Cryptocurrencies are the digital currencies that use encryption to secure transactions and generate new coins, in a manner known as mining. Bitcoin was the first cryptocurrency to be created and has since become the most well-known, but there are now thousands of cryptocurrencies that you can buy, sell or trade. These include Dash, Ethereum, Litecoin and Zcash, just to name a few along with crypto pairs such as VRA USDT and APT USDT.
Important Points to Know before Buying Cryptocurrency
1. Learn about the basics
When people start to learn about cryptocurrencies, one of the first things they want to know about is investing in them. But before you invest your money in a cryptocurrency, there are a few things you should know.
- Cryptocurrencies are not legal tender and do not fall under any regulatory regime in India
- Cryptocurrencies are unregulated in India
- There has been very high volatility in the value of several cryptocurrencies
- There have been several media reports about scams related to cryptocurrencies
- The transactions of Bitcoins (and other cryptocurrencies) can be tracked
- The transactions made using Bitcoins (and other cryptocurrencies) are stored in a public ledger called blockchain
- There are no legal protections on losses incurred while buying or selling Bitcoins (or other cryptocurrency)
2. Go For a Balanced Portfolio
Don’t put all your eggs in one basket. It may seem counterintuitive at first glance (and even a little boring), but diversifying across multiple coins will help guard against losses should any single currency fail or fall out of favor among investors.
In other words, don’t just buy coins because they are going up in value. Instead look at the fundamentals behind each project–things like team members’ experience level; how long they’ve been around; what stage they’re currently at etc. And make sure there’s more than just hype behind their rise before deciding whether or not this is something worth investing in long term.
Another way not only protect yourself financially but also maximize profits is by diversifying within each category as well. If one coin does poorly then another may do well enough so that overall profitability remains unaffected despite individual losses from time-to-time.
3. Research is Mandatory
Before you invest in any cryptocurrency, you should do your research. Research the company and the product. Research the team behind it. Research the market, competition and technology on which it’s based. And finally, research its community–its users and developers–to see if there are any red flags that might indicate a problem with adoption or growth potential down the line.
- A good place to start is by reading reviews from other investors who have been involved with cryptocurrencies before (and thus know what they’re talking about).
- You could also check out websites like Investopedia or CoinDesk which offer information on different coins as well as news updates related to them.
4. Trustless Approach
A trustless approach means that you can transact without having to trust the other party. You don’t have to worry about them running off with your money or making changes to the transaction after it’s completed. This is because every transaction is recorded on an immutable blockchain, which makes it impossible for anyone to change the record after the fact.
In addition, cryptocurrencies are pseudonymous–not anonymous–and this helps protect users from fraud by ensuring that all transactions are recorded publicly in blockchains. Because of these features alone, cryptocurrency transactions are considered “trustless” because there isn’t any need for third-party institutions such as banks or credit card companies (which traditionally act as trust intermediaries).
4. Investing in cryptocurrencies is risky—and that’s a good thing.
Risk is an inherent part of cryptocurrency investing, and that’s a good thing. If there was no risk involved in any sort of investing, then anyone could do it and everyone would get rich overnight. While there is plenty of risk involved with any investment, there is also plenty of opportunity for massive reward.
The key to success with cryptocurrency investing is to do plenty of research on individual coins and understand how they work within their larger ecosystem in order to make informed decisions about where to invest your money.
5. Taxation and Regulatory Concerns
Taxation and regulatory concerns are not limited to the United States.
The crypto market is global, and many countries are taking steps to regulate it. You should be aware that if you’re investing in cryptocurrencies such as Bitcoin or Ethereum, there may be additional tax implications depending on where you live and how you use them.
6. Get the Right Wallet
If you’re going to invest in cryptocurrencies, it’s important that you have a place to store them. A wallet is essentially a software program that allows users to access their coins and make transactions. There are different types of wallets available, each with its own pros and cons. Some examples include:
- Mobile wallets (e.g., Jaxx)
- Desktop wallets (e.g., Exodus)
- Hardware wallets (e.g., Trezor)
It’s also important to note that there are two types of storage options: hot vs cold storage. Hot storage refers to any wallet connected directly or indirectly through an internet connection. Cold storage refers to offline methods such as USB keys or paper wallets.
