Cryptocurrencies, despite their bearish slant this year, have not lost their charm for all investors. The crypto market has marked levels of volatility, often proving seasoned experts wrong in their predictions. Therefore, for investors, there are certain things to know before they invest in cryptocurrencies as knowing about these things will help them take an informed decision.
- Crypto market is very different from a stock market
If investors feel that they are prepared to make a foray into the crypto market just because they’ve bought stocks and bonds before and know how those investments work, they would be making a huge mistake. Investors must bear in mind that at least at this point in crypto’s life cycle, it is at a more wobbly and uncertain position than the stock market, which has an established history with well-defined regulations.
Due to its novelty, not only is cryptocurrencies’ mainstream adoption low, but their trust quotient and credibility in the minds of the public are also much lower. In addition, cryptocurrencies still do not have a uniform, standardized set of regulations like the stock market does, which makes it a rather risky venture, even when it’s a rewarding one.
- There are different storage options
Once you have invested in cryptocurrencies, how should you store your crypto holdings, online or offline? It depends on a wide variety of factors, ranging from how much you are ready to shell out to how travel-friendly you need your storage option to be.
There can be paper wallets, hardware devices or online wallets. Security issues are rife with online wallets but they do provide a great degree of convenience. On the other hand, cold storage wallets (wallets not connected to the internet) are slightly less inconvenient to lug around or use. The choice is difficult but it’s useful to have an idea about how you will store your cryptocurrencies before investing in them.
- The choice of crypto exchange is a responsible matter
In addition to choosing a wallet, the investor needs to choose a suitable and reliable crypto exchange where they will be able to exchange fiat currencies to cryptocurrencies. There are several great crypto exchanges to choose from, based on which country you live in and where these exchanges operate.
- Don’t invest a lot right away
Cryptocurrencies are still quite new and although they do hold a great deal of promise, they are not very time-tested. Invest carefully. Don’t invest all your hard-earned money in crypto. As they say, invest as much as you can afford to lose.
- Lack of regulatory control
Since this is a fairly new class of assets, regulatory authorities have not yet formulated universally accepted and implementable regulations concerning these. Because of this, there remains a high possibility that one fine day, the taxation status of crypto investment, rules of trading etc. could change with little warning. Moreover, a government may even suddenly take an anti-cryptocurrencies stance altogether.
While investing in cryptocurrencies can be a very rewarding decision, it would be worthwhile to keep these factors in mind before investing in cryptocurrencies.