Before Buying Cryptocurrency: Part One - Understanding the Risks

 Aug 26, 2020  |    ? Comments
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It would be smart to realize that Cryptocurrency is a very new and complicated piece of technology, which is still in development.

These kinds of assets are unlike others that you might be used to. In contrast to banks, credit associations, and traditional stock trades, there are nearly no safeguards set up to shield you if you make an error or don't appreciate the complexity of the system, and of what you're doing while investing.

  • There is no hotline you can call when you are locked out,
  • There's no corporate main office you can connect with on the off-chance that you lose your assets,
  • There are no authorities which 'cover' banks behind these ventures in worst-case scenarios. 

This implies that you could lose the entirety of your assets in the blink of an eye, with no safety net. This could be due to malicious attacks (hacks) or system glitches, or even other things that may be under your control, i.e mistakes that you make. All of this with no remedy to your troubles.

The Modern Wild West

Digital currency is a bleeding-edge innovation. It's like a present-day version of the Wild Wild West. Keeping all of this in mind, it requires some concentration, time, and willpower to understand completely. 

It is also important to note that cryptocurrency is a fairly volatile commodity. Thus, you must choose to spend the amount that you can bear losing, in the worst-case scenario. This is also fairly well-known advice in the world of investments in general:

"Never invest more than you can afford to lose."

Risks v Rewards

High risk and high reward investments are very enticing, and human beings have a natural attraction to higher amounts of risk for the promise of rewards. However, you have to be sure that the investments you are making have only a healthy amount of risk when weighed against the actual amount that you can afford to invest (or to lose). It should be an amount that you would be sad to see lost, but not of such a magnitude that you lose the will or ability to recoup those same losses.

Once you have taken these factors into account and decided on an expense value that you are okay with, you then have to be patient in this game of probability and maintain composure. You must also be wise enough not to overreach beyond your current investment value and goals. In all fairness, digital money is significantly more unstable and erratic than the everyday securities exchange. It cannot be compared to the 9-to-5 New York Stock Exchange, as digital money is exchanged throughout the world, all day, every day. 

To be as stress-free as possible in your life as a crypto speculator, you need to have a detailed spending plan of the amount of cash you will use to bankroll your investment and adhere to it no matter what.

Learn and Invest

If you've read this far and are comfortable with the risks that are associated with investing in cryptocurrency, great! Now you're one step closer to learning how to acquire digital money! What's more, since you're not managing any banks or other money-related establishments, This procedure is fundamentally helping you set up your very own bank to oversee and secure your very own assets.

This was part one of the guide on things to keep in mind before investing in cryptocurrency. Stay tuned for the next steps! In the meantime, we would also recommend reading up on what Cryptocurrency is, what Blockchain is, and how to look for the most reputable crypto exchanges.