As with any investment you make in life, it’s absolutely crucial that you understand the ins and outs of the item you’re investing in. Whether it’s the stock market, property investment, or digital money, knowledge can help you get ahead.
When it comes to digital currency, also called cryptocurrency, it’s a rather new and risk-associated investment to make. This means that an understanding of the fundamentals could not be more important.
As of January 2021, the total value of the cryptocurrency market is over $1 trillion. If you’re looking to make your investment in digital money, there could not be a better time. This blog outlines the considerations to keep in mind, first.
Digital Money: Is It Real Money?
When cryptocurrency first hit the market, many people scoffed at the idea of digital currency actually having any real value. A decade down the line and most of us are wishing we had invested in cryptocurrency a good few years ago.
When it comes to real value, digital money is just as powerful as tangible, cold, hard cash in today’s day and age. But what exactly is digital currency and how does it work?
Cryptocurrency, which is an umbrella term used to describe different forms of digital money, is a medium of exchange. It’s a unit of measurement that stores value.
Essentially, it’s any form of money or payment, but only exists in electronic form. You cannot cash out or withdraw cryptocurrency into tangible bills, checks, or coins.
The value of cryptocurrencies is determined by inflation and monetary policy. There are certain laws that govern Blockchain technology and how cryptocurrency units are created and valued.
The reason why cryptocurrency is viewed as a legitimate form of currency today is because of the evolution of technology and the fact that payments are mostly digital. This means that the need for tangible money has greatly reduced over time.
The Most Popular Forms of Digital Money
Digital money has existed for quite some time already. The most common form of digital money is actually held by banks and central government deposits. The only difference is that this currency is not physical and does not sit in a safe. This capital is often used to help these institutions through economic stress.
Banks handle digital money transfers and transactions on a daily basis, handling millions, if not billions of dollars through digital channels. Then there’s cryptocurrency. This form of currency is not handled by banks, but by the Blockchain network.
Some of today’s most popular and investment-worthy forms of cryptocurrency include Bitcoin, Litecoin, Ethereum, and Ripple. Nowadays, there are a number of banks and financial institutions that facilitate the transfer of cryptocurrencies and other transactions.
Whether you’re thinking of buying Ripple, Ethereum, Bitcoin, or Litecoin as an investment, here’s what you need to know first:
1. Research and Compare Digital Currencies
As with any investment, it’s important to understand the item/unit you’re investing in very well, first.
Depending on the cryptocurrency you choose, make sure you have a good idea of the team behind it, the trajectory of the currency, its mission, and historical performance. Do your research on each currency’s track record and compare performance notes.
Only then should you make a well-considered decision on which currency to buy/invest in.
2. Consider the Supply and Demand of Your Chosen Currency
The cost of the currency you choose is determined by two key factors: supply and demand. Bear in mind that the price your currency is sold at is the price most people are willing to pay. It doesn’t usually get better than that, so you should be willing to pay what the majority pays, too.
Try not to get too hung up on the actual monetary value of a currency. You want to look at the technology that governs it. Look at the industry it serves and its growth potential.
3. Purchase What You Can Afford
If you cannot afford to invest in a cryptocurrency, such as a full Bitcoin unit that is now hovering around $30,000, you can invest in a fraction of it, too.
This means you can purchase 0.025 of a Bitcoin if that’s all you can afford. It’s worth owning smaller fractions of high-performing cryptocurrencies than owning none at all.
4. Consider the Nature of the Investment You Want
Before you invest in cryptocurrency you’ll need to think about a trading plan.
Think about the nature of your investment: do you want to hold onto your cryptocurrency and wait for its value to increase? Or, are you more interested in short-term bursts in price and cashing out when the price is right?
The latter is known as high volatility trading or short-term trading. If you choose this option, you must have a good understanding of market trends and cycles for your chosen currency.
If you choose the first option, this is perhaps a ”safer” approach, but can hurt you if the price does not stabilize, increase, or falls drastically. You could lose a lot of money and your investment could become worthless.
5. Educate Yourself on How to Safely Store Your Digital Money
It’s no secret that the world of digital currency investment and storage is like being thrust into the Wild Wild West, unarmed, and carrying sacks of gold. You’re vulnerable and safety should be your number one priority.
Before investing in cryptocurrency, do your homework on the best places to digitally store your investment. Cyber hacking and cyber threats are at an all-time high. Also, if you lose digital currency from your wallet, it’s lost forever.
The reality is that digital currency storage has no fail-safe system to protect it. It’s always at risk of being stolen from hackers or lost due to user error. Cryptocurrency exchanges are also unregulated, so anything can go wrong.
A basic tip is to never store your security information or passwords online. Do not ever choose the ”autofill” or ”save my password” option. Instead, write this information down in a personal journal (old school, we know) to be extra safe.
One final tip: try not to store your digital currency in a digital or exchange wallet. These areas are most vulnerable to hackers. Do some research on hardware wallets that protect against malicious software and hackers.
Learn How to Strike It Rich Online
If the concept of investing in digital money has piqued your interest, there are plenty of opportunities out there to make decent amounts of money online. But what’s most important is doing your research and understanding the product you’re investing in.
Explore the rest of this blog for insider updates on all things online marketing, finance, and how to grow your wealth online.