What are cryptocurrency funds and is it possible to make money on them

Bitxmi experts explain why funds based on digital currencies are the best solution for investors who have no experience with crypto assets but want to generate income from them.

Over the past six months, according to Google Trends, interest in cryptocurrencies has only increased. This is happening against the backdrop of the growth of quotations. Over the past week, the cost of bitcoin has increased by 8.76%. At the time of this writing, the main cryptocurrency is trading at $ 58.4 thousand on the Bitxmi crypto exchange.

Other digital currencies also show growth, for example, Ethereum, the largest altcoin by capitalization, has risen in price by 9.8% over the past week. On April 1, the cost of the cryptocurrency is $ 1.9 thousand.

If the investor does not have experience in working with crypto assets but wants to start making money on them, then the best solution would be to use cryptocurrency funds. When investing in a crypto fund, you do not need to think about the rules of exchanges, rates, entry points, and other factors.

How do crypto funds work?

Cryptocurrency funds can be compared to conventional exchange-traded funds, which are tied to a specific sector of the economy, only in this case, the link is to the digital money sphere.

These funds mainly buy bitcoin and other promising liquid cryptocurrencies. In this case, the profit will depend on the growth of cryptocurrency quotes. Also, these funds may have a margin of flexibility in the form of cash in order to actively manage the position in the cryptocurrency market, experts say. As soon as the purchased assets have risen enough in price, they are sold, and investors receive their share of the profits.

Prospects for crypto funds

Investing in cryptocurrency funds for the short and long term now looks pretty reasonable. According to experts, this is due to the fact that in the short term there is an institutional wave of acceptance of bitcoin in the financial system, and this promises to push the price up in the coming weeks, possibly months. When focusing on the long term, over the next 5 and 10 years, Bitcoin will be able to boast of ever-higher highs and less and less deep pullbacks.

Potential risks

When investing in a large cryptocurrency fund, all key risks are negotiated in advance and the investor can be calmer about his funds than if he buys digital money on his own. In large crypto funds, a certain risk management policy is provided, which describes the levels of risk capital (potential losses) and the level of the balance that will be returned to the investor.

Cryptocurrencies, like all assets, can not only rise but also fall, experts remind. In their opinion, digital coins are more like stocks than currencies, since in theory, they can completely depreciate. For example, in the case of prohibitions by the regulators of developed countries.

How to choose a crypto fund?

Bitxmi experts advise you to start choosing a crypto fund by studying its reputation in the market, as well as analyzing the history of its work. One of the hallmarks of fraudulent funds is the promise of guaranteed high returns to investors.

Bitxmi’s experts recommend working with funds that have long held ETFs in the stock market. The largest and longest-running funds are Pantera Capital, Bitcoin Investments Trust, and Blockchain Capital.

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Disclaimer: Bitxmi News is a news portal and does not provide any financial advice. Bitxmi's role is to inform the cryptocurrency and blockchain community about what's going on in this space. Please do your own due diligence before making any investment. Bitxmi News won't be responsible for any loss of funds.