How To Invest In Tezos - Step-by-Step Guide
Tezos (XTZ) is both a cryptocurrency and also a smart contract blockchain platform. This is one of its main advantages: the system, in fact, automatically updates its algorithms to avoid forks and bugs.
Its technology is based on the Proof of Stake protocol, which allows its users to automatically earn through the token deposit and participate in the validation of transactions in the Tezos network.
The following article will analyse how to invest in Tezos, where you can buy this cryptocurrency and the different strategies you can adopt to obtain the best out of your investment.
Invest in Tezos in 3 Steps
Get a Tezos wallet
The first step to start trading Tezos is to have access to some kind of wallet. There are different options in this case: both a software and a hardware wallet can be a good choice.
You can either download a wallet app, access a wallet platform or buy a hardware wallet compatible with Tezos.
It is undeniable that in the latest years the easiest way to store cryptocurrencies like Tezos is with apps like Coinbase or Coinmama, which also offer a trading service. You can also easily store your Tezos by downloading a compatible mobile wallet on your smartphone.
Join a Tezos exchange
The most important step to start investing in Tezos is to join a cryptocurrency exchange that will allow you to trade it with fiat currencies. As mentioned before, many apps and websites offer both a trading and wallet service.
Once you register on an appropriate exchange, you will have the chance to exchange Tezos with other cryptocurrencies and fiat money.
Invest in Tezos
At this point, you are free to trade Tezos. The process you will have to follow usually is to verify your identity and insert your payment method. This may take more than one day, depending on the system you are using. After your bank account or credit card has been verified, you will be able to make your first purchase.
Investing in Tezos Explained
Now that you have decided to start investing in Tezos, you should get to know all the various tools you will be using in your investment journey.
The wallet is one of the most important tools for a trader because it allows you to store all of your cryptocurrencies and keep them safe. There are different types of wallets, but they mainly fall into two categories: hot wallets and cold wallets.
What does this mean? Cold wallets are called so because they store your investment offline. This aspect may be essential for some users because if you plan to go for a long-run investment strategy, it is not a good idea to keep your funds online on an exchange platform.
On the other hand, hot wallets are storage options for your cryptocurrency if you desire easy and quick access. Another option is the web wallet, accessible from your regular search engines.
The most common way to keep funds in cryptocurrency nowadays is through smartphone apps. If you do not plan to have very long investments, this may be the best choice for you. This type of app is convenient when it comes to store tokens safely and trade them at the click of a button. They provide an easy option for the user to easily control their investment.
Furthermore, it is beneficial to be able to access these platforms from the palm of your hand since we are well aware of how volatile this market can be and how quickly we may need to sell and buy cryptocurrencies. Some apps also have an efficient notification system and are compatible with Tezos trading.
Where Can You Invest in Tezos
To offer our readers the best experience of trading with Tezos, our team has selected a few options based on their reliability, user-friendliness and regulatory status. We have listed these platforms taking into consideration the best interest of users and their needs.
To invest in Tezos, you can use a variety of payment methods. Most of the platforms where you can buy this cryptocurrency are designed to accept payments both from your bank account and credit/debit cards.
Usually, you will be asked to select your preferred payment methods during the registration process. This step is important because before you choose an option as your default payment, it needs to be verified.
Usually, this process consists of either the system asking you to send a small amount on your account or charging the same small amount on your credit card or bank account. The verification can take up to some days, especially if your payment method is your bank account.
After you have verified your payment methods, you will be free to make your first deposit. Remember that when you are sending money to the platform you are not yet trading any cryptocurrency, you are just depositing your money on the account, from where you will be able to start exchanging your preferred fiat currency with Tezos.
For example, you will need to click on the wallet section and click on the fiat currency you would like to deposit. You will be asked to choose between the payment methods you previously inserted and then confirm the transaction.
Tezos Investment Strategies
In the section below, you will find some of the most recognised strategies for trading Tezos. These strategies will give you an idea of how to start your trading, how to make the best of your investment and start earning profit from it.
Buy and 'Hodl'
What is it?
This strategy takes its name from a funny joke that circulates in the cryptoverse. In 2013, there was a big recession of Bitcoin exchange value that mobilised the whole market. The price of this cryptocurrency was collapsing. It was at that moment that a drunk user, GameKyuubi, posted "I AM HODLING".
His message quickly created a funny reaction in the trader community but actually held a pearl of great wisdom: if you are a bad trader, you should not try to fool the market.
Hodling strategy requires ignoring short term price fluctuations and looks at gaining from price increase in the long term.
How to use this strategy
It is quite simple to implement the "buy and hodl" strategy. You should only invest your money in Tezos and then forget about it. This is the best way to avoid FOMO (fear of missing out) or FUD (fear, uncertainty, and doubt) that are an investor’s worst enemy.
When to use this strategy
Ideally, you should make your move with this strategy when the price hits a low point on the graph. The lowest Tezos has ever reached at this point in time is $ 0.77, with an all-time high of $11.46. Considering these two boundaries, a user should try to invest in Tezos whenever there is a lower trend in the market.
A user will also need to control his emotions and not sell prematurely in order to gain from the Hodling strategy. This is easier said than done since cryptocurrencies are a volatile investment instrument and see frequent price fluctuations.
Buy Fractional Tezos
What is it?
When we talk about fractional, we refer to that strategy that does not intend to buy integer quantities of cryptocurrency, but only a small amount. This strategy is usually used with cryptocurrencies that have reached a very high value, and are out of reach of most retail traders.
When it comes to Tezos, the current prices are not prohibitive and you will be able to buy a whole coin without the need of investing in smaller amounts.
How to use this strategy
This strategy is useful and practical in the long run because it gives everybody the chance to participate in the market. By setting aside a small amount each month, a trader can reach a considerable investment. Furthermore, it is very likely that the investment will be worth more with time, so even if a user invests a small amount, he/she can accumulate a significant amount of tokens in the longer term by investing passively regularly.
When to use this strategy
This strategy is used when the price of a token has appreciated to such a great extent that it is impossible for a retail user to buy it. A series of small investments could potentially help a user build up a significant amount of tokens in the long run.
Long Position on Tezos
What is it?
The long position strategy is the most common one and the opposite of the short position. This strategy involves purchasing an asset, in this case Tezos, with the expectation of seeing it grow in the future. Long positions are frequently used through a financial instrument known as Contracts for Differences (CFDs). A CFD allows a user to bet on the future price without owning the actual asset.
How to use this strategy
This strategy can be easily applied on any trading platform and involves you investing in a bull market. With the bull market, we refer to the market during its rising phase, where you will invest in your cryptocurrency or a CFD and hope that its value will keep following the positive trend.
When to use this strategy
This strategy offers potential payback when the market is rising. The rise could be due to some financial news, positive political development or just a trend spread from more powerful traders. It is always a good idea to keep yourself informed on what is going on in the cryptocurrency world, as many changes can happen within hours, if not minutes.
Benefits of Investing in Tezos
- Smart Contract- These types of contracts have the advantage of self-regulating themselves in such a way that no scam is possible from either side. The language Tezos uses to give birth to its contracts is Michelson.
- Peer-to-peer- This technology allows the system to work in a decentralised way still ensuring the maximum degree of safety.
- Hard-fork free- Hard forks are particular events in a coin’s life moments where parts of the blockchain separate from the other (and original) chain. In cryptocurrencies that use this system, users can vote for some update and, if it is approved, blockchain will divide and give birth to a new chain. Tezos, however, goes beyond a traditional fork method and uses it to secure its blockchain. It still allows for updates, with the difference that the modifications will be applied to the whole system.
- Two types of account- Implicit accounts: thought to be used in XTZ transactions. Originated accounts: can be used to manage smart contracts.
Disadvantages of Investing in Tezos
- Tokens delay- Some users have reportedly experienced a delay with the token issuance, causing them to miss out on possible rewards.
- Considered an immature network- As the platform is not yet widespread at a Bitcoin level, it is hard to predict the speed with which it will evolve.
- Not well known- Considering this cryptocurrency was released only in 2018, it is not as famous as other cryptocurrencies.
Other Ways of Investing in Tezos
In the sections above, we analysed different ways to invest in Tezos, but there are other ways with which you can invest or trade this cryptocurrency.
If you know other people who are investing in this cryptocurrency, face-to-face transactions are an option. If you are thinking about meeting with an unknown seller please consider meeting in a safe place and make sure to have some information about them before meeting in person. Peer-to-peer marketplaces are also a good option since they provide escrow services to ensure the transaction is safe and secure.
Other ways to trade Tezos are on leverage and in exchange traded funds. Let us see these two options in more detail.
Trade Tezos on Leverage
Leverage is a powerful instrument to use while trading Tezos. As such, it should be evaluated carefully. Trading with leverage means being allowed to have more access to greater funds than a user holds in his account. This is done by borrowing these funds from the investment platform. This tool can be particularly useful in the short run, where a user has predicted some positive trends and wishes to take advantage of the trend.
It is possible to use leverage on platforms like eToro, Skilling, Plus500, but usually it is not a default option and it needs careful verification from the system. This is due to the fact that significant losses can come from this type of strategy, and all trading platforms need to verify that you will be able to afford such a choice.
Invest in a Tezos ETF
Another way you could consider trading Tezos is through Exchange Traded Funds (ETF). This method can be useful if you would like to invest in Tezos or in combined funds but you are not sure you will be able to keep up with the price monitoring process. An ETF is a passive instrument and helps a user to manage risk appropriately by using a diversification approach.
This type of investment can be easier and faster for investors because it allows them to be passive but does not preclude some sort of gain.
Stake Tezos to Get Passive Income
Tezos is a cryptocurrency that can be staked. This can be done in two ways: with your token or on a trading app. Most exchange wallets come with a built-in feature that allows you to stake Tezos by simply leaving the tokens on the exchange platform’s wallet. Many mobile wallets also provide this feature.
In the first option, it may not be easy to manage the technical aspects of the process. Tezos allows users to delegate this type of operation, so a token owner can ask someone else to stake its funds.
Staking on an app is far easier. For example, on many exchange platforms, the only thing you will need to do is invest in Tezos and leave them in your wallet. After a first conservation period, you will start gaining interest at an annual rate estimated at 5%.
Frequently Asked Questions
You can find Tezos on most of the exchange trading platforms. Check with your local platforms to find out if Tezos is offered on the platform.
Yes. Most reputed and regulated platforms will insist on account verification since it enables them to prevent fraud and provide their users with a safe and secure investment platform.
Arthur Breitman is the founder of this cryptocurrency.
No, but for a long term investor, it is a good idea to explore the option of hardware or cold waller. Leaving funds on an exchange platform is risky.
Use a regulated platform that insists on KYC and AML procedures and protect your account by using additional security measures such as 2FA.