Estimated reading time: 3 mins
Cryptocurrencies are extremely relevant in today’s financial world. They’re discussed quite frequently in business circles, the media, and at dinner parties. Digital currency has been compared to gold in the way that investing in it will diversify your investment portfolio. To an extent, this is true; it can be used to protect your investments from collapses, natural disasters, and currency declines. It can seem like cryptocurrency is the next big thing, and it has people rushing to invest in it. Before you decide to buy into cryptocurrency, consider the following five things to see if it’s something that’s right for you.
1. You should fully understand what cryptocurrency is and all the currency out there. You need to always understand what you’re getting into when investing. If you just start buying cryptocurrency without fully understanding the currency and the market, you’re putting yourself at a great risk.
Cryptocurrency at its simplest is a digital currency that is anonymous and secure. It’s not regulated by any government nor most traditional banks. You can make money transfers directly from one account to another without a third party.
The most popular kind of cryptocurrency is Bitcoin, but there are dozens of other types of digital currencies out there, including Etherium and Ripple. As of 2017, the total value of virtual currencies has reached beyond $4 billion.
2. Consider what you can do with cryptocurrency. Like any other currency, you can use Bitcoin to sell and buy goods and services. The tricky part of using cryptocurrency to buy and sell things is finding someone else who uses or accepts digital currency. While Bitcoin is a familiar word in society, not many traditional stores and retailers accept it as payment.
You most often see Bitcoin used in investment portfolios. People hope that cryptocurrencies will increase in value. Many people who invest in cryptocurrency do so with the future in mind. They’re trying to stay ahead of market trends.
3. Know the difference between cryptocurrencies and blockchain. So, you know that cryptocurrency is digital money, but you may get confused when you start dealing with blockchain and cryptocurrencies. Blockchain is the technology that tracks where the currency goes. It’s a secure, computerized ledger system that is public record and makes discrepancies in accounting impossible.
While blockchain is used with cryptocurrencies, it’s not the only use for the system. It’s also used in other industries. It keeps track of patients’ medical records, supply chains for manufacturers, and voting to detect voter fraud. Many people who are interested in cryptocurrency but worried about its staying power are really interested in the possibilities of blockchain technology.
4. Consider whether you need the help of a broker. If you’re completely new to investing, then you should look for a broker. Those who are more experienced and know all there is to know about cryptocurrencies can do without one. For those starting out, Bitcoin can seem expensive, but you can buy just a fraction of the cryptocurrency.
If you’re interested in getting into cryptocurrency but aren’t sure how to start, going to a broker is the best course of action. There are a few ways to buy Bitcoins through a broker. Before you get into investing, you will want to research these ways and read reviews about online brokers. Look for reviews, like this in-depth review on Coinmama, to help you decide what course of action is the best for you.
You’re Still Interested, Now What?
Now that you’re prepared, strap yourself in for a roller coaster ride. Cryptocurrencies are extremely volatile. This volatility comes from a lack of clarity; no one knows when or if Bitcoin and other cryptocurrencies will be accepted into mainstream markets.
When you invest, you want to do careful research because the future is so unpredictable. If you’re looking to just diversify your portfolio, invest only a little. Remember, the fastest way for you to lose money is by investing in something you don’t understand.
