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.