This guide outlines the 7 crucial questions to ask yourself before diving into cryptocurrency investment as a wealth strategy.
Cryptocurrencies are truly revolutionizing the modern financial landscape as we know it. Not only are they offering a new way of exchanging money for goods and services, but they have also become a potential vehicle for growing your money.
But before you jump on the cryptocurrency investment bandwagon, you ought to learn a bit more about cryptocurrencies first. That way, you can avoid many of the basic mistakes that many crypto newbies make. At the same time, this will help you dispel any of the misconceptions you may have had about this new kind of currency.
Cryptocurrency investment: 7 questions to ask yourself first
To help you out, here are a few simple questions to ask yourself before diving into the world of cryptocurrency investment.
What Exactly Is Cryptocurrency?
As the name implies, cryptocurrency or crypto is a digital form of money that is secured by cryptography. This virtual currency relies on blockchains, which are essentially ledgers of transactions managed and monitored by a wide network of computers.
Because of how they were designed, cryptocurrencies cannot be counterfeited or duplicated. This, in turn, means that each crypto token cannot be spent more than once. This prevents any disparities between the amount of crypto available and the spending records.
How Can I Store Cryptocurrency?
The most common way to store crypto is to use a digital wallet that’s specifically designed for that particular virtual currency. For example, if Monero is your cryptocurrency of choice, then you’ll need to sign up for a Monero wallet. You’ll also want to choose the best Monero wallet available to ensure that your crypto is safe and secure. Essentially, the same basic concepts apply to most other types of cryptos.
How Do I Choose a Digital Wallet?
Ultimately, deciding what wallet to use depends on your needs and preferences, as they aren’t one-size-fits-all. Before signing up for just any wallet, research your options and look up reviews for each one. You can even join online forums dedicated to particular cryptocurrencies and ask other users about their preferred wallets of choice.
Can I Buy or Sell Cryptocurrency at a Bank?
Unfortunately, most banks don’t currently sell or accept cryptocurrencies—at least, not at the moment. The good news is that some organizations are currently working toward enabling banks to buy, hold, and sell cryptocurrencies to meet growing customer demand for these particular features. It may not be long until you can start managing your crypto in bank accounts as you do with your fiat currencies. Till then, you’ll have to make do with each crypto’s recommended digital wallet.
Which Cryptocurrency Investment Should I Use?
While reading up on cryptocurrencies, you may have encountered a few popular ones such as Bitcoin, Ethereum, and Monero. You may have even heard of a few lesser-known cryptos that gained a lot of attention in the past year, like Dogecoin and Axie Infinity Shards. What you may not know, though, is that there are actually thousands of cryptocurrencies to choose from—6,000 of them, in fact — for potential cryptocurrency investment. With so many cryptos to choose from, how do you decide which one to start with?
Generally speaking, it’s a good idea to go with the more established cryptocurrencies such as the aforementioned Bitcoin, Ethereum, or Monero. Because they’ve already garnered quite a reputation, you’ll be more likely to find vendors who accept these virtual currencies as forms of payment.
That said, it might be worthwhile to give lesser-known cryptos a try, especially if they seem particularly promising in terms of their potential applications. You never know when they may gain widespread adoption in the years to come.
How Can I Buy Cryptocurrency?
Before you can start using cryptos, you’ll need to know where to purchase them first. While it’s possible to buy these digital currencies from other users, your best bet is to go to a cryptocurrency exchange. Put simply, an exchange is an online platform that allows its users to buy and sell the cryptocurrencies of their choice. Here, you can trade one form of crypto for another or purchase crypto using fiat currency.
Why Am I Getting into Cryptocurrency Investment?
Despite all of its promising potential, converting your existing money into cryptocurrency can be a risky move. So, before you step into the world of crypto, ask yourself this: why, exactly, am I interested in cryptocurrency investment in the first place?
For instance, are you looking into using crypto because you want to earn money from trading it? If so, tread carefully, as cryptocurrencies are more of a speculative asset rather than a blue chip investment vehicle. While there is certainly the potential to earn a lot of money with cryptocurrency investment, there’s an equally likely chance that you’ll lose everything you put into crypto.
If not for profit purposes, are you interested in learning how to use crypto because you believe that it may be the future of money? Or are you backing a particular crypto with the hopes of encouraging wide-scale adoption by people and businesses alike?
Whatever your reasons may be, follow this rule of thumb: put in only as much money as you’re willing to lose in cryptocurrency investment.
Hopefully, these questions have helped you get a better idea of what using crypto may entail. Before you commit to any cryptocurrency investment, just make sure to do your homework first. Read up on all of the available options, and learn about each crypto’s pros and cons. By doing so, you’ll be able to make more informed decisions as you explore the exciting world of digital and virtual currencies.
