Crypto Is Going Mainstream | What You Should Know Before You Invest
Cryptocurrencies have gone from curiosity to viable investment opportunities that can turn hundreds into millions overnight, making them almost impossible to ignore. When it comes to cryptocurrency you have probably been hearing all about it over the last few months. Whether on the news, from colleagues at work, or at your niece's 2nd birthday, crypto has been making some big noise and some even bigger moves in the market lately. Between Elon Musk’s “Send dogecoin to the moon” tweet and bitcoin’s growing acceptance on Wall Street, cryptocurrency has managed to once again demand everyone’s attention.
Coinbase recently made headlines for being the first crypto exchange to go public on the Nasdaq, and established firms like Fidelity are adding crypto to their investment offerings. The adoption of online payments using crypto is growing too, thanks to brands ranging from legacy publisher TIME to digital payment facilitator PayPal and international auction house Sotheby’s.
If you just started paying attention to cryptocurrency and considering investing, it is extremely important for you to know exactly what you are getting yourself into. As with any other investment, research is a must before you simply hand over your hard-earned money. Here are a few things to consider before you step into the world of Crypto:
Understand What Is Cryptocurrency
Cryptocurrency is a digital coin that is not backed, issued, or controlled by anybody, in contrast to FIAT that is regulated by banks and backed governments. The first currency and probably the most well-known is Bitcoin and has been around for more than a decade. Bitcoin is based on blockchain technology.
Oil billionaire, Kjell Inge Rokke, has voiced his favor of Bitcoin in a recent statement:
“Bitcoin may still go to zero. But it can also become the core of a new monetary architecture. It’s not inconceivable that one Bitcoin could one day be worth millions of dollars.The direction is clear: finance will be disrupted as surely as fossil fuels will be, the question is not if, but when."
Know How Many Cryptos are Out There
The success of Bitcoin triggered the creation of thousands of currencies. As of January 2021, there are more than 4,000 cryptocurrencies in existence. While many of these cryptos have little to no following or trading volume, we have seen some enjoy immense success and popularity, some of the other famous currencies include Tether, Litecoin, Dogecoin, Monero, Ripple, and Ethereum.
Don’t Fool Yourself
Crypto is even riskier than most other investments, and even though you can win big in a short amount of time you can lose even bigger. Never put in more than you can afford to lose and do not get caught up in the hype. The only guarantee you have when it comes to crypto is its volatility. The volatile nature and unpredictability of crypto cause coin prices to swing wildly from minute to minute and for the most part, cryptocurrencies are unregulated.
Know Your Stuff
Before you invest a significant amount of money in any digital currency, be sure to really know your stuff. Read everything you can find about the particular technology on which your cryptocurrency is built. You have to understand the value proposition in order for you to determine whether someone else will be willing to buy it from you at a higher price.
By immersing yourself in a community of digital currency investors and enthusiasts you will be able to stay up to date with the newest buzz going on in the cryptocurrency world. Reddit has become a central hub for digital currency enthusiasts, but there are also many other communities online and especially on Twitter where active discussions are going at all times.
Take Bitcoin For A Test Drive
You don’t need to buy a whole coin. Bitcoin, for example, is divisible to the eighth decimal. So if you’re curious about how this stuff works, you can purchase as little as $10 worth and just play around with it until you have developed a feel for the cryptocurrency industry and feeling more comfortable with increasing your investment.
Wait For The Green Light
By now you know all about the highly volatile state of the Crypto world. Because the digital currency space is such a trendy area, things tend to develop and change at a rapid pace, making it even more important for you to time your investment perfectly.
On one side, buying into a hot new currency before it explodes in popularity and value may be the most attractive option, though you're more likely to see success if you keep a close eye on the entire industry as a whole before making a move.
Cryptocurrencies tend to follow particular price patterns. Bitcoin often leads the way among digital currencies, which tend to follow its general trajectory. Something like Tesla announcing the acceptance of Bitcoin as a payment method and then making a U-turn on the decision can send shockwaves through the cryptocurrency sphere, resulting in big jumps and equally catastrophic drops.
Finally, remember that digital currencies are a highly speculative area. For every overnight cryptocurrency millionaire, there are plenty of other less lucky investors who have poured money into the digital realm only to see their money disappear. Investing in this space means taking a risk. By doing your homework before making an investment, you help to give yourself the best chances of success. Be patient but ruthless when it comes to your digital investments.