Cryptocurrency has been around for a while now and people are taking an interest in the subject. Investors all around the world are interested in trading or doing crypto exchanges and investing in blockchain technology because it is predicted to be our next official form of currency.
Before you decide to invest in cryptocurrency you need to define if it will be a good investment for you or if investing in this network rather than doing it in stocks or real estate, is your best option.
First, you need to learn and understand the blockchain network, then you should research the legality and regulations of cryptocurrencies in your country because it's different for every country.
Once you know more about the functionality of cryptocurrencies like Bitcoin or Ethereum, you have to learn and understand terms like crypto wallet, token, asset, Bitcoin, and more. Other important terms to pay attention to are trade, coins, assets, credit, and more.
Once you learn about the basics you have to define if investing in this market is a good idea for you and your financial reality. To know this you first have to figure out if an investment is safe, clarify what other expenses you have, and how much you have available to invest. You will have to do in-depth and long research before you make a decision.
You can continue reading and learning about this subject on A guide to Cryptocurrency.
Is it safe to invest in cryptocurrency?
You're probably asking yourself this question and we have one syllable answer for you. Is it safe to invest in cryptocurrency? – No, it is not.
Putting your money in Bitcoin, Ethereum, or other crypto exchanges and currencies is not the best idea, especially if you don't know much about the subject.
Investing means putting your money in a place where you will obtain a return or a payoff later on. For example, you can buy a stock, and after buying you own part of a business or company. Stocks are an investment that will give you back what you put in and more.
That sort of guarantee does not exist for cryptocurrency. There is no expected future flow of income. If you invest in cryptocurrencies you're predicting, and probably hoping, that in the future someone will buy it for more than you did.
We are not saying that it can't happen, but this is the clearest way to explain it.
There are crypto products that will allow you to earn interest or fees if you lend out your crypto. There are some options in the market to do this. The first one is if a company pays you interest and lends out your crypto to other people or through Decentralized Finance which are products that allow you to make a return on your cryptocurrency.
Even though you get a recurring payment, there is also a "hoping" factor because the payment and assets are still in cryptocurrency.
Now that you know a little more about cryptocurrency, you can learn about the Legality of cryptocurrency.
What to invest in before cryptocurrency?
Before choosing to invest in something, you need a clear picture of your financial situation. Do you have student debt? Are you renting out an expensive apartment or living with your parents? What are your assets? Do you have savings? Do you know anything about other possible investments like the stock market or real estate? Do you know anything about digital money?
Here is a list of things you can do before you invest in cryptocurrency:
- Pay off any debt: Whether it is credit card debt or loans if you have any kind of debt just make sure you pay it off before you start investing in something.
- Make sure you have at least 9 months' worth of living expenses: if you don't have money to live for the next months then you probably shouldn't invest in something just yet.
- If you have extra income at the end of every month you can set up an automatic withdrawal from your bank account and save that aside.
- Life insurance: and health insurance if you don't have that either. It's a great way to take care of your loved ones in case something unexpected happens especially if they depend on you financially.
- Buy stock or look into a real estate opportunity.
If you're a little confused you can learn more about crypto on What is Cryptocurrency?
How much to invest in cryptocurrency?
The answer to this question depends completely on your financial situation and your risk tolerance. The best way of know how much money is worth investing is by asking yourself the following question:
Losing that amount of money would suck or would it get you in trouble?
If losing that amount of money gets you in trouble then you probably shouldn't invest it. Investing involves risk, especially if you choose to do it with cryptocurrency. This is why investments should never be a sum of money that you can't afford to lose.
Put a price on what you can or can't lose and then go ahead and invest it somewhere. People with good financial stability become investors because they wish to make more money but they also know that the risk is high and they don't care.
Based on everything you just read, your decision has to be taken considering first your situation and second, as we mentioned, your risk tolerance. You should also consider any other asset that could be more useful than investing.
If you're in a country where cryptocurrency is not banned, you can learn what to do with it on the Best way to use cryptocurrency.
Cryptocurrencies are growing stronger
Every year cryptocurrencies like Bitcoin and Ethereum grow stronger. Blockchain technology and its market is huge and filled with opportunities but extremely dangerous if you don't know what you are doing.
Buying cryptocurrency can seem revolutionary and attractive, but in reality, it can be the perfect recipe for losing all your assets if you don't prepare accordingly.
Crypto exchange is the future of currency, and it will probably replace the functions of a bank, but that doesn't mean that investing in it right now is a good idea. Bitcoin investors are well-established people, who have many assets and have been in the crypto wallet world for a long time.
If you wish to enter this world you need to be financially stable and spend long nights learning everything you need to know before you chose to buy, trade, or exchange crypto coins. You need to learn about the different markets, understand terms like token, crypto asset, blockchain network, digital wallet, price range, and more.
To continue learning about this subject check out this article: How many cryptocurrencies are there and which are the best ones?