Cryptocurrency is one of the trendiest investment opportunities in the third generation of the WorldWide Web (Web3.0.). Cryptocurrencies have attained new heights with a new euphoria among investors and a vision of a decentralized and open web with greater utility.
Thousands of different cryptocurrencies are currently accessible worldwide. Ripple, Cardano, Sandbox, Dogecoin, Tron, Ethereum, and Bitcoin are some of the most renowned ones.
Despite the enthusiasm and boom in this market, investing in cryptocurrency should be a well-thought-out decision. It is essential for you to do your research analysis, understand the basics of financial markets, and then decide whether you should pour your money or not. As a beginner investor, you must familiarize yourself with blockchain technology, research different cryptocurrencies and their growth potential.
5 Crucial Aspects to Know About Investing in Cryptocurrency
Here is a list of five things you should know before investing in cryptocurrency–
1. Get a Hold of the Crypto Market
You should learn about how cryptos function before investing. This is especially important for those who are new to the concept.
Devour some time getting to know the various currencies available. It’s essential to go beyond the most prominent names, like Bitcoin, Ripple, and Ethereum, to the hundreds of different coins and tokens that are accessible and understand how they work. Enrolling in a cryptocurrency course can prove vital for that.
2. Cryptocurrency is Decentralized
Cryptocurrencies use blockchain technology to build decentralized networks.
Now, what is a blockchain? Blockchain is a system of administration that safeguards the integrity of transactional data.
Since cryptocurrencies are decentralized, no single governing body has any control over them. It indicates that crypto is a digital asset built on a network allocated across many computers worldwide.
This is a pro and con for crypto investors as they get safety for their investment with no centralized authority being present to manipulate it. At the same time, it is hard to track or identify cyber crimes.
3. Taxation of Cryptocurrency Gains
Even though these virtual digital currencies are currently unregulated, several nations have specific tax implications for them. India declared a 30% tax on transferring digital assets such as cryptos in 2023 with a 1% TDS. Additionally, it is vital for you to know that loss from digital assets is not allowed to offset against any other income.
The good news is that holding onto cryptos is tax-free, but it is essential for you to keep track of transactions so that it becomes easy for you to calculate capital gains or losses accurately. But, as of now, there are no specific tax benefits for investing in cryptocurrency in India.
Thus, as an investor, you need to understand these tax implications before investing in cryptos.
4. Invest Fund Wisely
Cryptocurrency is dynamic in nature. This means it has higher volatility which can result in unstable returns over a period of time. Over the past ten years, Bitcoin (BTC) alone has had at least eight severe collapses or market corrections. As a result, you should research well about the cryptos of your choice and invest prudently.
Setting clear investment goals, and risk tolerance is important. It implies you must also know when to exit the market after investing in a specific cryptocurrency. So, prepare a well-planned strategy before investing in cryptocurrency.
You must also keep up-to-date with market trends and news to make informed investment decisions.
5. Threat of Cyberattack
Scammers use social media spoofing and identity theft to deceive scapegoats into giving them access to their cryptocurrency wallets.
In a few instances, some of the well-known cryptocurrency exchanges have been breached, resulting in the loss of many investors’ cryptocurrency possessions. Thus, ensure the platform or wallet you choose has enough measures to safeguard your financial assets.
Conclusion
Over the last couple of years, investing in cryptocurrency has increased tremendously. This market is evolving. However, before entering the crypto world, you should learn how to invest and exit the market to minimize your risks. There are thousands of cryptos in the market; before choosing the coin you wish to invest in, do proper research and determine its last 1 year’s price fluctuations.
Also, investing in crypto is risky; invest money you are comfortable losing. While buying crypto, apart from just knowing about the market, it is also essential for you to stay updated with the taxation and regulatory measures as well.
Before investing, familiarize yourself with the cryptocurrency market to determine whether this investment opportunity is worthwhile.
