How Much Do You Need To Know About Cryptocurrencies Before Investing?

Cryptocurrency has been a buzz topic of conversation for quite some time. The media’s been infiltrated with ‘How To Guides’ on making money with crypto investments, and people’s eyes have been glued to their phones while they wait for the arrows to rise in hopes that they will make some kind of profit on the money they’ve put in.

For someone who is new to the scene, it may seem a little complex and out-of-depth, but once you clear up some facts you’ll be on your way to starting out your crypto-investment journey. 

Understanding Cryptocurrency

We can classify cryptocurrency as an up-and-coming asset class; which can also be referred to as digital or virtual assets. With this kind of currency, you won’t find any tangible representation, given that digital “tokens” are used instead of actual “coins” or “notes” to represent the currency.

This may seem a little shady, but the encryption and other aspects of these digital tokens are based on cryptography and other cutting-edge technology, such as blockchain.

To fully understand blockchain, you may need to do a little bit of extra research. 

There may or may not be an underlying asset behind cryptocurrency. This currency is generally used by computer programs, automated agreements and payment systems.

What’s cool about this currency, unlike its more traditional counterparts, is the fact that crypto-assets can be made by practically anyone, so you’ll see thousands of assets circulating in a day. 

Unpredictability is to be Expected

You’ve probably already heard about crypto’s volatile nature, however, we’ll be emphasizing it just so that you don’t get too emotionally invested.

Essentially, the value of cryptocurrency entirely depends upon what people are ready to pay for it. Since market speculation is the redeeming characteristic that affects cryptocurrency prices, they are subject to wild swings.

It’s a currency whose market value is tied to trends. What this means is that a lot of attention is paid to the conduct of those who have a substantial amount of a cryptocurrency or who use social media to affect the price.

Just take a look at the influence Elon Musk had on the value of Dogecoin with a single tweet! 

How Can I Get Crypto? 

People tend to turn to cryptocurrencies to attain a certain sense of freedom from the hierarchies of power within the financial market. There are plenty of crypto trading platforms that can be used to buy crypto instantly and place it into your digital wallet.

This currency is not bound by the regulations of higher authorities, but by the people who are interested in it.  The private keys (unique codes) stored in a user’s wallet are used to authorize outbound blockchain activities.

There are two types of wallets: software wallets and hardware wallets. The private keys are stored on a hardware wallet, which is not linked to the internet. This safeguards the user’s bank account against cyber thieves.

Take Risks into Account

With elements of freedom, come certain responsibilities. Probably one of the most important things to note before you start investing in cryptocurrency is that there are a couple of risks attached to it. Many cryptocurrencies are not recognized to be financial goods by many people.

The sites where you purchase and sell bitcoin may not be controlled by ASIC as a result. This means that in the case that a trading platform goes down or is compromised, you might not even be covered.

Investors stand to lose all their money if a cryptocurrency goes under. Most nations do not recognize cryptocurrencies as currency. Because of current laws, you’re only safeguarded to the degree that they meet your needs.