ryptocurrency, arguably, is the most trending topic in the digital space for the past 365 days now. With all the mouthwatering stories surrounding cryptos, ranging from how outrageously the price could change from a single-digit today to thousands tomorrow. One is tempted to say that this so-called digital currency, in the air right now, is way more than hitting a pot of gold at the end of one’s effort digging down the tunnel.
Well, in the case of crypto, there is no need to assert your energy ‘digging’ for gold even though the term ‘mining’ is associated with it. The much effort needed here is knowledge (being in the know) of what, where, how, when to invest in a certain digital currency, and importantly, when to sell it off. Because, as to all businesses and investments, the risk of losing your money is as equal to the gains of making more money. See it more like a 50/50 chance of gain/loss. So, your know-how and not the money you are willing to invest is really important in this digital mining business.
So, what is cryptocurrency all about? A cryptocurrency is a digital or virtual currency protected by encryption, making counterfeiting and double-spending practically impossible. Many cryptocurrencies are decentralized networks based on blockchain technology, which is a distributed ledger maintained by a network of computers. They are distinguished by the fact that they are not issued by a central authority, making them potentially impervious to government intervention or manipulation.
It is worthy to note that some cryptography used in cryptocurrency presently was created for military purposes.
The government attempted to regulate cryptography in the same way that it regulates guns, but the right to utilize cryptography by people was protected under the freedom of speech act.
Bitcoin was the first blockchain-based cryptocurrency, and it is still the most popular and valuable of them all. Thousands of other cryptocurrencies exist now, each with its own set of features and requirements. Some are Bitcoin forks or clones, while others are entirely new currencies.
Satoshi Nakamoto created Bitcoin in 2009. There were around 18.6 million bitcoins in circulation as of March 2021, with a total market capitalization of around $927 billion.
Litecoin, Peercoin, and Namecoin, as well as Ethereum, Cardano, and EOS, are examples of competing cryptocurrencies spawned by Bitcoin’s success. Aside from Bitcoin, other cryptocurrencies are known as “altcoin” (Alternative Coin). The entire worth of all cryptocurrencies is currently over $1.5 trillion, with Bitcoin accounting for more than 60% of that amount.
One of the most difficult things for investors to avoid when it comes to cryptocurrencies is getting caught up in the excitement. Digital currencies have swiftly become a prominent part of many individual and institutional investors’ portfolios. Analysts, on the other hand, have continued to warn investors about the stock’s volatility and unpredictability.
If you have decided to invest in the cryptocurrency market, just like any other investment, you should do your homework beforehand. Before you invest, there are a few things you should know.
Think about why you are investing in cryptocurrencies.
The most important question you should ask yourself before investing in cryptocurrencies is why are you doing it? At a particular time, there are a plethora of investment options available (many of which offer more stability and less risk than digital currencies).
Are you intrigued by the cryptocurrency mania merely because it is popular? Is there a compelling reason to invest in one or more digital tokens in particular? Of course, different investors have different financial objectives, so some investors may be better off investigating the cryptocurrency area than others.
Obtain a Basic Understanding of the Business
Before investing in digital currencies, it is critical for newcomers to gain a better understanding of how the market operates. Take some time to familiarize yourself with the various currencies available. With hundreds of different coins and tokens to choose from, it is critical to go beyond the most well-known names, such as bitcoin, ether, and ripple.
Furthermore, learning about blockchain technology is essential for understanding how this component of the bitcoin industry works.
If you do not have a background in computer science or coding, you will find it difficult to understand several parts of blockchain technology. There are various beginner guides available about blockchain technology.
Once you have decided on a cryptocurrency (or several), research how those tokens use blockchain technology and whether they offer any unique features that set them apart from their competitors. You will be better able to assess whether a possible investment opportunity is worthwhile if you have a deeper understanding of cryptocurrencies and blockchain technology.
Join an Online Cryptocurrency Community
The digital currency market is such a hot topic so, things move quickly. Part of the reason for this is because there is a large and active community of digital currency investors and aficionados who communicate with one another at all hours of the day and night.
Carefully study White Papers on Cryptocurrency
The characteristics of digital money, rather than word of mouth, are more significant. When you are thinking about making an investment, look for the project’s white paper. Every cryptocurrency project should have one, and it should be easy to find (if it is not, consider it a warning sign).
Read the white paper carefully; it should contain everything you need to know about the project’s developers’ intentions, including a timeframe, a basic summary, and specifics. It is often regarded as a negative if the white paper lacks statistics and precise facts about the project. A development team’s white paper is their opportunity to spell out who, what, when, and why their project is happening. If you find something in the white paper to be incomplete or misleading, it could be a sign of deeper problems with the project.
It is all about timing.
You have probably developed a feel for the cryptocurrency sector as a result of your meticulous research, and you have decided on one or more projects to invest in. The following stage is to determine the best timing to invest. The world of digital currencies is fast-paced and often unpredictable.
On the one hand, investing in a hot new currency before it explodes in popularity and value may motivate other investors to follow suit. However, if you keep an eye on the industry before making a move, you will have a better chance of succeeding. Cryptocurrencies have distinct pricing patterns that they prefer to follow. Bitcoin is frequently the forerunner among digital currencies, with the majority of them following in its footsteps. Of course, news of an exchange hack, fraud, or price manipulation can send fear across the cryptocurrency world, so it is crucial to keep an eye on what is going on in general.
Last but not least, keep in mind that digital currencies are a highly speculative market. Many other investors have invested money into the virtual token universe just to watch it disappear. Investing in this sector entails taking a chance. You can improve your chances of success by doing your homework before making an investment.