4 Aspects to Consider Before You Start Investing in Cryptocurrencies

Bitcoin

With Bitcoin peaking in value at almost $20,000 in January 2018, the economic stratosphere seems to be in a frenzy with the cryptocurrency hype. Players like Ethereum along with Bitcoin have been making rapid gains in the last couple of years with more than 100,000 businesses adopting it into their operational network. This includes big names like Microsoft, Dell, and Overstock.com. 

Before you dive into the “blockchain party” regardless of whether you’re an individual or a business entity, there are certain aspects you need to get a foothold of before investing in cryptocurrency.

1. Legal Discrepancies

Cryptocurrencies are pretty much in circulation all around the world with just a handful of countries imposing an outright ban on it. That being said, most countries don’t have a solid set of legislation for cryptocurrencies.

The laws formulated around Bitcoin and similar currencies are kind of foggy and subject to change every now and then. It’s going to take some time for the governments of different countries to reach some kind of consensus about cryptocurrency.

Until that happens, it’s always going to be more or less a gamble investing in cryptocurrency. Before you make an investment, just be clear of how the legislation leans with regards to cryptocurrency in your country.

2. Don’t Get Carried Away By the Soaring Values

In talking with a number of financial analysts and Bitcoin “specialists,” one thing that everyone agrees on is the fact that the mercurial rise in the value of cryptocurrency is to a large extent just speculation.

For any financial system to establish itself and gain credibility, it has to stand the test of time. In the current scenario, cryptocurrencies have not been in the market for enough time to be deemed a stable currency.

Due to the fact that there is actually no historical precedent for this kind of currency, no one can actually predict which way cryptocurrencies are going to go. The rapid fluctuations also make it really dangerous to put a price on items with cryptocurrencies.

3. Security is Prime

Instances of financial fraud online are increasing with every passing day. Cryptocurrency is designed to be safer and tougher to manipulate; however, that doesn’t mean you are completely insulated from fraud.

There are plenty of people out there who find stealing cryptocurrency from somebody else much more worthwhile than investing in it. If your wallet doesn’t have the required security protocols, you risk losing your investment to somebody smarter than you.

Use exchanges that have a good reputation backing them up. Make sure you use tough-to-crack passwords. Always utilize two-factor authentication as much as you can. Be extremely cautious about what you download. Avoid opening attachments from unknown sources. Being a little paranoid in your online transactions is a good idea.

4. Toughen Up

You can easily make out a bad trader by a lack of resolve during market drops. They tend to buy only when the market is on the upside and go on an emergency selling drive when the market drops.

This is not necessarily the optimal strategy to survive in the cryptocurrency market. The best strategy would be to consider your investment as a “measured loss.” This will keep you in a disposition that is appropriate to face sharp drops during cryptocurrency trading. You need to be quick to respond to sudden negative events that cause the price to fall.

Document Everything to be on Top of Your Finances

documentation

Documentation is really important when you are doing your finances. Doing your finances isn’t exactly something people enjoy, and that is often because they don’t have enough information and knowledge about it nor do they know tricks to make it easier.

I have always believed that whenever an idea strikes, putting it all on paper is the best way to go. That is how I approach my finances as well. Having everything laid out will give you a clear idea as to what is needed to make the best budget plan.

You will get to see all the pre-requisites right in front of you and it will give you a pretty good clue of how the cashflow occurs in your month  You will be able to calculate the cash flow taking into account all the incoming and outgoing transactions. You will be able to dissect all your spendings and categorize them to take a closer look into what area needs more work.

“I’m a hoarder. For me, documentation has always been key, and I’ve kept everything from my past.” -Diane Keaton

The only hoarding I don’t mind is the bills. Hold onto all your bills especially if you pay cash so that you don’t forget the purchases you make. This will help you make a more vigilant budget at the end of the month or the beginning, whenever you sit down to review your finances.

You will not be moving forward with an unrealistic approach toward your budget planning. Making a budget and allocating money to each area of your life like the needs, wants, and savings on a document and then keeping on visiting it from time to time will help you stay true to your financial decisions.

Whenever you feel like you are going off track with your spending, you can revisit this document to remind yourself what you planned and what you need to do to maintain your financial health.

Planning on Real Data

Whenever you think of making big changes in your lifestyle or the way you handle your finances, you often hit the bump of uncertainty. If you maintain a file – whether a hard copy or soft copy – you can always refer to it when making financial decisions. This gives you certainty and confidence in whatever decisions you make.

You also have more trust in your decisions because you can base it on real data and not just something you heard someone say works for them. Just because something works for someone else, doesn’t mean that it will surely work for you. Make sure a new technique, trick, or method is going to benefit you based on your financial track record.

Final Thoughts

Documenting all your earnings, spendings, and savings isn’t exactly difficult. You just have to take a little time out every week and review the results every month. I, personally, record my daily expenses and then tally it at the end of the month. This helps me make sure that I don’t go over budget and if I do then I can plan how to make up for it in the coming month.