What to know before trading cryptocurrencies?
Since its debut in 2009, Bitcoin has gone on to make strides in financial technology in ways no one could’ve initially foreseen. Bitcoin’s current market capitalization is at $576B, having reached highs of over a trillion-dollar in April 2021. Even further, Blockchain, the underlying technology behind Bitcoin, has over the last decade birthed over 19,000 other cryptocurrencies (altcoins), as listed by coinmarketcap.com, which brings the total market capitalization of cryptocurrencies today to about $1.2T.
Crypto continues to receive criticism from financial experts globally for a variety of noteworthy reasons. Lack of regulation and high volatility are among reasons why most investors shy away from bitcoin and other cryptocurrencies. Still, cryptocurrencies continue to gain momentum and wide use across industries. As with other investments, trading crypto requires caution and a risk management strategy.
What to know before trading crypto?
Since its debut in 2009, Bitcoin has made strides in financial technology in ways no one could’ve initially foreseen. Bitcoin’s current market capitalization is $576B, having reached over a trillion in April 2021. Even further, Blockchain, the underlying technology behind Bitcoin, has, over the last decade, birthed over 19,000 other cryptocurrencies (altcoins), as listed by coinmarketcap.com, which brings the total market capitalization of cryptocurrencies today to about $1.2T. This has, in consequence, placed crypto as the best performing asset class in the last 13 years of its existence. Institutions from Governments to banks have gone from highly criticizing the digital assets industry to accepting, regulating, and even investing in the industry.
Crypto however, as in the past, has continued to receive criticism from financial experts globally over a variety of noteworthy reasons. Its lack of regulation so far and its high volatility tops the reasons why crypto has sired a substantial amount of slander and uncertainty among investors. Should you therefore invest in crypto?
To answer this question, it is critical to understand why blockchain was created. In any financial transaction, the key component is trust, and blockchain offers the best of trust as every transaction is cryptographically proven, and details of the same verified and stored by the blockchain system. This simply means it is impossible for any single individual in a transaction to make an altercation; the blockchain simply won’t accept it. Blockchain therefore is believed to be the most revolutionary technological invention since the internet, and cryptocurrencies the first new asset class since oil 150 years ago.
While crypto has produced a massive range of investment opportunities in recent years, its’ substandard regulatory situation has also brought about a lot of dangerous and risky loopholes in the trade. Traditionally, currencies been controlled and regulated by the central banks of the world’s government, Bitcoin and blockchain on the other hand, run on the principle of decentralization; no single entity can regulate, reproduce, or remove crypto once a blockchain is setup. Bitcoin for example, will ever have a total of 21,000,000 bitcoins in circulation. This core principle of the blockchain technology has brought about various risks, the main one being numerous scams that have cost investors losses in the hundreds of millions of dollars. This has explained the skepticism by various regulators, governments, and financial institutions.
How do I invest in cryptocurrency?
So, should you invest in crypto? Yes, but there is a catch. Having established the volatility of the trade and the risks that come about investing, a few pointers are necessary. There are few tips for investing in cryptocurrency:
- Trade with a trusted exchange or broker. Investing safely is every investor’s concern, and it doesn’t change with crypto. Getting a reliable broker like Investors Europe for your safe investing should be a priority.
- Learn about the cryptocurrency you’re investing in. Each digital currency seeks to offer a solution to an existing problem, and the details on its functioning more often than not, are documented in the cryptocurrencies Whitepaper. Before investing in any crypto, reading their Whitepaper should be the starting point.
- Get a feel of the industry. High volatility of the crypto trade means it offers a different experience from other markets and timing is paramount. It is important to get a feel of the trade before fully investing in it.
We at Investors Europe prioritize safe investment and introduced crypto FX, where investors can trade a Contract For Difference (CFD) on major cryptocurrencies including Bitcoin and Ethereum on our Rock Trader platform.