5 Things To Know Before Investing In Cryptocurrency

5 Things To Know Before Investing In Cryptocurrency

Unless you’ve not been on the internet within the last five years, then there’s a chance you’ve come across the term "cryptocurrency" or "bitcoin."

Here is a quick definition though, just in case you’re reading about it for the first time:

• Cryptocurrency is a term used to refer to a new form of money which lives on the internet and allows people to complete transactions easily without the need for a third party.

• Bitcoin is the first cryptocurrency while other types of cryptocurrencies are known as Altcoins.

Now, within the last decade, cryptocurrency has grown from a little piece of invention to a full digital asset class.

Many people including celebrities have made a lot of fortune from this form of investment, especially during the meteoric rise of cryptocurrency prices in late 2017. Others who trade it in the same way as traditional stocks raise profits from the sharp rise and fall in crypto prices.

You’re probably reading this article because you have an interest in making money from cryptocurrencies and want to cross the T’s before diving in. Well, we will shortly reveal some important things you should know before making your first cryptocurrency purchase or investment.

5 Things To Know Before Investing In Cryptocurrency

1. Cryptocurrency Prices Are Volatile

As you may have seen from crypto price charts on www.addisonchurchill.io, the price of cryptocurrencies also increase and decrease in the same manner as traditional stocks.

However, the primary difference between the old and the new is that crypto prices are highly volatile.

You could see a particular coin gain as much as 50% in a single day, as was the case with Ripple XRP coin in 2018, while there could also be such a massive decline in the value of another coin.

With that in mind, it is also important to note that most of the top cryptocurrencies are now immune to such a high level of daily volatility but could post such values within one week or more.

It is through the sharp rise and decline in prices that cryptocurrency investors make their gains, so it is a high-risk investment especially if you're trading in the short term.

2. Methods of Purchasing Cryptocurrencies

Cryptocurrencies are held in digital wallets, that is usually in a hardware or software version.

For convenience, some cryptocurrency investors sign up to exchanges such as www.addisonchurchill.io to allow them to create wallets for the coins they wish to invest or trade in.

You can also directly buy or sell Bitcoin or any other cryptocurrency to your friends. To do this, you only need to collect their wallet address and make the transaction via the crypto exchange or wallet provider you're using to manage your assets.

3. Diversify Your Investments

As highlighted earlier, the price of cryptocurrencies are always fluctuating, meaning that you can be loosing on your investment in a particular coin while gaining on the other.

For this reason, it is vital that you diversify your investments.

Most of the top coins like Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) are considered slightly low risk when compared to other new coins, so it would not be a bad idea to stock most of your crypto investment within the most popular cryptocurrencies.

Extra Tip — A rise or decline in the value of Bitcoin has a profound impact on the crypto market, therefore, leaving most of your crypto investment portfolio in Bitcoin is recommended if you're trying to play safe.

4. Research and Stay Updated

As an emerging industry, the price of cryptocurrencies is easily affected by positive or negative news from the media.

So it is crucial that you stay on top of current events such as the possibility of a Bitcoin Exchange Traded Fund (ETF) or the progress made by the Bitcoin Lightning Network.

If you're investing in altcoins, it is necessary to do concise research on what the project plans to achieve or any current development around the firm that could drive the price of their coins high.

The listing of a coin on a top cryptocurrency exchange like www.addisonchurchill.io could drive the price of that particular coin since it will mean that more people can now buy it.

5. Long Term Investments Likely Pays Off

The fact that most cryptocurrencies and the project behind them are at an early stage means that playing long term almost guarantees you'll make a substantial profit.

Those who invested in Bitcoin when its value was $1 for 1 BTC in 2009 gained profits of nearly 20000% during the bull run in late 2017.

Although prices are at a low now, most of the top cryptocurrencies have potential use cases that will drive their value up within the next decade or even earlier than that.

On this basis, investing in cryptocurrencies with the long-term objective heightens your chances of being among the biggest gainers when the next bull run begins.

Final Words

As we've discussed thus far, investing in cryptocurrencies can be a great way to earn substantial income or save up for the future.

It is only a matter of getting off on the right foot; a task you have accomplished by reading this article.

Millions of people around the world are already transacting with their Bitcoin wallets, and you just got all the information you need to stay safe right from the go.