The explosive growth in the cryptocurrency industry has been remarkable. While crypto had gone through its trials and tribulations since its birth a decade ago, the experience has been far more positive than negative. Crypto is the future, and the various protocols behind these tokens are facilitating innovation, much like the early days of the internet.
Digital currencies are here to stay. Bitcoin and Ethereum are the premier cryptocurrencies, battling for control of the market. The thousands of other tokens are vying for greater market share. While many alternative coins are jokes and memes, there are plenty of superb coins, and the technology that powers these investments offers users a utility.
The promising innovation and technology are what make cryptocurrency so exciting. Yes, you can make a great deal of money. At the same time, you also support the advancement of technologies and money that can revolutionize industries and perhaps even economies. But is it something you should invest in, particularly when volatility is the norm? It depends on what you know, what you are invested in, how much you are buying, and your risk for tolerance.
So, head on over to an exchange, visit your nearby Bitcoin ATM, or purchase shares in a crypto-related exchange-traded fund (ETF) and become entrenched in crypto. With that said, there are some things you should familiarize yourself with before you open a digital wallet and head over to a nearby Bitcoin ATM. Here are seven things you should learn immediately.
1. Become Acquainted with the Crypto Industry
The one main problem in crypto, similarly to any other realm of the financial sector, is that the FOMO (fear of missing out) is all too real – and ubiquitous. Many novice investors will try to ride the wave and chase the gains, but they will inevitably miss out.
Ultimately, you need to be well-versed or acquainted with all things crypto. Here are some questions to answer to determine if you are proficient in crypto:
- What is cryptocurrency?
- Is cryptocurrency legal?
- Where can you buy cryptocurrency?
- Are your holdings taxed?
- What is a blockchain?
2. Crypto is Not Regulated and Insured
First, cryptocurrency is legal. You can buy, sell, and trade Bitcoin, Ethereum, or Cardano without concern of committing a financial crime.
Second, crypto is not regulated or insured. While there is a push to regulate and insure the sector, investors are not shielded from fraud or industrial transgressions. In the end, if you lose your Chainlink or Dogecoin holdings on an exchange or trading platform, your money will most likely be lost forever.
3. Know the Tax Implications
Whether Litecoin or Shiba Inu, cryptocurrency will be taxed like any other investment security. This means that any capital gain from your initial investment will be taxed accordingly. Indeed, your profit from Avalanche or Solana will be hit with a financial penalty. As more tax agencies crackdown on the crypto industry, shielding your holdings from the taxman will be challenging.
4. Do Your Due Diligence
Like every other investment you make, it is critical to do your due diligence and conduct research on what you are buying and holding.
But what should you be on the lookout for anyway? Here are some tips for the best research:
- Read a cryptocurrency’s white paper.
- Learn more about the company behind the token.
- Who are the biggest investors?
- Does the token have an excellent track record and strong consumer confidence?
- Find out how the token has performed over the last year.
You will be protected from hefty losses if you find out these things.
5. Join a Crypto Community
You can learn a lot by joining a cryptocurrency community, whether a Reddit subpage or a forum. Either way, individuals interested in crypto can always have their questions answered on these types of web pages. Moreover, you may also learn about the next great crypto and protocol that possess utility.
6. Read the Market
Cryptocurrency is now part of mainstream media coverage, particularly on the business news networks. If you are watching CNBC, there will be a segment on Bitcoin. If you are reading The Wall Street Journal, you will come across an article about Ethereum. Coindesk.com is also a terrific resource for both written and video content. This website has been around since the early days of cryptocurrency.
7. Invest What You Can Afford to Lose
Put simply, no matter how much you know or how confident you are in a digital token, you should only invest what you can afford to lose. In other words, you do not want to put all your eggs in a crypto basket and take out your life savings to dump into XRP. While crypto is a permanent segment of the economy, it is essential not to get ahead of yourself and begin converting your entire paycheck into a virtual token.