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Cryptocurrency and Price Volatility

Cryptocurrency provides a safe haven for your money that is not a part of the mainstream financial system as all cryptocurrency transactions are anonymous and outside the purview of the government. But this has not been without risk. We’ll take the example of the most widely used and valuable cryptocurrency of recent times which is bitcoin. Bitcoin was one of the first cryptos to enter the market and had a rapid rate of adoption but has seen massive swings in its value over the course of its lifetime. It has been quite volatile since the beginning but the last few years have been a wild ride for investors seeking to profit off of the digital currency. While some people have made millions with an upswing, others have lost both large and small bitcoin savings with equally brutal downward swings.

Hence, even though bitcoin can prove to be a worthwhile investment it’s best to be aware of the risks associated with it to prepare for the worst and minimize losses or even rake in profits by being smart about crypto management. The main two risks with bitcoin investment are: highly volatile exchange rate and investor uncertainty.

Here we can outline the main few factors that impact the main risks associated with bitcoin and cryptocurrencies in general:

1) Cryptocurrency is a new market

Cryptocurrency has garnered much press and media attention over the past decade but despite all the commotion surrounding the digital currency, it is a very new market, especially compared to the traditional fiat currencies and commodities like gold. Even during the peak of bitcoin, its market cap was very small compared to the stock market in the United States.

The smaller size of the market means that certain key factors or players can have bigger effects on the entire bitcoin currency. Such as a massive investor buying or selling their holdings can result in slight fluctuation of the price. This is why people should always check a reliable source to understand the market changes and factors that can have ripple effects all over the bitcoin economy. But this smaller and emerging market also creates opportunities for exciting opportunities such as a new company entering the market with a product that can grow in popularity quickly and receive larger attention than in the fiat market.

2) Cryptocurrency is entirely digital

Cryptocurrencies like bitcoin are purely digital assets, which can be bought and sold using apps like https://www.coin.cloud/app, meaning they are not backed by the government or any independent financial entity. Its price is mostly determined by the law of supply and demand resulting in higher and quicker fluctuations as there is no central entity governing the price. Because of this, the price of bitcoin can tend to gravitate towards both extremes. Media hype and artificial demand can result in a hyper-inflated bubble which is then followed by market correction and a sharp fall in prices. Hence, knowledge about typical bitcoin price movements can be necessary for short-term investing. Long-term investing tends to be safer as the price tends to correct itself sooner or later.

3) Development of crypto technology

Cryptocurrencies like bitcoin work based on a decentralized technology named Blockchain. It keeps track of all the digital transactions happening in the bitcoin network. The technology is still new and rapidly developing. Since crypto transactions are completely dependent on it unlike fiat currency, any congestion or problems in the blockchain can affect the service for millions of people. The network congestion can also result in higher transaction fees which are not desirable as one of the key attractions of bitcoin is lower transaction costs than traditional banking transactions. But since the technology in bitcoin is so rapidly developing, it leaves a lot of room for new technologies to develop and take the space of current ones diversifying the available tech for use in bitcoin.

4) Speculation, media and new investors

Speculation, media hype, and investors all work in tandem to determine the price of bitcoin. The heightened speculation can lead to media promoting or criticizing bitcoin which can lead to newer investors buying or selling their bitcoin assets. Since bitcoin is purely digital, there’s little to no entry barrier for a new investor. All a person requires is their payment card and a crypto wallet to buy and sell all kinds of cryptocurrencies. Hence it becomes even more important to research and study bitcoin and its behavior to make informed investing decisions. A smart and focused strategy can lead to some great returns over time making it imperative to avoid amateur mistakes when working with this new age currency.

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Tips on Investing in Cryptocurrency

Many of us are now realizing the profitability that comes with investing in cryptocurrency. It’s impressive how cryptocurrencies have made our transfers and purchases secure and safe. However, the cryptocurrency market is unpredictable, and it keeps changing.

Investing without proper knowledge can lead to making huge losses. But just because I can make losses and the market is volatile doesn’t mean that I shouldn’t invest in cryptocurrency. Here are useful tips that can help you and me invest in cryptocurrency.

1. Conduct Proper Market Research

The cryptocurrency market has many scams, and I can be tricked to invest in a money scam. Understanding the cryptocurrency market is the only way I can make money from it. It’s essential that I proper market research and check for legitimate sites that I can invest in.

It’s also wise that I invest in something that I have an idea about. Researching and updating ourselves with trends in cryptocurrency is important. Moreover, I should be aware of the different terms used in cryptocurrency transactions. For example, if I want to trade in bitcoin, I should be aware of terms like private keys, public keys, wallets and digital coins.

2. Selecting a Good Broker

We can define a good broker like the one you can find here, by the quality of technical support, security, client communication style, and funding capability that they can provide us with. It can be tempting to choose a broker platform that has a beautiful platform. However, that is not the most important factor that should guide my search for a broker. What I need is a platform that will solve all my problems and provide me with safe, secure, and efficient transactions.

The best way that we can know our broker is efficient is by reading reviews about the broker from other investors. Reading articles about different cryptocurrency brokers, like this crypto superstar erfahrungen review, will enable us to make an informed decision so we will have the best experience possible once we start investing.

3. Investing in Different Coins

We already know that I can make losses by investing in cryptocurrency, and that is why I should look for ways of minimizing the losses. The best way to do this is by investing in more than one coin. For example, it would be wise to purchase Bitcoin, Ethereum, and E-Yuan kaufen. This means that I will be spreading my investment risk across various cryptocurrencies.

Therefore, I will split my money and invest it in diverse digital currencies instead of investing in just one currency. For example, we shouldn’t invest all our money in just one of the physical crypto coins like Bitcoin. Instead, we should choose another currency to invest in, for instance, Ethereum.

A good example of investing is if I want to invest $20, then I should invest $10 in bitcoin and the other $10 in Ethereum. That way I can be sure that even if I make a loss in one currency, then the other one might give me a profit. Moreover, I can make a profit in both coins or make a loss in both since they are both risky investments.

4. Being Ready for Profits or Losses

Cryptocurrency investing is full of uncertainties. The future of cryptocurrency is not a predictable one, and its value in the market can either appreciate or depreciate. I should ensure that I am investing money that I am ready to lose. For instance, I should not invest using money for basic needs like food or place my emergency fund in cryptocurrency. I should have a mindset that I can either make huge profits or huge losses. For those of us who aren’t willing to lose money, then don’t invest in cryptocurrency.

5. Learning from Investment Professionals

The best way that I learned how and where to invest in cryptocurrency is from professionals who have been investing in cryptocurrency for some time. There are many professional YouTubers that post guides on investing in crypto. However, do not take all their information as gospel truth. Do your research and compare notes from other people too. If you know someone investing in cryptocurrency, then talk to them because they can be more forthright with information.

I hope the information above has helped you out and increased your understanding of cryptocurrency. I hope I have helped you cut through the noise and the crazy marketing tactics from people who want to profit from your lack of knowledge.