What to Know Before Investing in Crypto

02/01/2023 - Actualizado: 08/01/2023

Investing in Crypto

What to Know Before Investing in Crypto

Cryptocurrency, also known as virtual currency, is a type of digital currency that exists only electronically. You can usually use your phone, computer, or ATM for investing in crypto.

The best-known cryptocurrencies are Bitcoin and Ethereum, but there are several different coins and new ones are being created all the time.

People use cryptocurrencies for a variety of reasons, such as making quick payments, avoiding transaction fees charged by traditional banks, or because they provide anonymity. Others may buy and hold as a way of investing in crypto in the hope that it will increase in value.

  1. What to Know Before Investing in Crypto
  • How to start Investing in Crypto?
  • What Is the Difference Between Cryptocurrencies and Money?
  • Beware of Privacy
  • How To Avoid Scams When Investing in Crypto?
  • The Four Most Popular Options for Investing in Crypto
  • The Newest Options in An Ever-Changing Market
  • How to start Investing in Crypto?

    You can buy cryptocurrency through cryptocurrency exchanges, websites, or ATMs. Some people can mine cryptocurrency through a complex process called mining, which requires advanced computer hardware to solve very complex mathematical problems.

    Cryptocurrencies are stored in digital wallets or online wallets, computers, or other external physical media. A wallet or digital wallet has an address, usually a long string of numbers and letters. If there is a problem with your cryptocurrency or money wallet, for example, if an online transaction you use disappears, you send your cryptocurrency to the wrong person, you lose your digital wallet password, your password is stolen, or your digital wallet has a problem, no one may be able to help you get your money back.

    What Is the Difference Between Cryptocurrencies and Money?

    Since cryptocurrencies only exist online, there are significant differences between cryptocurrencies and traditional currencies like the US dollar. Cryptocurrency accounts are not backed by the government.

    The cryptocurrencies in the accounts are not government insured like the dollars in FDIC-insured bank accounts. If something happens to your account or cryptocurrency assets, such as the company that provides your virtual wallet storage services, goes bankrupt or gets hacked, the government does not have to step in to help you get your money back.

    The value of cryptocurrencies can change rapidly, even hourly. And these fluctuations can be large. Its value depends on many factors, including supply and demand. Cryptocurrencies tend to be more volatile than traditional investments like stocks and bonds. An investment that is worth a few thousand dollars today may be worth only a few hundred dollars tomorrow. And if the value falls, there is no guarantee that it will go back up.

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    There are many differences between paying with cryptocurrencies and paying with credit cards or other traditional payment methods. Cryptocurrency payments have no legal protection. Credit and debit cards have legal protection if something goes wrong. For example, if you need to dispute a purchase, your credit card company has a process to help you get your money back.

    Cryptocurrencies do not have the same protection. Generally, cryptocurrency payments are irreversible. When you pay someone with cryptocurrency, you usually only get your money back if that person returns it to you.

    Before buying something with cryptocurrency, research the seller's reputation before paying.

    Beware of Privacy

    Certain information about your transactions may be made public. Cryptocurrency transactions are said to be anonymous. But in reality, is not so simple.

    Generally, cryptocurrency transactions are recorded on a public ledger known as a "block chain." This is a public list of all cryptocurrency transactions with sender and recipient information.

    According to the blockchain, the information recorded in this registry may include information such as the amount of the transaction and the digital wallet addresses of the sender and receiver of the payment. Transaction and portfolio information can sometimes be used to identify the individuals involved in a particular transaction.

    When you buy something from a seller who asks for additional information, such as your shipping address, that information can later be used to identify you.

    How To Avoid Scams When Investing in Crypto?

    Scammers are always looking for ways to steal money from you using cryptocurrency. Here are some tips and tricks to avoid cryptocurrency scams.

    Only scammers ask for cryptocurrency payments. No legitimate company will ask you to send cryptocurrency in advance to buy something or protect your money. It's always a scam.

    Only scammers can guarantee you high profits. Do not trust people who promise you that you can make money quickly and easily in the cryptocurrency market.

    Scammers use the same tactics, but now demand payment in cryptocurrency. Investment scams are one of the main ways scammers use to get you to buy cryptocurrency and send it to scammers. However, scammers also impersonate businesses, government agencies, romantic relationships, and other tactics.

    Investment scams often promise you "big money" with "zero risk" and often start on social media, dating apps or websites. Of course, these scams also start with text messages, emails, or phone calls.

    Investing in Crypto
    Investing in Crypto

    We will discuss four of the most popular options:

    • Buy and sell cryptocurrencies.

    The first way to start investing in crypto is by buying and selling cryptocurrencies. This consists of buying a certain amount of the cryptocurrency in question (Bitcoin, Ethereum, Litecoin, etc.), waiting for it to convert, and then selling it at a higher price. For example, someone who bought BTC/USD in mid-September will get a 75% appreciation. All you have to do is create a virtual wallet using a website that offers online virtual wallets.

    • Cryptocurrency mining.
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    Mining involves solving complex mathematical problems in exchange for rewards in cryptocurrency. This option is a bit more complicated because you need a good hardware (CPU, graphics card, specialized software, etc.) in charge of solving these problems by combining numbers. With increased competition, "mining pools" have sprung up where you can collaborate with your equipment and be compensated for the power you supply.

    • Trading

    This option requires knowledge of how to invest in crypto, cryptocurrencies will be used like any other financial asset in the stock market. To do this, it is necessary to find an Internet broker that offers CFDs on cryptocurrencies and create an account.

    The advantage of this method of operation compared to the first one is that you can take advantage of any market situation; that is, you can take advantage of the bearish moment of an asset to carry out short operations.

    • Earn some cryptocurrency

    The last option we will discuss involves finding sites on the web where they will give away some cryptocurrency in exchange for doing a certain action, such as viewing an ad at a certain time. Here the income is low, but you can try to increase it by inviting more people.

    The Newest Options in An Ever-Changing Market

    As you can see, there are different ways of investing in crypto, but with all of them you have to be very careful. The profitability of each crypto will depend on your dedication and knowledge of the subject.

    • Return of Funds through Decentralized Financing (DEFI)

    With decentralized financing, you are no longer dependent on financial intermediaries. DeFi is based on the Ethereum blockchain, so it forms a complete open financial ecosystem where you can find digital assets, protocols, smart contracts, and decentralized applications (dapps).

    Now with DeFi you will be able to access several platforms that will allow you to earn interest on cryptocurrencies without requesting credit or exchanging money in a decentralized way.

    • Staking

    Staking involves rewards for locking cryptocurrencies in wallets or depositing them in wallets. This approach offers double the earning potential by locking in cryptocurrency price growth and dividend payments. In itself, what this method does is lock the cryptocurrencies in the wallet to earn additional coins to secure the crypto network.

    • NFT or digital art
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    Non-fungible tokens (NFTs) are very popular. Also known as cryptographic tokens, they have a special property: they are unique. NFTs are not just a trend for investing in crypto as they are a way to earn money, and once they increase in value they are bought and sold at higher prices.

    • Stocks and ETFs

    The most common ways are through public companies or through ETFs. As for an ETF (Exchange Traded Fund), this is an exchange-traded fund, so buying shares in an ETF means buying a basket of securities, just like a traditional mutual fund, but traded on the stock market like a single action.


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