The recent surge in the demand and popularity of cryptocurrencies has got much thinking if it’s worth their investment or not. While the young population is betting big on cryptocurrencies, many from the older generations are still hesitant yet excited to explore what the crypto world holds for them. Whether cryptocurrency is a safe investment has become a highly debatable topic, and you can find an equally good number of people supporting different sides.
But, in the end, it all boils down to your decision, as you’re the only decision-maker for your investment portfolio. Even though cryptocurrency like Bitcoin, Ethereum, etc., has been around for over a decade, the concept of digital currency is still new to many people. It is the lack of understanding and skepticism why people take a back step to buy ethereum, or bitcoin or from taking any cryptocurrency-related investment decision.
If you notice the cryptocurrency trends over the recent years, the same market and digital coins have made some investors crazy rich, while others ended up losing their life savings to it. What made this stark difference was the understanding of the market and the digital currencies people invested in. If you want to know if cryptocurrency is the right and safe investment option for you, make sure to read this complete article till the end.
Cryptocurrency: Basics Everyone Must Know
A cryptocurrency is a virtual currency secured by cryptography. Almost all cryptocurrencies use blockchain as their underlying technology and can be transferred to anyone around the world in a fast, secure, and affordable manner. Some people have a misconception that all cryptocurrencies are the same. While most are digital currencies, their use cases vary.
For example, Bitcoin, the world’s leading cryptocurrency, was launched to change the current financial system by removing the need to have any middlemen (like banks and financial institutions) to facilitate financial transactions. It basically aims to become the future currency of the world.
Ethereum, on the other hand, is more than a digital coin. You can use it to facilitate financial transactions, but you can also use it to develop dApps or other crypto-focused projects that have real-world relevance. Anyone can use the Ethereum network to create decentralized apps, non-fungible tokens, or decentralized finance apps that can have a real-world impact.
Similarly, different cryptocurrencies have different use cases, and their prices and value depend a lot on their real-world relevance. As Ethereum provides utility services whose impact is tangible, its value has skyrocketed over the years. It is one of the reasons why so many investors are keen to buy Ethereum across the globe. If you see value in a digital currency, you can consider investing in it.
Is Investing in Cryptocurrency Legal?
Lack of regulatory framework has made many raise a brow about cryptocurrencies’ future. But it couldn’t stop everyone from investing. Even after no legal framework was in place, 2021 witnessed a massive increase in the number of cryptocurrency investors. People and businesses have started to witness the potential these digital currencies hold. And with the speed with which financial infrastructure is being built to support these digital tokens, one can only see positive trends towards cryptocurrencies.
Cryptocurrencies are not government-approved tenders, but no government has openly come out or imposed restrictions on trading the same. It only motivated others to come forward and become an active participant in this growing space. Many countries are considering bringing in laws to regulate these currencies, but they will still not be as controlled as fiat currencies are. It is good for crypto investors as little government interference means little inflation of digital coins.
Is Cryptocurrency Risk-Free?
A straightforward answer will be “No.” But then again, you cannot find any investment option that is 100% risk-free. If you look at cryptocurrencies from the eyes of an investor, you’ll find it has more or less the same risk that is usually attached to investing in equities or other investment options. The only difference is cryptocurrencies are extremely volatile, and the crazy price swings can either make or break your finances.
But if you engage in cryptocurrency trading as an informed trader, your chances of suffering losses will remain relatively lower as compared to those incurred by newbies. As long as you make investment decisions based on analyzing the market condition, sound knowledge of the currencies you’re investing in, and your risk appetite, you will not have a harrowing experience.
Tips to Ensure You Indulge in Safe Crypto Investments
The growing popularity didn’t just attract investors’ attention to cryptocurrencies; it also invited a lot of scammers. To ensure you avoid indulging in any crypto transactions with a fraudster, never buy and sell cryptocurrencies outside of a trusted cryptocurrency exchange. Let’s say you want to start your crypto investment journey with purchasing Ethereum.
To do so, start by creating a KYC-verified account on a trusted crypto exchange instead of a peer-to-peer network, uploading Indian currency to the wallet, and using the platform’s service to convert the added INR to Ethereum by making an instant online purchase. You can also use the same exchange to sell Ethereum or other cryptocurrencies you purchase in the future and cash it out by converting the proceeds into your fiat currency.
Final Words
Now that you know what cryptocurrency exactly is, if it’s legal to trade cryptocurrencies, and if it is risk-free or not, you will be in a much better position to determine if cryptocurrency investments are for you or not. As it is a pretty new asset class for many, it may seem risky for investment. But if you understand the digital coins better, start understanding the crypto market, and follow the tips shared above to avoid scams, you will rarely regret being a cryptocurrency investor.