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Cryptocurrencies are all the rage right now, and for obvious reasons. Even President Biden has asked financial departments to look into the feasibility of creating a ‘digital US dollar,’ further legitimizing its use.
But as crypto has become a popular talking point, as well as an investment protocol that many people feel sure cannot lose, it’s true that more and more people are investing in this digital asset without being truly prepared for what that means. In this post, we’ll discuss a few insights worth knowing about cryptocurrencies so you can get your start in this space without being misinformed or unsure of where to begin.
With that in mind, let’s begin:
Cryptocurrencies run on the blockchain:
The blockchain refers to a public digital ledger of transactions that can help you assess the veracity of any digital transaction between two parties. As cryptocurrency exchanges are peer-to-peer, utilizing a ledger like this can be essential to making sure that the legitimate ownership and value of such assets is maintained. Different coins use different blockchain technologies.
Photo by André François McKenzie on Unsplash
The platform you choose matters:
Not all platforms you choose for your crypto investments are alike. Some offer transaction fees, some do not, while others add a cost to given withdrawals. All will ask you to verify your identity as crypto holdings are taxable. Latency, the availability of blockchain integrations and plugins can differ from platform to platform.
As such, it’s important to measure the difference between crypto platforms to see which ones are most suitable for you. Coinbase and Binance are two of the most popular, while crypto banking services are providing the means to hold and buy crypto at scale.
Pump & dump schemes are ongoing:
Despite heavy controversy and litigation actively targeting these individuals, as cryptocurrencies are a relatively new phenomenon and because the perceived value often has real influence, it’s not uncommon for celebrities, influencers, and internet financial “advisors” to suggest which coins are the next big thing, to sell off their holdings, and then to leave the trusting investors to hold the losses when the value plummets.
As such, any cautious crypto investor should be mindful of the advice they’re being given. Be sure to consider the source of such insights, as well as claims such an individual or entity has made in the past.
Valuations vary wildly:
The crypto market is more volatile than several areas of the stock market, and that means massive gains and tremendous losses can be found. Something as simple as a petty tweet by Elon Musk can double or halve your portfolio, while rebounding valuations after crashes are common, too.
This is something that all crypto investors have to get used to as the technology becomes adopted more prominently into society. Of course, we can have our own positive effect on this by using crypto for payments where available, accepting them ourselves, and understanding the basic philosophies behind the movement.
With this advice, we believe you’ll be able to manage your crypto investments with confidence and caution at the same time.