Thinking about investing in cryptocurrencies? You might be considering it since Bitcoin has been making headlines lately. The price of Bitcoin and other cryptocurrencies like Ethereum and Litecoin have skyrocketed. Crypto investment is a great way to diversify your portfolio and park some gains. Also, Bitcoin is a great way to safely transfer funds across the globe, as well as a good alternative to gold.
However, cryptocurrencies are volatile. There are a lot of risks involved with this type of investment that you need to be aware of before making any decisions. Here’s a look at some of the things that you need to consider before investing in cryptocurrency:
- 1. Picking The Right Exchange Platform
- 2. Research The Cryptocurrency You Want to Invest In
- 3. Cryptocurrencies Are Highly Volatile
- 4. Know How To Store Cryptocurrencies Properly
- 5. Know How To Keep Your Wallet Secure
- 6. Understand How Blockchain Technology Works
- 7. Pay Attention To Rules And Regulations
Picking The Right Exchange Platform
Choosing the right cryptocurrency exchange platform is the first thing that you should consider. Since there are a lot of exchange platforms today, it can be hard to pick which one will best suit your needs and use it successfully. Pay attention to specific features like transaction fees, security protocols, and payment methods when choosing an exchange platform. Pick a process that is easy for you to use and understand.
Many newbies use the wrong platform, which makes it hard to use their cryptocurrency investments wisely. To use an exchange platform for other purposes like making a purchase online, you’ll also need to use a cryptocurrency wallet. It will convert your Bitcoins to fiat currency such as U.S. dollars and Euros. Choose an exchange platform that matches your use cases and needs such as Sortter. Also, use exchanges that are widely trusted by regulators and users around the world, including Coinbase, Kraken, and Gemini.
Research The Cryptocurrency You Want to Invest In
So many people have lost money just because they invested in the wrong cryptocurrency. Since there are so many options to choose from, you need to find out which one is a good fit for you. For instance, some cryptocurrencies use peer-to-peer transactions and some cryptos use their blockchain technology. Some cryptos use a combination of both, so it’s best to research and find out which one works best for you.
When looking for a cryptocurrency to invest in, you need to consider several factors including the use case of the blockchain, the market penetration and use of the cryptocurrency, as well as dominant competition. On top of that, it’s also important to look at the people behind the cryptocurrency because they will ultimately determine if their coin or token can survive in this cutthroat industry.
Cryptocurrencies Are Highly Volatile
The cryptocurrency industry is extremely volatile. One day, cryptocurrency prices are soaring like Bitcoin and others. The next day, you’ll see that the price has dropped significantly. If your only aim is to make profits overnight, then this kind of investment would be for you. However, if you’re looking to build a long-term portfolio then cryptocurrencies might not be the best choice for you because it’s quite difficult to predict its movements in the future since there are no fundamentals involved here. Also, cryptocurrencies require knowledge on how blockchain technology works, which can take years before anyone starts getting the hang of it.
Know How To Store Cryptocurrencies Properly
Like any type of investment, knowing how to store your earnings properly is essential. Cryptocurrencies aren’t like the fiat currency that you’re used to. It’s not printed money anymore, so you can’t just keep it in your wallet or purse or leave it in your bank account. You need to figure out where and how to store cryptocurrencies properly and safely.
If you want to invest in Bitcoin, for example, there are several wallets out there that you can choose from. Some of them include Bitcoin Core, Armory, Blockchain.info, Trezor, and Bitcoin paper wallet among others. Just look for a platform that is approved by experts and cryptocurrency users alike, since this is where you’ll be storing your Bitcoins safely after purchasing some on an exchange platform. Also, make sure that whatever exchange platform or wallet you’re using is PCI DSS compliant. This will ensure that the platform follows strict information security standards to protect your data and cryptocurrency investments in general.
Know How To Keep Your Wallet Secure
You’ll be spending a lot of time researching for an exchange platform or wallet to use, so make sure that you also check how secure it is. Installing antivirus software would help but if your investment is being stored on an online wallet, keep in mind that hackers are good at getting their hands on personal information, so even one small mistake can lead to serious consequences. Always use strong passwords when creating accounts with different exchanges or wallet platforms, then double-check them just to be safe. You should also enable two-factor authentication for your account to make sure that no one else is accessing your platform or wallet.
Understand How Blockchain Technology Works
Blockchain technology has made cryptocurrencies possible, so you need to understand how it works before investing in any type of cryptocurrency. The blockchain is the public ledger that records all bitcoin transactions. This digital book is shared or copied on different computers connected to the internet, so there’s no central storage location for the information. Each time a transaction happens, it’s broadcasted on the network then bundled up with other transactions into a block which will be authenticated by miners who have the computing power to solve complex math problems to produce new coins in exchange for coins they already hold.
Pay Attention To Rules And Regulations
No matter how good or bad cryptocurrency regulations are in your country, always make sure that you’re following them diligently to avoid ending up in legal problems. Rules and regulations may vary from one country to another, but there’s no denying that they’re still important, as these would protect you as an investor as well as the platform or wallet provider. We all know how cryptocurrency platforms and wallets can be vulnerable to security threats, so legally binding rules and regulations would help them improve their systems just to keep you safe.
Image source: https://unsplash.com/photos/9opiHRPIvR0
Investing in cryptocurrencies is a risky endeavor, but if you do your research and understand how everything works, it can be a very rewarding experience. With these things to consider before investing in cryptocurrency, you’ll have a better idea of how to go about it. Just make sure that you’re aware of the risks involved and follow all rules and regulations accordingly to avoid unnecessary problems in the future.