5 Things You Should Know Before Investing in Cryptocurrencies
More and more people are now becoming more interested in cryptocurrencies like Bitcoin, Ethereum, Litecoin, and many more. This is mainly because of the father of all cryptocurrencies, Bitcoin. Once again, the value of a Bitcoin has peaked. It is currently playing at over 22,000 US dollars and it has been over two years since this happened.
While cryptocurrency prices have skyrocketed, it is still very important that investors do their research before getting into buying cryptocurrencies. What’s happening with Bitcoin right now is very exciting for many crypto users but if this is something you’d like to invest in, make sure that you have enough knowledge for it. Here are five of the most important things to keep in mind before buying cryptocurrencies.
- Cryptocurrencies are extremely volatile
Yes, the value of Bitcoin right now is pretty much sky-high. However, it is known by every crypto user that these digital currencies are extremely volatile. In short, its value fluctuates a lot. This is because virtual currency trading occurs on various crypto platforms.
Bitcoin has already undergone four corrections of at least 2 percent in six consecutive months. In 2017, when the value of this crypto reached 20,000 US dollars, people thought it would only go up from there. However, in the years between the last time it peaked and now, there were days when its value slumped to below 6,000 US dollars. It’s just really hard to predict when its value will be stable and so investing in cryptos can pose big risks for many investors.
- Crypto is virtual, intangible assets that need strong cybersecurity
Bitcoin is stored online and that only means it is still susceptible to hackers. Know that with any online or digital assets, you always need to make sure that you do your best to protect them and you can do this by making sure that you only use a secure crypto wallet and in addition, use a VPN to encrypt your network and with it protect your privacy whenever you make a crypto transaction.
You should also use strong passwords and private keys whenever you input your details online. For passwords, avoid using any information that anyone can easily find out like your date of birth.
- It is operated on blockchain technology
There are cryptocurrencies because of blockchain technology. This is the infrastructure that Bitcoin and other cryptos are founded on. It is a digital and decentralized ledger that records all transactions made with cryptos. With that, it’s easy for people to track the status of their transactions efficiently. This also makes the use of crypto generally safe and this is why big businesses are very excited about it.
- Many big companies are interested in Crypto
Speaking of big businesses, many of them see the potential of cryptocurrencies to the point that they want to create their digital currencies. An example of this is Facebook which announced its interest in creating a digital currency in 2018. The company then confirmed in May 2019 that they are working on this project and by June 2018, they announced that it will be called Libra.
Initially, they were hoping to have Libra available to the public by this year. However, recent reports said that the company will only be launching a slimmed-down plan that includes the cryptocurrency being backed one-for-one by the US dollar rather than a multiple currency collection. It was also announced that instead of Libra, it will then be called ‘Diem’. With this, we can say that a big company may consider creating their currencies online in the future.
- There is a difference between hot and cold wallets
You should also know that there are different ways for you to store your cryptos. The two main types of crypto wallets are hot and cold wallets. A hot wallet is online storage for your digital asset. This is easier to set up and access as you only need to be connected to the internet. However, hot wallets are susceptible to hackers and other technical vulnerabilities.
Meanwhile, a cold wallet is a storage that is offline or not at all connected to the internet. Generally, this is more secure as your cryptos won’t be accessed by anyone online. The only downside of this is that cold wallets don’t usually accept as many cryptos as hot wallets. Usually, you will also need to purchase access to a cold wallet like Trezor and Ledger.
Like with any investments, you should always find the time to study and research about it. Cryptocurrencies are not that technical and hard to deal with. You just really need to have the right information to avoid making mistakes and high-risk decisions with this sort of investment.