Cryptocurrency is a popular currency in the digital age. It is a huge investment opportunity for many and has been trending over the last several years in popularity. But before you jump on the hype train and invest your own money into something like bitcoin, take some time to consider a few things before you hit the trading floor.
What is Crypto?
Before you get into learning different tips about crypto trading, you have to first understand what cryptocurrency is. Without getting into specifics or complexities, crypto is a reference for digital assets. It is a virtual currency that can be traded for goods or services, essentially acting as its own form of currency.
Of course, because there is no physical currency, you have to attain crypto somehow, and in most cases, have to trade your own currency for cryptocurrencies to be able to then utilize that in your transactions. There are thousands of options, but the major one is bitcoin, while etherium and ripple are lesser known, but popular forms of cryptocurrency. Crypto uses blockchain technology, and is not restricted to government regulations.
Benefits of Crypto
There is no central economy when it comes to cryptocurrency as well. This means that no banks or institutions are able to control and change the values that are associated with its financial value. This is contrasted by banks and how they dictate your money with different prices, fees, costs and valuations. This makes cryptocurrency more enticing to others as you don’t have to rely on the banks to hold and value your money. You can also use it internationally, as long as others have the resources to process these transactions. This also allows you the ability to trade 24 hours in a day.
The fact that crypto is fully digital ensures that you do not have to carry anything around and be secure on your person. Of course, you need to ensure that your digital security is in place to keep your accounts and passwords safe, but that is the same with anything online.
Investing in Crypto
When investing in cryptocurrency, it is important to understand that it is not something that is easy to invest in, and the issue lies in that there is no actual asset you are investing in. The value associated with it is a created value, based on the perception of the market. Buying and selling with crypto is comparable to gambling or speculating, as these markets and values tend to fluctuate much more than other investments such as stocks in different companies. However, just because these titles of “investments” are debatable, this is not to say you cannot make money off cryptocurrency. There are many cases of people making millions. But with such success stories, you must be aware of the number of unsuccessful ones, and those that have lost substantial amounts of money.
One of the key points to consider when investing is to do your research. There are so many intricacies when it comes to cryptocurrency that you want to understand different aspects such as which currency should you consider, or what platform is best for your investments and budgets. Bitcoin is the most popular, for example, but that also means it is the most expensive. Advice from the insidebitcoins team is to do as much research as possible. With crypto investing, risks, just as much as the rewards, have a significantly larger impact.
Another point of emphasis that you should take to heart if you are considering investing in any sort of cryptocurrency is that you want to have extra income to invest. The reason you want to invest with more than you have, as emphasized by this, is because it is extremely volatile. As mentioned, there is no physical asset, and the value tied to the currency is that of the rest of the market. Unlike companies where you can monitor different technologies and statistics like sales and profit margins, you don’t have that same data available that creates more consistent and stable fluctuations. If you make the wrong decision on your crypto investment and either buy or sell at the wrong time, you could lose a lot of money. This makes investing in crypto extremely risky, and should be done when you do not necessarily rely on the money of this investment.
Cannot Be Duplicated
One of the unique aspects of cryptocurrency is that it cannot be duplicated. This means that, unlike physical money, you cannot create counterfeits. This means that it is more secure in its existence, and thus, translates to strong value that is not impacted by counterfeit markets and practices.
Limited Supply
Another aspect that makes cryptocurrency stand out is that there is only a limited availability of coins in the market. More coins cannot be created. Of course, you’ll wonder what it means by mining for crypto, and that just means that there are coins in existence, but are not accounted for yet. This finite quantity ensures that cryptocurrency is not susceptible to fluctuations and changes of market value due to inflation the same way other currencies are since governments cannot create more.
Impact of Changing Times
Some of the things that have impacted the recent changes and valuations of cryptocurrency is the pandemic that has hit economies hard in the year 2020. Jobs and incomes have been impacted and governments have resorted to providing financial assistance with stimulus packages. As discussed, this creates inconsistencies in the value of certain currencies. With how the markets have heavily fluctuated during the year, it is no wonder that people are looking for more stable economies to keep their money and hold value. Many have resorted and considered different cryptos such as bitcoin, which have then seen an increase in their value.
With all the attention brought to cryptocurrency, it can be difficult to understand it is still a good time to invest in it or not. Which way will it trend? Are you even in the right place to invest at the moment? You must do your research and understand what your best options are. Whether it is the next couple years or further down the road, you want to be able to know if your investment choices on cryptocurrency were the right ones.