Author: Kat Sarmiento
Cryptocurrency has become the equivalent of a gold rush in the Information Age, offering equal opportunities for everyone skillful or lucky enough to make the right investment at the right time.
It has even branched out to include different ways of earning, from playing NFT games to trading coins as you would with stocks.
4 Things All Crypto Investors Should Know
Whether you have already put in some money into various crypto coins or are looking to start anytime soon, here are 4 things all crypto investors should know:
1. It Is Incredibly Volatile
This has to be the most common association with cryptocurrency and is the first thing that investors should know.
Volatility refers to the tendency of an asset (in this case the coins themselves) to fluctuate or change value over time.
While you see this in stocks or in foreign exchange, this change in value is almost exaggerated in the crypto market.
A great example of this is when Bitcoin, one of the largest and most popular currencies, drops into a three-month low at the start of the year.
This sudden loss translated to the coin losing about half of its value in a span of six weeks.
If you are looking to build your wealth with cryptocurrency investments, make sure that you are aware of the risks involved.
Sure, you can find overnight wealth when your investment suddenly skyrockets in value.
However, there are equal odds of your hard-earned money amounting to nothing in the same short amount of time.
2. It Remains Decentralized
Although now taxable, most cryptocurrencies remain decentralized or free from the control of a specific individual, organization, or government–creating a virtual free market for all its users.
This means that on the plus side, you can expect cryptocurrencies to be free from direct interference from individuals, governments, or any regulatory agency.
However, as a free market for the public, the people’s collective generally offers insight into how the market might behave–best seen whenever Tesla founder and CEO Elon Musk tweets about Dogecoin (DOGE) and its value sees a spike shortly afterward.
Governments around the world have started imposing rules and legislations on how their citizens translate their crypto earnings into finances in their own countries.
There remains a massive gray area in this regard: no government still has direct control over how cryptocurrencies behave on the blockchain market.
However, existing legislations allow investors to slash crypto taxes at unbelievably unprecedented rates, allowing you to keep more for yourself.
Although it feels like freedom from governments and financial institutions, decentralization also means you have no one to run to should something happen to you or your investments.
There are no regulatory bodies and various forms of scams exist in every corner, which leads us to the next consideration everyone should know.
3. There Are A Lot Of Scams
Entering the cryptocurrency playing field is like navigating minefields as there are a lot of risks you have to face aside from the inherent volatility and decentralization in the market.
Below are some of the most common threats to your cryptocurrency investment:
Every cybersecurity problem also has its own cryptocurrency equivalent.
From malicious phishing links that send your remaining balance to a suspicious entity to direct attempts to steal your login credentials, there are countless attacks occurring on a global scale every single day.
Although the platform and the technology remain virtually unhackable and immutable, the people using them are not.
Furthermore, this is not limited to the individual level. Major currency trading platform Crypto reported earlier this year that they lost more than $30 million worth of coins after a hacking incident.
It recorded unauthorized withdrawals affecting close to 500 accounts on their platforms.
Cryptocurrency thrives on speculation and hype, and some malicious entities take advantage of it.
One common example of this is the creation of new coins. Theoretically, even you can create your own cryptocurrency, and it is up to you where it will be used and how it will create value for its users down the line.
Now, some groups create new coins and generate excessive hype, usually based on the promises of quick returns or sudden “to the moon” trends.
When there are enough people investing in their coins, the developers immediately cash out and steal all value in the sham currency, leaving their investors with their zero-value coins.
This is called a rug pull, as developers figuratively pull the rug under everyone else.
4. Information Is Your Friend
Rightfully called the Information Age, here is where you can leverage knowledge to your advantage in more ways than one.
For starters, basic trends and trading strategies used in conventional stocks and foreign exchange also apply in cryptocurrency.
Knowing certain trends and terms such as bull and bear markets will give you an idea of how to respond to certain crypto behaviors.
More importantly, you can do your own research in verifying potentially fraudulent activities and save yourself from the stress of being scammed.
On the other hand, the same knowledge can tell you where the next best investment might lie, letting you earn ahead instead of just going with the flow.
Fortunately, there is a relatively safe way to invest in crypto, which we will take a look at next.
How To Invest Safely In Cryptocurrencies
The safest way to invest in Bitcoin and other cryptocurrencies is through a crypto IRA, also called a Bitcoin IRA or digital IRA.
A crypto IRA or digital IRA is a self-directed IRA, which allows you to include various cryptocurrencies and other alternative assets, such as gold and silver, in a single retirement portfolio.
Additionally, it lets you simultaneously reap the tax benefits that are commonly associated with retirement accounts. It is therefore a more tax-advantageous way of investing in digital assets than trading crypto on, for example, Coinbase.
In a crypto IRA, you can hold various alternative assets, such as precious metals, traditional securities like stocks, bonds, real estate, and more.
Investing in cryptocurrency is a great way to earn additional income and accelerate your wealth-building process.
However, it is always important to do your due research before pouring your hard-earned money into this increasingly popular market.
You can either use its rapid growth potential to your advantage or risk losing everything with its propensity for rapidly going down as well.