Cryptocurrencies, despite their bearish slant this year, have not lost their charm for all investors. Many of them still want to bet on its magic and take home a pretty penny for it. For those investors, there are certain things to know before they invest in cryptocurrencies as knowing about these things will help them take an informed decision. The crypto market has marked levels of volatility, often proving seasoned experts wrong in their predictions. Therefore, it is only fair that all those who choose to invest in cryptocurrencies, know a few things about their investment and the market they are dipping toes into or taking the plunge for. Here are 5 Things To Know Before Investing In Cryptocurrencies:
1. Very Different From a Stock Market:
If investors feel that they are prepared to make a foray into the crypto market just because they’ve bought stocks and bonds before and know how those investments work, they would be making a huge mistake. Investors must bear in mind that at least at this point in crypto’s life cycle, it is at a more wobbly and uncertain position than the stock market, which has an established history with well-defined regulations. Owing to its novelty, not only is cryptocurrencies’ mainstream adoption low, but their trust quotient and credibility in the minds of the public are also much lower. In addition, cryptocurrencies still do not have a uniform, standardized set of regulations like the stock market does, which makes it a rather risky venture, even when it’s a rewarding one.
2. There are Different Storage Options With Varying Levels of Cost-effectiveness and Security:
Once you have invested in cryptocurrencies, So, how should you store your crypto holdings, online or offline? It depends on a wide variety of factors, ranging from how much you are ready to shell out to how travel-friendly you need your storage option to be. There can be paper wallets (including paper wallets on myetherwallet.com), hardware devices such as Ledger Nano S or online wallets. Security issues are rife with online wallets but they do provide a great degree of convenience. On the other hand, cold storage wallets (wallets not connected to the internet) are slightly less inconvenient to lug around or use. The choice is difficult but it’s useful to have an idea about how you will store your cryptocurrencies before investing in them.
3. The Need To Decide On a Reputed Crypto Exchange:
Besides deciding on a wallet, a potential investor should ideally also decide on a good crypto exchange where they will have their fiat currencies exchanged for cryptocurrencies. There are several great crypto exchanges to choose from, based on which country you live in and where these exchanges operate.
4. Cryptocurrencies are a Fairly New Innovation, So It Isn’t Wise To Invest A Lot Right Away:
Cryptocurrencies have not been around forever and although they do hold a great deal of promise, they are not very time-tested. It is advisable to remain cautious while committing one’s hard-earned resources to crypto and testing the waters gradually instead of investing all your life savings in it would be a more rational approach to take.
5. Lack of Regulatory Control:
Again, since this is a fairly new class of assets, regulatory authorities have not yet formulated universally accepted and implementable regulations concerning these. Because of this, there remains a high possibility that one fine day, the taxation status of crypto investment, rules of trading etc. could change with little warning. Moreover, a government may even suddenly take an anti-cryptocurrencies stance altogether, a little like the government of China.
While investing in cryptocurrencies can be a very rewarding decision, it would be worthwhile to keep these factors in mind before investing in cryptocurrencies.