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What to Know Before Investing in Cryptocurrency

Some say that investing in the crypto space is only for the prosperous. Maybe it used to be that way, but not anymore. Thanks to the internet and a wide variety of investing platforms, any one can invest in crypto at any time. One way people choose to invest is with a crypto business account. It’s just one of many ways to invest in crypto and blockchain. But…all this lingo already begs the question of what to know before investing in cryptocurrency…!

It can be confusing.

It can be a wild ride.

Cryptocurrency isn’t for everyone, but you should at least know something about it before you decide if you should invest or not. 

What is it you should know before buying cryptocurrency? Take a look at the full post below. From there, you should be much more education about what crypto is, if you should invest in it, and how to invest in cryptocurrency if you want to!

Related: How to Invest in Cryptocurrency in 2021 (And SHOULD You??!!)

what to know before investing in cryptocurrencyWhat Is Cryptocurrency?

Cryptocurrency is a digital form of money developed based on blockchain technology and decentralized arithmetic solutions. It cannot be held or seen. However, it has the same value as traditional money (banknotes, silver, gold, metals, etc.) payment and can be transferred, stored, or transacted over the Internet.

Crypto is also one of the types of digital assets designed explicitly to work as an exchange that uses cryptography to secure its transactions. From there, easier control over the creation of additional units and verification of the asset transfer process.

Conceptually, Bitcoin is the origin of crypto…but thousands of these currencies exist on the market. At this point, there are more than 4,000 types of cryptocurrencies on the coin market cap. Not to mention, there are still some coins that have not been updated yet. These coins are still evolving day by day to prove themselves, and they usually have good cryptographic technology.

However, no matter which cryptocurrencies you invest in, they all have one thing in common: volatility. So, from my personal experience, it is essential to choose a suitable exchange, cryptocurrency, and trading strategy for you.

Related: The Top 3 Bitcoin Alternatives

The Benefits Of Using Cryptocurrency

Looking for what to know before buying cryptocurrency? It’s important to know what’s good and bad about it. Here’s the good!

Not Regulated By The Government

For paper money, the government can freeze your account. Besides, you may also have the problem of reversing local currency transactions. As for Crypto, this cannot happen because the government does not control this currency.

What to know before investing in cryptocurrencyLow Transaction Fees

Crypto transaction costs are almost zero. Currently, many cryptocurrencies are aiming for free transactions. Meanwhile, transferring money via bank will cost a fee, even relatively high, if you move abroad.

Fast Transaction Speed

The process of transferring money through a bank will take you from a few hours (domestic) to a few days (overseas). Crypto only takes up to 15-20 minutes.

Transnational Transactions

You can trade Crypto with everyone in the world at lightning speed. In particular, Crypto is not as complicated and costly as paper money.

Not Subjected To Inflation And Counterfeiting

Cryptocurrencies have a finite number and cannot be increased or decreased (For example, Bitcoin has 21 million coins). So cryptocurrencies will not be released like paper money. In addition, Crypto exists in a physical form, so it cannot be fabricated.

The Downsides of Cryptocurrency

Wondering what to know about cryptocurrencies? The good stuff was above…and now it’s time for the downsides of cryptocurrency.

High Volatility

The biggest downside of Crypto compared to gold and paper money is its stability.

Crypto is highly volatile. For example, Bitcoins at the beginning of 2017 were only $1,000, but by the end of the year, they had reached $20,000 (and today they hover around $50,000).

On top of that, the crypto market is straightforward to manipulate if someone holds a large enough amount of coins.

how to protect your crypto walletVulnerable to Data Theft

If you do not prepare enough knowledge and skills when participating in Crypto, you will be susceptible to data theft.

Hackers always have sophisticated tricks to reach your crypto wallet. However, if you are a competent and diligent user, you will know how to secure your cryptocurrency well.

Vulnerable To Criminals Attacks

This is the big problem that Crypto has faced for a long time. Because of its anonymity and lack of control over information, Crypto is often attacked by many types of criminals. They used Crypto to launder money on black markets/markets.

Should You Invest in Cryptocurrency?

So here’s the big questions…should you invest in cryptocurrency?

From my point of view, no matter who you are – an office worker, a student, or even a homemaker – you can invest in the market.

As long as you have the passion, determination, resilience, and capital, you can accumulate knowledge and invest for yourself. Besides, many securities companies or Bitcoin exchanges do not require you to have a certain amount of money, so you are free to open an account and proceed to buy stocks or BTC, other coins, and transactions. 

But should you put money into cryptocurrency?

That answer if up to you. For me though, I’d do it sparingly. Like we said, this asset/currency is highly volatile. It could double in value tomorrow, or it may be worth nothing. Nobody knows.

If you are thinking about investing in crypto…and you have a couple thousand bucks to put toward it, the 50/30/20 rule below has been an interesting one. It might be something for you to consider.

Use 50% To Invest In Your Knowledge

Invest in yourself. If anyone wants to invest in stocks or investment channels like cryptocurrency, use 50% of your initial dollars to invest in financial knowledge. No investor can succeed without understanding the market, as no soldier goes to war without knowing how to use their weapons.

So let’s spend half of our money buying books, documents, or taking stock courses to enter the market with a solid foundation before thinking about investing money in the market.

  • Fundamental analysis,
  • technical analysis,
  • chart viewing,
  • stock selection,
  • stock valuation, etc…

All are essential things that we need to learn to be successful investors.

In addition, practice patience, hard work, mastery of emotions, set a suitable route, and follow it. If you combine the two factors above, you will be surprised at the speed of your progress.

Related: What Do The Rich Invest In (That The Poor Do Not!)

cons of buying VTSAXPut 20% of The Money Into The Market

Most investors dive in full speed or not at all. And many investors do not win initially. So why invest 100% of your money into the market (regardless of what you’re investing in!)?

New investors lack an authentic experience in the market.

In the beginning, you should not overthink about money, profit, or loss, but pay attention to mistakes and errors.

How the market works — that is the crucial thing that we aim for.

So why not put 20% of your money into the market and not be overly disappointed if your first investment fails. The mistakes and errors will help us draw for ourselves valuable lessons that books cannot teach us.

The knowledge learned in the real market plus a solid foundation will be the premise for the future success of every investor.

Related: What to Do With 100k Right Now (When Everything Is Overpriced!!)

Finally, The Remaining 30% Should Be Invested In The Future

No matter the availability, capital will soon be over without preparing knowledge, psychology, and experience.

After the above mistakes, everyone must have learned valuable lessons from them. We will be calmer, judge more accurately, and no longer be as surprised as the first time.

Use the remaining 30% of your initial money to invest in investments you think will increase in price…and then manage them wisely.

The process will likely be complex and require patience, but isn’t this a trait that every successful investor should have?

Trust the process and learn from your mistakes, and soon the rewards will come.

Related: How to Invest $1 Million (…to Make Another Million!!)

What to Know Before Investing in Cryptocurrency – In Conclusion

No article on the internet is going to tell you to for sure invest in cryptocurrency. Nobody really knows if it will be around for the long term. But, it’s stuck around this long and the value has only gone up. If it takes another dip, I’m going to be honest…it might be hard for me not to buy into it.

If you decide that investing in cryptocurrency is for you, just remember to first learn as much as you can about it, then invest just a small portion of your available dollars to learn from experience, and then take your investing cues from there!

What do you think? Are you going to pull the trigger on investing in crypto?

Money

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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