should you invest in cryptocurrency?
Cryptocurrency is a decade year old after the anonymous Satoshi Nakamoto released the Bitcoin white paper. Bitcoin is the first and the most famous cryptocurrency in the world. However, bitcoin is not the only cryptocurrency that is circulating in the digital world.
The advent of Bitcoin and its underlying technology, blockchain, resulted in the emergence of other cryptocurrencies as well. The second famous cryptocurrency is Ethereum. Today, there are 7,000 + cryptocurrencies that can be found on the internet. With this massive number to choose from, which one should you invest in?
should you invest in cryptocurrency?
What is Cryptocurrency and the Blockchain?
A cryptocurrency, like Bitcoin, is purely a peer-to-peer version of electronic cash. It allows online payment that eliminates certain trusted intermediaries – like financial institutions.
Many companies today developed and issue their own cryptocurrency, also known as tokens, that can be used to trade specifically for the good or service that the company provides.
Think of it as a casino chip. You have to exchange real money for the cryptocurrency (in this example casino chip) to access the goods or services
On the other hand, the blockchain eliminates trust, disabling the “double-spending” concern. The blockchain is distributed, centralized, and an immutable public ledger.
How Does Cryptocurrency Work?
Cryptocurrency like Bitcoin and other tokens are traded or exchanged on the internet without the knowledge of a bank or a government.
For example, you hired a child to clean your yard. Then, you paid them in cash without going to the bank to make an official transaction. It’s a peer-to-peer or person-to-person transaction.
Cryptocurrency is decentralized. Meaning, no institutions control the transactions, how they are made, how they are traded or exchanged, and what their value is.
If I invest in Cryptocurrency, Where Will I Buy and Store It?
That’s a great question! The most common sources of cryptocurrencies are cryptocurrency exchange platforms. Also, before buying and investing in cryptocurrency, you must have a Digital Wallet. This is where you must place or store your cryptocurrencies.
Some other cryptocurrencies have their own digital wallets. You can also store it on cryptocurrency exchange platforms.
This digital wallet gives you your own unique private key. This key enables you to digitally sign on to your purchases. The digital sign is mathematical proof that your exchange or transaction was legit.
Things to Know Before Buying and Investing in Cryptocurrency
Cryptocurrencies are extremely volatile.
Sometimes it goes up and sometimes goes down. It is unstable. If you are the kind of person who has mental health problems, then experiencing this kind of volatility is hard. Investing in cryptocurrency is a bad choice for you. Avoid it.
Cryptocurrency Has No Proven Rate of Return
Trading cryptocurrency is hard. Since it is not regulated, and you are trading from person to person, there is no pattern to its analytics. Nobody knows how these coins will perform in the long run. Since it is a new kind of investment, then it will be riskier than the common stocks we already knew.
Diversify Your Investments
It is good to know that there are other cryptocurrencies circulating on the web today. You just have to do your own research to select which one has the high rate of return.
You can visit the coinmarketcap website to know other cryptocurrencies. Consider the top 10 coins on the platform for your investment. They will not be ranked on top without any good reason. You don’t have to buy all those coins, like what we’ve said, do your own research about these coins.
Do Your Own Research
These tips are still not enough. It all depends on how you interpret certain information spreading on the web.
Losses
The decentralized nature of cryptocurrency makes it unique from other currencies. But, since it only relies on the cryptography of the blockchain, its safety falls under the user who owns and stores the private keys. If the owner forgets the private key he owns, then the investment will be gone forever in the blockchain.
Theft on the other hand is also one of the reasons why investors are losing. Regardless of how secure the exchanges are, it is still not hack-proof. Also, many hackers have stolen digital currencies worth billions of dollars. How the hackers penetrate these exchange platforms? There might be a bug in the software, or not updated mobile application, or social engineering.
Protect Yourself
Here’s our simple and plain tips for you before investing in cryptocurrencies.
- Read the White Paper
- Know who owns the company
- Look for its major investors
- Find the famous person backing up the cryptocurrency
One popular cryptocurrency today is Dogecoin. It is considered as a Meme Coin or a Joke Coin. However, it is backed up by the famous CEO of major companies, Elon Musk. Having this name embedded in the name of Dogecoin, make the value of the coin rise, gaining more than 100% return.
Bottom Line
It is absolutely clear that cryptocurrencies could be the next big thing. Its underlying technology, the blockchain can revolutionize the way we transact with different individuals, and firms anonymously.
On the other hand, investing in cryptocurrencies is a different story. While others really make a profit from it, others are unlucky, they have a massive loss. If you can’t bear losing, then do not attempt stepping into the game.
While other big names, like Elon Musk, control some cryptos, it does affect the movement of the entire cryptocurrency market.
There’s no easy way of getting rich fast, it is slow and steady. In the field of cryptocurrency, there are potholes we do not know. Do not put all your money in this kind of investment, diversify. Do your own research, invest at your own risk.
should you invest in cryptocurrency?
