The past few years have involved a lot of discussion about cryptocurrency online. We have read stories of people who turned into overnight millionaires by owning a few cryptocurrencies here and there. It is not always bliss because we also know of those who have lost almost everything in the pursuit of the crypto wealth. This brings us to the important question, how can you invest in cryptocurrency?
Back when the crypto conversations started, most people were talking about Bitcoin. However, things are different today. There are more cryptocurrencies in the market and many others are in the pipeline. With an increase in tradable assets, you have a lot to consider in terms of your investment.
Just like the traditional money market, there are lots of opportunities you can invest in using cryptocurrencies. These are cryptographic tokens that are immutable and exchangeable and you can even convert them into fiat currency.
Reasons for Investing in Cryptocurrency
Proponents of cryptocurrency believe that in the foreseeable future, cryptocurrencies will be effective substitutes for global currencies we are used to, like the Euro and Dollar. But, why should you invest in cryptocurrency?
Cryptocurrency offers an opportunity for you to hedge your wealth against a slump in the traditional currencies. If you hold a lot of wealth in dollar currency, for example, it might be wise to invest in cryptocurrency such that in the event of a market downturn as we experienced in 2008, you do not suffer a significant hit.
We live in a world that is advancing so fast with different groundbreaking technologies coming up all over the place. Cryptocurrency acts as a guide into the new world. The traditional money market might have been efficient for many years, but it has its unique challenges that are addressed by cryptocurrencies. One of the challenges with the traditional market is that it is full of middlemen. The problem with middlemen is that they always drive up the cost of transactions, and increase delays. These are some of the challenges that are addressed by cryptocurrency.
Before you think of investing in cryptocurrency, you must take your time and understand what they are about. This is not just about the technology behind it, but also the process and procedures involved. When you learn more about cryptocurrency, you have a better chance of spotting promising investment instruments and buying into them at a good price.
While this is a good idea, you also have to take precautions not to fall victim to the fear of missing out. This is one of the challenges that led many people to lose their money after investing in cryptocurrency. Don’t just buy into the hype because you like what you read online. Take your time, investigate, research and with relevant information, decide on the best cryptocurrency to invest your money.
Like any other investment, there is no quick money-making scheme in cryptocurrency investment. If you approach it in this manner, there is a good chance you might lose your money. There are also many unscrupulous dealers who actively search for gullible traders and take advantage of them. If you look at the price of Bitcoin, for example, between December 2016 and 2017, the price rose from an average of $750 to $10,000. Stories like these got a lot of people interested and invested in Bitcoin, most of them without knowing what they were getting into. With more speculative investors buying into the currency, it was only a matter of time before the tables turned and a lot of people lost their money.
This brings us to the importance of understanding cryptocurrency. When Bitcoin prices dropped, all the other currencies in the market suffered too. What we learn from this is that you have to identify the correlation between the major cryptocurrencies and any other cryptocurrency in the market, assuming you plan to invest in something other than the major ones.
How To Invest Wisely
The crypto market is highly volatile. Because of this reason, you can expect things to change more dramatically than they do in the traditional financial markets. One of the reasons for this is because cryptocurrency is not a normal investment instrument. Besides, when you look at the possibilities involved, many countries are still unsure about the prospect of cryptocurrency, so a lot of the central banks are cautious about it. You, therefore, need to invest only when you are certain you can convert your cryptocurrency into regular currency.
You will notice on trading platforms that there are many other cryptocurrencies available. You do not have to be limited to Bitcoin, Ethereum or any other of the top currencies in the market. Such currencies are referred to as Altcoins. The closest explanation of an Altcoin in the regular investment market is penny stocks. Are they worthwhile investments? Well, think about the fact that the Bitcoin share in the market was around 90% in 2017, and fell down to around 50% in 2018. This is proof that there are new and exciting currencies in the market.
Bitcoin might be the leader in the crypto market, but it has unique challenges that prompted the crypto community to consider other investments. Besides, it is never wise to put all your money in one basket, especially for an investment like cryptocurrency where the level of regulation is pretty much non-existent.
Before you invest in any platform, you must take precautionary measures to safeguard your wealth. One of the first things you are advised at CoinCheckup to do is to read the whitepaper of the crypto project you are investing in. The whitepaper gives you a lot of information regarding the currency. You learn about the team behind it, their goals, vision, and what other cryptocurrencies it is leveraged against. The more information you can get from a whitepaper, the better an investment prospect it is. This is because these reports are authoritative and inform you more about the crypto project. Therefore, if you are about to invest in an ICO and you do not find a whitepaper, you need to reconsider your options.
