If you have finally thought about investing in cryptocurrencies, then congratulations! Investing in crypto could be a fruitful and successful venture if you know how to play your cards right. But before diving deeper into crypto investments, you should first understand its inner workings first.
In this article, we will give you a thorough guide on what cryptocurrencies really are and what you should do before shelling out your hard-earned money for crypto investments.
History of Cryptocurrencies
The birth of cryptocurrencies came about due to the 2008 financial crisis (the recession). Today’s most popular crypto, Bitcoin, is also the very first cryptocurrency. It works through a decentralized system that is designed as an alternative for people who wanted to do away with the traditional centralized banking system.
It was no coincidence that Satoshi Nakamoto introduced Bitcoin right after the 2008 recession because Nakamoto intended it to be the answer to a rather insidious and unsafe banking system. Bitcoin is created as a cushion against inevitable inflation and corrupt governments and financial institutions.
Since a decentralized system of banking and coinage have proved to be safe, secure and sometimes profitable (in terms of investments), many people have embraced Bitcoin and cryptocurrencies in general.
Today, there are over 1,500 different types of cryptocurrencies. Bitcoin was just the first one, but it remains to be the most popular and highly-valued cryptocurrency today.
Decided to Invest? Prepare For A Roller Coaster Ride
Since last year, investing in Bitcoin and other cryptocurrencies was widely hyped. This is partly because many crypto companies promised returns of over 200 to 400% in just a few years.
However, this should be taken with caution. Although it is true that cryptocurrencies can reap higher benefits than your regular investment funds, it is also a very volatile asset. Hence, the risk of loss is also high.
An 80% drop is normal for most cryptocurrencies, and it could even drop lower during certain periods. In fact, Bitcoin has already lost 69% of its value last year. So like any other investment, you have to approach cryptocurrencies with caution and knowledge before even dipping your toes in it.
Cryptocurrency Investments: Basic Rules to Follow
Don’t invest more than what you can afford to lose.
This rule applies to all types of investments – even in cryptocurrencies. Remember that cryptos are a very volatile asset. Don’t pour all your savings and hard-earned cash into it, especially if you need to use that money for debt and mortgage payments, personal, and other urgent expenses. You can invest any amount, but make sure that the money is purely something that you can set aside (or lose in the long run).
Watch out for scams and unreliable exchanges
Since the past year, many Ponzi schemes rely on cryptocurrencies to scam people. It’s true that early crypto investors have made a huge amount of money – especially after experiencing a 200% rise in value, but this does not mean that everyone who jumps into the crypto bandwagon gets the same results too.
Before investing in any cryptocurrency, you also have to do a fair amount of research. Sure, there are a lot of risks involved when it comes to investing, but these risks could be calculated and minimized if you choose the right coinage with a relatively good history.
Choosing coins is a crucial step when it comes to cryptocurrency investments. Crypto exchanges can help you out with this task, but you have to be wary of unreliable and fake exchanges too.
Profit-Making Strategies
There are actually many ways to earn from your crypto investments. Aside from trading or buying and selling your coins, you can also buy and hold to earn dividends, run master nodes, or go mining. Mining cryptocurrencies, however, require a larger capital and is not yet recommended for crypto beginners.
Learn As Much As You Can
A very basic rule to remember before investing in cryptocurrency is to learn and research more about it. This is not just about Bitcoin and other coins, but you have to learn and understand the crypto system and infrastructure as well.
Aside from the performance and history of your chosen cryptocurrency, you have to learn about crypto wallets, hardware wallets, encryption, and security features if you want to ensure that your investments will stay safe and protected. This is because your chosen platforms could be hacked, and you may even lose all your investments in an instant.
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