Launched in 2009, cryptocurrency has changed the outlook of the financial markets around the world. People have gradually moved from using fiat or traditional currency to digital or virtual currencies for investment and daily usage.
Bitcoin (BTC) has emerged as the world’s largest cryptocurrency by market capitalization, thanks to its positive adoption and profitability. In addition, over 10,000 cryptocurrencies are available that you can buy.
Cryptocurrency can be a worthwhile investment if you are willing to accept the risks involved in it. The prices of cryptocurrencies can fluctuate at any time since they are decentralized currencies.
Let us find out how you can make a good crypto investment.
Understanding Cryptocurrency
The first thing you need to do as a crypto investor is to understand digital currency comprehensively.
Cryptocurrencies can be defined as digital currencies that are supported by blockchain technology. These virtual currencies are a peer-to-peer payment method system that is always online.
The cryptocurrency blockchain is protected by cryptography to ensure enhanced safety of transactions and crypto wallets. Each transaction of digital-currency is recorded on a publicly distributed ledger for easy access.
As a crypto user, no central authority can interfere with your wealth since cryptocurrencies are decentralized currencies which operate free from the influence of a bank or government. You can make a crypto transaction 24/7 and have to pay fewer fees as compared to bank transactions.
Cryptocurrency is supported by many global leaders as the best alternative to fiat in the past few years. Car Runefelt, alias, The Moon, is a global crypto leader who has invested in more than 350 crypto startups.
He says, “Bitcoin is the only non-political money in the world. Remember guys your bank money can get frozen, and your gold can get confiscated, but Bitcoin remains whether you’re in Slovenia or Sweden or Dubai. No matter where you are, Bitcoin is always online, always working for you, and for everyone else. I think that is revolutionary, and I am so happy to be part of Bitcoin, especially in times like these of massive global uncertainty.”
Risks Involved in Cryptocurrency Investment
When you are investing in cryptocurrency, you should be aware of the risks involved in its trading.
Financial regulators and governments across the globe have warned people of the risks posed by cryptocurrencies. But the widespread hype around digital currencies has partly down these warnings.
Here are some of the risks of digital-currency investment.
Volatility
Cryptocurrencies are labelled volatile and sometimes extremely volatile.
Where fiat is backed by government or bank regulations, cryptocurrencies are unregulated currencies. The value of cryptocurrency is driven by market sentiments that play a crucial role in the crypto business.
You can suffer major losses because of the volatility of cryptocurrency. For example, BTC was valued at around $70,000 in November 2021 and its current value is around $19,671 (as of October 2022).
No Regulations
Decentralization can be viewed as a benefit of cryptocurrency, but it is also a disadvantage. Unlike fiat, which is regulated by a central bank, digital-currency transactions do not come with legal protection and are non-reversible.
This increases the chance of fraud in cryptocurrency.
Another issue that is raised by the decentralized nature of cryptocurrency is the lack of valuation protection. For example, if a large group of investors decides to stop using a particular cryptocurrency such as Bitcoin, its value can decrease greatly and affects a wide range of crypto users.
Irreversible
The lack of security is yet another risk involved in the crypto business. Since cryptocurrencies are decentralized currencies, their transactions are irreversible and final.
Nothing can be done even if you make a wrong transaction.
Another risk involved in cryptocurrency investment is that once you lose the key to your crypto wallet, you cannot retrieve it. Your fund would become inaccessible or gone completely.
Things to Remember When Buying Cryptocurrency
Cryptocurrency can be a remarkable investment if you do it in the right way.
Do not be scared of the risks involved in it, but you should understand how to overcome them when buying cryptocurrencies.
Here are some tips you can follow when investing in cryptocurrency.
- Do market research and read the current trade charts of a digital currency in which you want to invest in.
- Never invest all your life savings in crypto markets.
- It would be beneficial if you see it a bit like gambling and only invest a small amount of your income.
- You should never invest in cryptocurrency more than you can easily afford to lose.
- Like traditional assets, treating cryptocurrency as a long-term investment would help you make good money.
Conclusion
Cryptocurrency investments are rising among communities since people want to hold on to assets with handsome returns.
However, there are multiple risks involved in cryptocurrency investments that you should be careful about. You can follow the above-mentioned tips to start investing in cryptocurrency in a hassle-free manner.
