Introduction to Cryptocurrency
A cryptocurrency is a digital asset. It is a digital or virtual currency that uses cryptography and block chain technology. They are used as medium of exchange (buying, selling and transferring) like the cash we carry.
The concept of digital currency was developed by “ Santoshi Nakamoto”, a pseudonym, back in 2008. In 2018, block chain technology and cryptocurrency were overtaking the international economy. This technology holds the benefit of providing cheap, secure and near-instant transactions. Cryptocurrency technology allows micropayments seamless and allows business to have a real time pay per use consumption from any place of the world.
Overview of Cryptocurrencies
There are more than 20, 268 cryptocurrencies circulating across the world. The number of cryptocurrencies have doubled since 2021. Cryptocurrency has a huge market and followers. The global market capitalization of cryptocurrency is $918.28 billion (12th October,2022).
|Bitcoin (BTC)||$ 19,082.40||$ 365.39 billion|
|Ethereum (ETH)||$ 1,285.66||$ 157.37 billion|
|Tether (USDT)||$ 1.00||$ 68.42 billion|
|USD Coin (USDC)||$ 1.00||$ 45.95 billion|
|BNB (BNB)||$ 271.32||$ 43.18 billion|
|XRP (XRP)||$ 0.4861||$ 21.63 billion|
|Binance USD (BUSD)||$ 0.999||$ 22.63 billion|
|Cardano (ADA)||$ 0.3914||$13.44 billion|
|Solana (SOL)||$ 30.93||$ 11.03 billion|
|Dogecoin (DOGE)||$ 0.06048||$ 7.96 billion|
|Polkadot (DOT)||$ 6.19||$ 6.95 billion|
Transacting in Cryptocurrency
Cryptocurrency is a modern concept. Such digital assets are in stage of development and market testing. The nature of the product, the response of the investors, regulation from the regulators and acceptance in the economy is yet to be understood. Due to such reasons, investing in cryptocurrencies or making any cryptocurrency transaction is a very considerate and speculative decision. Cryptocurrencies have a high market volatility.
The price of a Bitcoin in October 2021 was $ 61,374.28 and after a year, the price in October 2022, it is around $ 19,626. There is deviation and high fluctuation in the price of bitcoin. Almost all cryptocurrencies have unpredictable fluctuations. Any assets with such unusual behavior need special consideration. Some of the guidelines that we can follow before transacting in cryptocurrencies are:
The digital world is full of information flooding from everywhere. There are multiple self-proclaimed experts and gurus with their sutras of crypto-success. There are millions of articles which proclaim that they know all the algorithms to block chain and cryptocurrencies investment.
The only valid sutra for transacting in cryptocurrency is that “You Educate Yourself Properly”. Like any investment and trading, there are no shortcuts to success. There are fundamentals to understand, risk to measure and determine the best option necessary.
Never act based on “Fear of Missing Out”
Everyone is talking about crypto and block chain technology. Everyone around you is investing in different cryptocurrencies. Everybody around knows about cryptocurrency. This has become the scenario in today’s digital world and this has been acting pressure among those who are interested but are unaware of how and what to do.
Investing in cryptocurrency just because you fear missing out the trend could back you bite. Such a mass trend forces you to take irresponsible decisions. Another simple, yet critical thing to understand is every investor/trader has their own journey. Never act just because everyone is doing.
Proceed with Caution
Cryptocurrency is a contemporary concept. Hence, it is very volatile and the market is still in development. While you are dealing with such assets, one needs to proceed with caution. Caution could be with the amount of investment or the elements of investments. Random and uncalculated steps could lead your investment to loss.
Take proper security precautions
This is a part of risk assessment. Before involving in any crypto related business, one must understand all the regulatory, operations, tax related requirements. Different countries have different regulations and in many countries transaction in cryptocurrency is illegal.
Also, one must understand how much to invest. Volatile nature of such digital assets urges you to invest more but you should not invest more than you can afford to lose.
Prepare for volatility
No matter if you are trading or investing, you need to be prepared for the fluctuation in the prices. Considering the recent development in crypto trading, the prices of cryptocurrencies fluctuates like wildfire. From merely a tweet, we can see people go havoc for crypto investment and later regret the decision. To be prepared and to make informed decisions, one needs to be ready to see marketing flexing.
Analysis and measurement of risk is a basic step in any kind of decision making. Managing risks means increasing the chances of beneficial investment. Before you make any assessment regarding crypto investment, it is necessary for you to understand the underlying risk associated with it.
Crypto investment is not an easy investment, as it is a global situation. There are regular scams that are being conducted on this platform. This makes, investors/traders to have proper risk assessment.