Cryptocurrency has rapidly emerged not just as a promising technology sector but also a potentially viable route for investing. While many are making large fortunes in cryptocurrency, it is important to remember that due to the massive variability in prices and short-term growth, there is still a large amount of risk. Therefore, proper caution is critical.
To say the cryptocurrency space has taken off in the past year would be ironic. The number of digital currencies continues to flourish, and the industry saw a net market cap of nearly $180 billion at its highest point this summer. Beyond that, the cryptocurrency space is highly volatile, meaning there are sufficient opportunities for investors to score big wins.
These are some things to keep in mind when considering a cryptocurrency investment.
Price Swings Are Common
Price swings are incredibly common in the cryptocurrency space, even among the biggest coins like Bitcoin and ether. Part of this is because cryptocurrencies are mostly unregulated, meaning that swings of 25% of the total value or more are not unheard of. This variability will probably not go away unless some sort of regulation or centralization was introduced, which would then defy the core of what cryptocurrency is.
Safety and Security
The unregulated nature of cryptocurrencies also means it’s important to take extra precautions to invest safely and securely. Finding a reliable and trustworthy cryptocurrency wallet is the most important first step. Some of the best options are wallets which are also linked to exchanges, allowing you to stockpile and trade your cryptocurrency assets from the same place. Still, web-based platforms tend to be less secure than their alternatives.
Market Trends and Investor Perception
Unlike stocks and other traditional financial instruments, cryptocurrencies tend to fluctuate based on public perception and important trends. Market caps and performance data are useful in selecting stocks in which to invest, but they are not so important for coins. Rather, cryptocurrency investors should look to the news stories swirling around a particular cryptocurrency and aim to predict trends.
Beware the Bubble
There are many investors and analysts who feel the cryptocurrency space is a bubble. Prices have grown at a great rate, and these investors believe the industry is not viable over the long term. If this is the case, and as with any bubble, it would be difficult or impossible to predict exactly when the industry would crash.
However, savvy investors tend to keep this possibility in mind when making investment decisions in the cryptocurrency space; diversifying your holdings is a good way to protect yourself against the possibility of one or more coins suddenly failing.
Basically, cryptocurrencies are proving to be an entirely new financial vertical with lots of promise to pay off. But execution should be a priority, or else investors may end up losing a massive amount of money, and possibly, faith in the value of blockchain technology. Familiarize yourself with how cryptocurrency functions and how you can optimize your growth potential before investing in it.
See Also: Things You Need to Know About Bitcoin
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