Cryptocurrency: What you should know before buying
Cryptocurrencies have taken over the internet and are the hottest trend. Nowadays, everyone seems to be buying and selling crypto, especially on social media. According to Statista, their xnumber has increased from 66 in 2013 to more than 10,000 in 2022.
Here are five things to consider before investing in your first coin.
Key Points
- Know what you are buying
- Which coins are legitimate and which are scams?
- No regulation in place
- There is generally no recognition of cryptocurrency as a legal tender
- Conclusion
Know what you are buying
A cryptocurrency is a digital form of money that does not fall under a centralized authority. You can purchase things with cryptocurrency, but you'll need a wallet to do so. There is no centralized intermediary involved in the transaction.
Many people looking to invest want quick returns. However, the process of making successful crypto investments is not straightforward. Since most of the coins do not have analog backing, their price depends on supply and demand. It's, therefore, crucial to learn how to invest in cryptocurrency and get a thorough understanding of it.
Which coins are legitimate and which are scams?
There are thousands of cryptocurrencies available on the blockchain. Thus, the issue of identifying the legitimate ones arises. In some cases, cryptocurrency creators will even pull the rug out from under you. Using attractive terms and a captivating story, they create a cryptocurrency and market it relentlessly.
As soon as the coin gains enough investors, they suck the liquidity pool dry, resulting in the coin's price falling to zero. Is there a way to avoid this? If something sounds too good to be true, it probably is. It should therefore be avoided. Take the time to learn everything you can about the coin you intend to purchase.
No regulation in place
When purchasing cryptocurrencies, be vigilant. Certainly, buying cryptocurrency is relatively straightforward, but losing money is just as easy. If you lose your money, you likely did not buy it on a regulated exchange or wallet platform.
Make sure your crypto wallet is backed up so that if something goes wrong, you can restore it.
There is generally no recognition of cryptocurrency as a legal tender
Currency created by governments, such as dollars, yuan, pounds, etc., is backed by a government or a government-approved institution. That's the issue with fiat. The majority of people want money that does not involve the government. Governments regulate banking to make sure that any money you claim to own is legitimate, and if the government does not recognize it, it is not "real" or considered legal tender.
Conclusion
There are many success stories of people who made money with crypto. But don't let dreams of success blind you. If you don't want to take on too much risk, you should prepare thoroughly before committing to cryptocurrencies.
Learn about the creators, observe trade metrics, and talk to experts about the market and cryptocurrency you want. Market growth can change several things. Perhaps it will stabilize or be regulated. For now, only buy what you know.
