Five points to ponder before investing in cryptocurrency
Undoubtedly, customer demands for digital assets are skyrocketing. Some well-known tech-giants for example Mastercard, Tesla, and Bank of New York Mellon have depicted their bluntness about cryptocurrency transactions. As the crypto market is growing swiftly with the speed of light, corporates such as Uber are taking into consideration when and how they should begin accepting bitcoin as a method of payment.
Experts believe that acceleration in cryptocurrencies is observed in the past few years and a much more rapid acquisition will be observed in the upcoming years. Digital currencies have brought from hype to mainstream and mass adoption is observed due to soaring interest from both institutional and retail investors. Bitcoin momentary has bypassed the figure of $50,000 on Monday but struggled to sustain the uptrend. As the world is more prone to digitization due to accommodation with technological advancements, central banks and governments are exploring the launch of their own digital fiat currencies.
Investing in cryptocurrencies remains extremely hypothetical and that’s not for everyone. The selection of crypto exchanges is the key to success. Below are compiled top 5 considerations that everyone should acknowledge before investing in cryptocurrencies.
1. Understand how cryptocurrency operates
It is very simple to get convinced to jump right into business transactions without even investigating it in this modern digital-oriented era. Not performing the investigation process is the biggest mistake anyone can ever make. The critical and mandatory thing is to develop a better understanding of how cryptocurrencies actually work. You can easily venture into it and give it your all once you know how it operates.
Materials such as “All Crypto Whitepapers” prove to be beneficial for individuals, requiring a knowledge enhancement regarding cryptocurrency investment. You can buy various products and services using cryptocurrencies and it is crucial for you to study and conclude which niche matches your requirements.
Some of the sectors are as follow:
2. The utilization of crypto varies
Cryptocurrency is known for funding illegal transactions but still, legal businesses utilize cryptocurrencies for their transactions because it offers low-cost money transfers accurately and effectively. That’s why cryptocurrencies are well-known for international money transfers. $99 million litcoin (LTC) transactions take only two and a half minutes and the transaction fee is as low as one dollar. Cryptocurrency is free from authorities and cannot be frozen. Digital assets can be accessed only by those who have strong and secure private keys to their wallet. Investors can also invest in listed cryptocurrencies betting on which one will prosper and which one will not.
3. Investing in crypto might be risky
Investing in cryptocurrencies is very hypothetical. The majority of the cryptocurrency assets might fail and become worthless in the upcoming years like the majority of startup companies. Anderson claimed that
“Non-professional shareholders should only invest an amount that they are prepared to lose.”
Investing in an unfortunate time can result in swift and extreme losses. One unit of bitcoin traded for approximately $1500 as late as May 2017. Bitcoin hit its peak as high as $19,800 in December 2017. The risk of trading cryptocurrencies is mainly related to their volatility. Hence investors should mandatorily get themselves familiar with current cryptocurrency challenges and risks before making hefty investments.
4. Cryptocurrency can vanish
Blockchain technology is very well-known in a wide range of financial infrastructures and other individuals around the globe. There is a high possibility for an account balance to be abolished since cryptocurrencies are virtual and have the deficiency of a central storehouse. Let us consider an example. A stash of cryptocurrencies can be destroyed If a computer crashes without a backup. A cryptocurrency owned by an individual is not recoverable if he loses the private key of their wallet.
Scammers are also evolving in this digital-oriented world and they are capable enough to hack someone’s mobile account by imitating an account holder. It’s obligatory upon investors to keep an eye on their private keys and utilize a wallet from a well-established organization. Professionals and cryptocurrency experts suggest securing cryptocurrency private keys by utilizing strong passwords.
5. Cryptocurrency may fail
The future of cryptocurrencies is not guaranteed. A professor of finance at Creighton University, Robert R Johnson claimed that:
“I strongly believe that cryptocurrencies will collapse and will no longer exist in the near future in a meaningful sense. The complete cryptocurrency market is a bubble. ”
According to Johnson, the cryptocurrency market is driven by greater fool theory as emerging investors reply upon new buyers to bid up the price. There will still remain a question that needs to be addressed if the cryptocurrency market does not fail and Johnson’s prediction went wrong. The question is “which digital currency will survive in the future after the disruption of the cryptocurrency market? Not all the emerging offerings and entrants will last forever. Investors should stick to some popular names to survive in this market, such as bitcoin, ethereum, bitcoin, etc.
The final verdict
Cryptocurrency is here to stay and is not subsidized by a government or a tangible form such as paper money or gold. There would be no wrong in saying that the emergence of cryptocurrencies provides great opportunities to investors but every coin has two sides. There might be a high possibility that this could be your biggest mistake in your investing journey if you do not perform proper research or do not consider the above-mentioned points. It is mandatory for you to pay attention to critical information and ensure to make comprehensive research to come up with the best decision.