Cryptocurrencies have been gaining massive attention for more than a decade now. Since 2009, cryptocurrencies have been in use. Its utility and value have increased raising the bar for every investment. If you are recent to Crypto trading and investments, you should look into the Bitcoin trading platform like Bitindex Prime.
Cryptocurrencies are nothing but digital assets that enable easier payments on the internet. The token has still not got an acceptance as a legal tender. Also, cryptos are still not used in a widespread manner like regular currencies.
Since the cryptocurrency market has evolved a lot, today there are more than 14k+ crypto tokens. Each of these tokens makes use of blockchain technology and decentralized finance.
All popular cryptocurrencies including Bitcoin, Ethereum, Polka, and Shiba are making history. The total market volume of cryptocurrencies is more than $3 trillion today. Out of this, Bitcoin holds more than 40% of the total investments.
All cryptocurrencies have gained much popularity in the past ten years. With the growing interest in cryptocurrencies, many popular exchanges gained popularity. You can engage in crypto trading using these exchanges. As an investor, you just need to complete your KYC to engage in trading activities. Also, cryptos behave differently compared to any other investment model.
Cryptocurrencies are bound by various factors including price fluctuation and volatility. This is another why these currencies are also known as digital assets. There is no balance sheet governing the investment model. Also, there is no backing from regulatory agencies and central banks on such assets. Also, crypto tokens like Bitcoin and Ethereum are becoming a competitive investment. The prices of these tokens are increasing day by day. But what is important is the fact that an investor should not react to market hypes. There are also institutional investments that have now added this investment to their portfolio.
Let us look at five key factors that you need to keep in mind before investing in cryptocurrencies.
Cryptocurrencies offer a decentralized environment
This is the primary factor of cryptocurrencies. It works on blockchain technology to create transaction history. Every crypto token works in a decentralized environment. The transaction is not controlled by any regulatory authority. Crypto transactions are held on user computers from across the globe.
Considering the growing popularity, many state and central governments are working on regulations. Many countries are in favor of this investment model.
Cryptocurrencies are a speculative investment model
Cryptocurrencies have been in the industry for more than 10 years now. But many industry experts believe that the hype of cryptocurrency is only short-lived. Cryptocurrencies tend to destabilize the entire investment market. Most crypto tokens will not survive the market pressure. Only a few popular ones can survive the market pressure and attract more investments.
Also, cryptos do not have the backing of any underlying asset. The case is different for stablecoins. What drives cryptocurrency is the price speculation on each token. Bitcoin, prices have been increasing owing to market pressure and speculation.
Crypto is a highly volatile investment model
Yes, this has been the case for the past ten years now. The market is open 24*7 and hence prices may not be the same always. The price you invest at night may not be the same in the morning. Although there are various market research and investment paper. There is a lack of clarity on what factor drives the prices of these tokens. A rapid increase in prices can provide you with better benefits. But, a market dip also means your entire money is wiped out.
Open to cyber attacks
Indeed, cryptocurrencies do not have any cyber incidents. But every crypto transaction is built on blockchain technology. All user transactions work on cryptography ensuring that there is adequate security. Most crypto trading happens through crypto exchanges. These exchanges don’t need to be safe like crypto platforms. There have been incidents of crypto exchange hacking in the past.
Taxation on profits gained in crypto investments
Yes, though cryptocurrencies are still not legal tender. Many countries have imposed taxation on crypto profits. The most recent county to add to the list is India with a 30% tax on crypto profits. Other than India, many other countries including the US, Africa, etc impose the crypto tax.
Cryptocurrency is a lucrative investment model. Many investors have tried their luck with this investment.