digital asset, as well as advice on how to invest.
Cryptocurrencies
Cryptocurrencies are digital currencies. Like real world currencies, they have a monetary value. Unlike real world currencies, they are not centralised to any government and have no cash equivalent.
The first ever cryptocurrency was Bitcoin – it was introduced in 2009 as a neutral currency to be used by businesses to get around currency transfer fees. Many cryptocurrencies followed in its path. There are now hundreds in existence.
Cryptocurrencies have seen huge rises in value over the last decade. For example, Bitcoin increased 43 times in value between 2017 and 2021. These dramatic rises have been followed by dramatic falls – Bitcoin has almost halved in value since March. This volatility does make it risky.
By diversifying and investing in multiple cryptocurrencies, it’s possible to reduce the risk. It’s also important to buy crypto from a trusted exchange – you can find out how to open a cryptocurrency account here. Cryptocurrency needs to be stored in a secure place such as a cryptocurrency wallet. It’s worth spending time researching different cryptocurrencies before investing any money.
NFTs
NFTs (non-fungible tokens) are the collectibles of the digital world. Just like owning an original art piece or the first ever printed copy of a book, an NFT grants you ownership of an original digital asset such as an image, audio file or document. While there’s little to stop someone copying a digital image, an NFT is a certificate to prove that you are the owner of the original image – therefore controlling copyright laws.
Already several NFTs of popular memes have been sold for huge amounts of money. In other cases, companies have been cashing in by creating their own NFTs in the form of digital trading cards and other collectibles. You can check out this post for some of the best NFT projects. NFTs are thought to only become more popular in the next few years. Of course, their newness does make them slightly risky.
There are specialist platforms set up for buying NFTs. You can usually only purchase NFTs using a cryptocurrency such as ethereum.
Domain names
Domain names are one of the oldest forms of digital asset. Some domain names can be worth thousands and even millions of dollars due to containing a word that is in demand (such as ‘business.com’ or ‘insurance.com’). Money can be made from buying a cheap domain name that later becomes in-demand. New words and acronyms are constantly being invented – if you happen to own a domain name that contains one of the words or acronyms it could be very valuable.
You can buy domain names via domain registrar websites. This guide offers more information on investing in domain names.