Cryptocurrency is a new and exciting domain in the 21st century. Many crypto-enthusiasts believe that cryptocurrencies will power the future world of the global economy while many other experts warn the investors to stay away from them. There is a lot of dilemma among people on whether they should invest in it or not. Here, we will discuss some important things you need to know before diving into the cryptocurrency market.
1. What is cryptocurrency?
A cryptocurrency is a form of virtual or digital currency. These currencies exist entirely online and allow money and value to be moved around, independent of third-parties, central banks, and international borders. These are not based on any physical asset as their values depend on the public sentiment.
Cryptocurrencies bring in a lot of benefits to daily transactions. They make fund transfer easy and convenient between the two parties allowing secure transfer of funds through the use of private and public keys. Similarly, cryptocurrency uses cryptography to deal with the decentralized system and transfer, generate and keep the distributed ledger available.
2. How was cryptocurrency originated?
Bitcoin started the cryptocurrency era. It was the first to decentralize the digital cash. It is believed to be created by Satoshi Nakamoto in 2009. Though thousands of cryptocurrencies were released, none of them have achieved success as much as Bitcoin.
3. Are all cryptocurrencies the same?
As there are many types of cryptocurrency available now, you will need to find out the differences between each of them. There have been a lot of misconceptions among the public about Bitcoin being the only cryptocurrency. However, you need to realize that there are thousands of other cryptocurrencies as well. Ethereum, Bitcoin Cash, EOS, XRP, and Litecoin, are among the most popular cryptocurrencies after Bitcoin. Apart from these, many organizations are exploring and bringing out their own currency these days.
Do your research and find out the pros and cons of each of the currencies before investing and you will make a wise decision.
4. Is cryptocurrency transactions legal in your country?
There are only a few countries in the world that have legalized the cryptocurrency transactions and there are a lot of countries who have blocked their use and further research on their feasibility. Since cryptocurrencies have no central authority to control, a government needs to carefully study every single factor before legalizing it. Thus, it is critically important for you to know if these currencies are legal in your area before making any sort of transactions. You can also trade cryptocurrency in the international exchange in case your country has restricted its operations.
5. How much should you invest in cryptocurrency?
It is a crucial thing not to bet all of your money in cryptocurrency and invest only the amount you can afford to lose. In a lot of cases, the crypto market does not operate as we wish. It is a vulnerable investment. So, instead of taking out the second mortgage or any sorts of loan for buying a cryptocurrency, you can generally start with a few hundred or thousands of dollar and understand what really happens. The investors claim it as a fun investment and it might mean something in the long run.
6. What are your plans with cryptocurrency?
Before buying a cryptocurrency, you should be aware of what you are going to do with the amount. Decide beforehand, if you are planning to buy it as a part of a pure investment and sell it later after the certain time frame. Else, it is really important to find out if they have outlets for selling the stuff you’re planning to buy. Now, apart from big companies, even smaller merchants have started to accept or are in the process of launching their own cryptocurrency.
7. When is the right time to buy?
This is a really tricky question. Nobody can assure the actual time to invest in this market as the price of cryptocurrency changes a lot in less than a day. They are also not controlled by any central authority nor are affected by any country’s financial instability or situation. So, do your research before deciding.
8. Where is your cryptocurrency stored?
Cryptocurrency is stored in a digital wallet. You can always send, receive and store cryptocurrency in those wallets. These are protected with your secured PIN or access details.
9. Is your cryptocurrency secure?
Cryptocurrency is a highly volatile and risky asset. Further, it might need to tackle legal issues, hacker threats any many other potential threats. Usually, the crypto exchange and trading services are attacked the most as they have security issues. Though many ways have been discovered to make it completely hack-proof, they operate at less speed and convenience. Another way is to keep the funds in the offline wallet instead of keeping it online. However, if you want to trade these funds, you must go online. So, it is better to find your comfort zone before investing.
10. Can you cancel cryptocurrency transactions?
After making any transaction in a cryptocurrency platform, you can't revert it. Even if you have transferred it to a wrong ID or on the particular ID that hasn't been created yet, the cryptocurrencies get transferred. In this case, you can only expect to meet these guys someday and get your currency back.
Technically, if a crypto is transferred out from your secure wallet there is no way to recover such transaction. Therefore, you need to verify every single detail before making any crypto transaction.
No-one really knows what is going happen in the future but it is quite certain that cryptocurrencies are here to stay. So, it's really important to do your research and make sure it fits into your financial plan before investing. Finally, better would be to prepare yourself for the ups and downs that will embrace you in multiple stages of the crypto investment journey.