Cryptocurrencies are one of the hottest assets in the market right now. And the numbers do not lie. Back in 2013, only 66 cryptocurrencies were present. As of now, the number has swollen well over 6800. Getting into cryptocurrencies because of the hype or the fact that they are too big to ignore might not be the right approach.
If you are someone who is new to cryptocurrencies, it is advisable to know a few essential things before investing your hard-earned money. Here are four factors that you must remember when buying cryptocurrency.
- Is it the right choice for you?
Just because the entire world is buying, doesn’t necessarily make cryptocurrencies ideal for you. There has been a constant rise in the popularity of cryptocurrencies due to investments from retail as well as institutional investors. There are a lot of financial experts who warn you that might lose your entire capital, should you invest in cryptocurrencies. Thus, you first need to ponder and decide if cryptocurrency is for you.
- What to Buy?
Cryptocurrencies are digital currencies that are decentralized. In simple terms, banks or governments do not have any control over cryptocurrencies. If you wish to buy cryptocurrencies, you would need a wallet to do so. And you can do transactions with anyone, without requiring any middleman for the same. All the transactions are recorded on a blockchain.
Since they have a lot of volatility, people usually invest in cryptocurrencies to make a quick buck. But that is far from reality. There are a lot of factors that go into deciding the valuation of a cryptocurrency. The price usually depends on demand and supply, as they aren’t backed by anything physical.
Since they are all the rage, a lot of scammers find easy targets to make money off. Thus, understanding cryptocurrencies and finding the right one to invest in is essential.
- Not a Legal Tender:
All the national currencies such as Dollar, Pound, Rupees, Yuan, etc. are created by individual governments and backed by them also. This is also one of the reasons why cryptocurrencies are popular since a lot of people do not want the involvement of any government. Since banking is regulated by the government, you can prove that the money you own is yours. You cannot say the same about cryptocurrencies.
- It is not Regulated:
One must be extremely careful when buying cryptocurrencies. Yes, it is relatively easy to get your hands on cryptocurrencies but it’s equally easy to lose your money as well. There are quite a few instances of cryptocurrency hacks where people have lost a lot of money. Since it is not regulated, you are almost helpless in such situations. You must look for options to back up your crypto wallet, for the worst-case scenario. You might have a possibility to restore it later.
It is important that you educate yourself and know as much as possible about cryptocurrencies before investing your money in them. The above points should give you a good head start with cryptocurrencies.