Important aspects to consider before investing in cryptocurrency

 Cryptocurrency has been hailed by many financial experts as being the future of money and, with the widely-reported profits that can sometimes be possible through investing, crypto can often appear an extremely attractive proposition for investors.

However, before investing in crypto, it’s important to remember that – just as with all forms of investment – the value of crypto can both rise and fall. Therefore, to better protect yourself (and your money) from market fluctuations, there are some important questions to ask before backing any cryptocurrency.

Below are some top tips from the experts to help you work out if you should invest your hard-earned cash in cryptocurrency – and, if so, to help decide which one.

Rule 101 – understand what crypto is

It’s unlikely any savvy investor would put money into a company they didn’t study and understand – and the same should apply to investing in cryptocurrency.

Cryptocurrencies are, in essence, just a way of making payments. The first crypto, Bitcoin, was launched in 2009, largely due to the global financial crash. These days, it’s common for companies to launch their own currencies, mostly as a way for consumers to buy their particular products or services. For a real-world comparison, you could consider crypto almost like casino chips. Just as the way you exchange cash at the casino door for chips, you can exchange money for ‘tokens’ to be used in that particular establishment. Companies launch new currencies through Initial Coin Offerings (ICOs) – which can often seem attractive as the price is perceived to be at its lowest.

How many cryptos are there?

There are currently more than 10,000 cryptos on the market, valued in August at around $1.6 trillion in total. However, while Bitcoin is perhaps the most famous of all the cryptos, countless others often slip under the radar of prospective investors.

The key to making a good investment is studying past performance and looking for trends that might suggest growth (or other well-known investors backing that particular crypto). So, for example, you should check online for the current price and performance, e.g., checking the dogecoin price to see how it’s fared over recent months and years.

Is it a good idea to invest in cryptos?

As mentioned earlier, the key is to remember that all investments have a certain amount of volatility attached and that investing in anything carries with it a level of risk. However, it’s also equally important to remember that cryptos don’t generate money on their own – they are merely a way of transferring money. For an investor to make a profit, someone else needs to buy their currency for more than they did (this also applies to real-world currencies). So you need to balance that with the idea of investing in a company, which may have the ability to make more money through your investment.

Is the future of money digital and cryptos?

Many investors are drawn to cryptocurrencies as they see them as the currency of the future. There’s certainly no doubting that the way we use and spend money has transformed irreversibly in recent years with the rise of e-commerce, online banking, contactless payments, and digital transactions for everything from our utility bills to standing orders and subscriptions.

The future of money is most certainly moving toward electronic finance, so it seems highly likely that cryptocurrencies will have their part to play. Indeed, one of the primary reasons many investors are drawn to backing crypto is the notion that, if they get in early now, the value of their investment has the chance to grow considerably in the future.

Is it legal to trade in cryptocurrencies?

This very much depends on your location as nations differ in their opinions. For example, crypto trading in the US is 100% legal, whereas China has all but banned the practice. If in doubt, check with a financial advisor, state advisor, or your nation’s government.

How do investors buy and sell cryptos?

Many cryptos can be bought with traditional money (e.g., Bitcoin), whereas others require that you purchase in Bitcoin or another cryptocurrency. Regardless, to start trading, you’ll need to set up a virtual ‘wallet’, a form of an online app that can hold your currencies.

Most traders set up an account with an online trading exchange where it’s possible to set up a ‘wallet’ and trade between the various available currencies. As ever, you should perform due diligence before entrusting your money and ensure the platform you choose has a good reputation and adequate security provisions in place to protect your investment.

Also, if you’re looking to grab crypto early via an ICO, you should do thorough research and ensure the company behind the currency is viable, profitable, and respected. Another good sign is whether other well-known or respected traders have backed the currency – plus, be sure to check whether you’re just buying the currency or will own an actual stake in the company through your investment.

You can start your crypto journey !
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