It is never too late to start investing in something you are interested in; it might be stocks and shares, you want to invest in something like whiskey casks – or you might really like the idea of owning some cryptocurrency.
Cryptocurrency has been one of the biggest and perhaps most important ways to buy and sell in the last few years. Although NFTs made a big splash, it is a cryptocurrency that has stood the test of time.
Every week there are new options that work with new technology – and often, they come into the market at a better price than some of the more significant coins. It’s not just the coins themselves; new user-friendly platforms are popping up every day, like the bitcoin era.
People who want to buy a cryptocurrency for the first time will typically feel hesitant for a while, unsure where to start, what the benefits are, and if they are even the type of person who belongs in the crypto-sphere.
Many people felt that way about stocks and shares, too – until they purchased some.
But there are a couple of things you should know or do about cryptocurrency before you buy any.
Taxes and Regulations
All countries have their own method for dealing with the taxes attached to cryptocurrencies and how they are regulated. You might find you reside somewhere that is strict with taxation, which will impact how much you could expect as a return. Make sure you check the tax rules for where you live – and adhere to them at all times. Violating laws while holding crypto can be detrimental to your investment.
Imagine that you go to a party and are handed one big cake. The cake is heavy and expensive, and you probably won’t eat it all. Imagine the same party, but everyone gets a smaller slice of the exact cake.
Often when people consider buying bitcoin, the price is something that puts them off – but fraction ownership means that you still get some cryptocurrency at a better price.
This is one of the best ways for people new to cryptocurrency to practice buying, selling, holding, and more.
Fractional ownership also means that you can buy many of the most popular coins rather than just pooling all your cash into one.
When you first start checking out cryptocurrency, you might get swept up in the big numbers attached to some coins. However, it is a good idea to ditch those pretty quickly. Unit bias assumes that a crypto trading at $2 per unit isn’t as good as one trading at $20,000.
That unit trading at $2 could have better developer support; it might have better decentralization, new technology – or have a massive explosion in popularity. It isn’t just about the current unit price but about the potential of that cryptocurrency.
Take into consideration all of the factors before making a choice.
Your wallet will be your best friend – because it stores all of the private keys to the currency on the blockchain. Find a wallet that will hold your chosen cryptocurrency – and find out what else you can do with it.
The two types of cryptocurrency wallets are hot and cold. A hot wallet will be used for all your daily management and transactions, and a cold wallet will store your currency (usually having high security).
You’ll also see paper wallets, hardware wallets, and software wallets. A paper wallet is considered cold storage, a cold wallet, or an offline wallet. You can’t access these via the internet – often, this is the safest option, but many people like the ease that a hot wallet offers.
For those who invest in other ways, a balanced portfolio is a must, and crypto is no different. Don’t put all of your cash into a single cryptocurrency – because just a few hours of watching the market will show you just how volatile it is. Instead, consider spreading your cryptocurrency investments across different projects like gaming, NFTs, DeFi, and more.
In almost all cases, you’re not going to have the backing of an insurance company should you lose big in cryptocurrency.
Instead, you need to make wise decisions and buy a variety of currencies.
There is a lot of hype around new currencies, and you can hear things on Twitter, podcasts, and even your favorite websites. Often when there is a lot of hype around one specific currency, it is a good idea to consider whether it is overinflated talk – or if there is some truth.
Many of the failed cryptocurrencies were enticing to beginners and said their value rose by 50%+ in just a few hours. It’s important to know that FOMO plays a significant role, and many new buyers will buy these cryptocurrencies only to see them heavily crash and never recover.
Try to avoid buying what the ‘herd’ is buying. Until it has some stability – or if you like to take risks.
You’d never throw your hard-earned cash into something that felt like a scam – but without the proper research, that is precisely what will happen. We’ve all heard of stocks and shares scams, and there are plenty of scams in cryptocurrency too.
Do plenty of reading about your chosen wallet, new currencies, and old ones, and if the people who are calling themselves cryptocurrency experts are really experts.
It’s not just those things, though, be sure to check out new technology, what is coming up, who is releasing NFTs, and any other buzz around specific cryptos.
Try to avoid buying with the idea of selling it at a later date for a higher price – although that is the idea, it isn’t the best way to look at your investments. Instead, look at the risk involved, and would you like to own that cryptocurrency?
Speaking of risks, here are some that you need to be aware of: Can You Overcome The Risks That Come With Cryptocurrencies? – Your Life After 25