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5 Things You Need to Know Before Buying Your First Crypto
The market and popularity of cryptocurrency have grown multi-fold. There has been a substantial increase in the number of investors globally. The concept of cryptocurrency became popular with Bitcoin entering the global market in 2009. This was followed by other cryptocurrencies as well. As of today, there are more than 14000 crypto investments. The total market capitalization of cryptocurrency has increased to $2trillion as of 2021. In addition to Bitcoin, there is Ethereum, Shiba Inu, and Polka Dot occupying a safe position in the market. Investors have been reaping benefits that may not be possible through other investment models. While the investments in the stock market and other assets continue to grow, cryptos have been able to get their safe position in the market. If you’re wondering why you should learn bitcoin trading visit this link to know why.
How does cryptocurrency work?
All cryptos including Bitcoin make use of blockchain technology. This allows user transactions to be broken down into multiple ledger blocks. User investments are stored in these chains/blocks that are stored in user computers. There is a mathematical puzzle and algorithm used to validate each transaction. This validation process is known as data mining.
You have gained a better understanding of crypto and its working model. Let us look at key factors for consideration before investing in cryptocurrency.
Understanding your investment
In order to buy a cryptocurrency, you need to have a thorough understanding of what it means. Cryptocurrency is a digital currency with a value assigned to it. This is much similar to other currencies. Cryptocurrency is used as a legal medium of exchange to buy products and services. This type of investment lacks any third-party or regulatory authority tracking your investment and transactions. Every transaction is validated and stored in multiple chains of blocks. This blockchain model makes it impossible to trace back to your transaction. It is nearly impossible to identify a user for each transaction.
Zero investment if you are not ready for the game
This is a thumb rule for every investment. Be it stocks, gold, and cryptos make sure that you do not invest more than you can afford to lose. Crypto markets are highly volatile and expected to change according to market conditions. A perfect example of this is Bitcoin. The prices soared up to $60000 in November 2021. However, the market price soon declined. Today, the market price of Bitcoin is hovering from $35K to $40K.
Decentralized finance and lack of regulation
This is the fundamental of any cryptocurrency. All cryptocurrencies currently available in the market are non-regulated. No central authority or third-party bank is monitoring your crypto investments. Even if your cryptos are secured it is equally important to ensure your crypto exchange is also secure. Crypto exchanges are prone to hacking by outsiders.
Be careful about your private key
You need to have a private key to authenticate any transaction. Your private key validates every transaction and keeps your cryptos secure as well. As an investor, you need extra caution while dealing with your private keys. Make sure that you do not store these keys on any public network. Anyone gaining access to your crypto private key can steal all your cryptos in a single click.
Be extremely patient with your investment
The Crypto market is indeed raising bars when it comes to investment. There is no looking back and cryptos are going to provide you with higher returns on your investment. However, as an investor, patience is a critical factor. Study market fluctuations, how the market responds to events, and other key factors while making your investment. Make sure to create an account in a legitimate exchange. Once your account is active you need to keep studying the trend patterns for a while. This can range from a month to six months. Go ahead and plan your investments only when you are confident.
Another key piece of advice here is to keep your investments small. Also, diversify your investments. Do not invest your entire funds into one single crypto. This will provide security for your money even if the market crashes.
With ongoing investment in cryptocurrency and government monitoring investment, we can soon expect regulations around the same. Like Nigeria, many countries are even looking at launching their native cryptos.