In the current age, making money online is the new in-thing. Anyone that is looking at conventional techniques of making money is likely to miss out on the opportunity that has presented itself in modern times. As you may be well aware, cryptocurrency investment is one of the best options to make money.
However, making money through cryptocurrency investment can be very challenging, and cryptocurrency can lead to numerous losses if not undertaken with skill and care. Here are five things you should know before investing in cryptocurrency.
Five Pointers For Investing In Cryptocurrency: A Summary
Investing in any financial market requires a lot of research, failure to which one can incur innumerable losses. While there are numerous sources of information on cryptocurrency investing, one of the best sources to explore is Bitcoin Union. The entity is not your typical cryptocurrency digital trading platform. It provides a platform for news, information collation, and trading, which ensures that the investor is well-equipped before making the first trade.
As such, before going through the process of investing in cryptocurrency, you should be aware of the following five pointers:
- Timing is key
- Cryptocurrency is largely unregulated
- Security is under the prerogative of the investor
- Market volatility
1. Timing Is Key
The first source of cryptocurrency information was posited by Satoshi Nakamoto in 2009 via the Bitcoin Whitepapers. At the time, cryptocurrency appeared to be a very novel concept with no use case. In fact, on May 18, 2010 – after 14 months after the Bitcoin genesis block, a developer called Laszlo Hanyecz ordered two large pizzas for 10,000 bitcoins.
After someone took him up on his order a few days later, the value of the coins was around $41. However, the cost of those two pizzas is well over $200 million. This illustrates how important it is for someone to invest in cryptocurrencies at an opportune time. Late investments based on a fear of missing out can lead to losses if not done strategically.
2. Cryptocurrency Is Largely Unregulated
Unlike other financial markets, such as stocks and forex, which are the subject of intense investigations and regulations, cryptocurrency is largely unregulated. As such, when investing in cryptocurrency, one runs the risk of losing money from unscrupulous trading platforms that may not be easily traceable. For instance, one should be cautious about exchanges listed in locations that have lax financial laws, such as the Cayman Islands.
3. Security Is Under The Prerogative Of The Investor
In the cryptocurrency market, every investor has the responsibility of taking care of their crypto wallets to ensure that they are not subjected to fraud. While the exchanges and operators of the wallets have a responsibility to guarantee against any cyberattacks, everyone is expected to take care of their wallets in order to ensure they do not lose them.
Every wallet has specific keys associated with it. The keys are the only mechanism one can have for entering the wallet and either transferring the contents or even viewing them. If one were to lose their wallet and keys, there would be no feasible way of accessing the wallets. As a result, all their cryptocurrency would be lost. Thus, you should always place the cryptographic keys associated with your account in a secure but accessible place.
Ironically, while the government does not overtly regulate cryptocurrency trading, any gains or profits acquired from trading are subject to taxation from the government. Depending on the jurisdiction you are trading in, cryptocurrency investments and profits are subject to a capital gains tax regime, albeit in different names. Thus, when trading in cryptocurrency, you have an obligation to declare any profits you get to the government and submit the taxes on it, failure to which you run the risk of prosecution for tax evasion.
The amount of tax to pay on cryptocurrency also varies from jurisdiction to jurisdiction and depends on the times. As an investor, you need to be well-appraised for any changes in the taxation regime. Therefore, this calls for regular reading any news articles on cryptocurrency and joining a cryptocurrency investors’ social media group in your region to interact with like-minded people.
5. Market Volatility
The cryptocurrency market is highly volatile. This means prices change rapidly and may not move based on logical reasons. Rapid changes in the prices could be debilitating for a new investor since one may be long on a cryptocurrency, only to realize the currency is on a bearish as the price goes down. On the other hand, you could follow the trends and go short, only for the price to increase rapidly. These changes require a trader to be well-versed in the trends before making a trade.
Joining the crypto market is very alluring, especially since many people have been investing and making wide gains. While the profits others are making could motivate you to enter the market, failure to take note of the five aspects illustrated above could place you at a disadvantage when joining the market. As such, as you plan your venture into cryptocurrency trading, be careful to avoid any pitfalls.