The worst mistake you can do in investment is risking your hard-earned money without fully understanding what you are getting into. The same goes for cryptocurrency investment.
This industry is still in its infancy. Every day, we read the news on how it continues to grow and prosper. However, just like other investments, cryptocurrency also has its risks. It’s not easy to earn a profit, especially if you do not fully understand how the industry works. That’s why some investors even take cryptocurrency courses just to make sure they are on the right track.
To help you get started, here’s what you need to know before you start investing in crypto trading:
Cryptocurrency is a complex matter to learn
If you’re having a hard time understanding how cryptocurrency works, you are not alone. While learning the ins and outs isn’t easy, it is not impossible. As a beginner, you need to at least spend a day learning about cryptocurrencies, before investing.
Whether you want to take up a cryptocurrency course or do your own research, make sure you spend some time learning the market. As mentioned, cryptocurrency is a growing industry, and every day we hear of new developments. Thus, learning about it should be a continuous process.
Investing is the best way to learn
Cliché as it may sound – experience is the best teacher. Although it is okay to spend a lot of time learning cryptocurrencies, blockchain, and trading, you would fully understand how it works if you immerse yourself in it. Try to play around with small amounts just to get your hands dirty and learn to play the real exchanges.
You can use the money to start creating accounts, buying coins, and trading. Once you get the hang of it, then you can bring in the amount you really want to invest.
Do not be influenced by FUD & FOMO
If you are not yet familiar with these words, FUD means Fear, Uncertainty, and Disinformation while FOMO means Fear of Missing Out.
From January to November 2021, many people joined cryptocurrencies because they were driven by FOMO. At that time, crypto was still considered a bull market that’s why not so many investors had enough time to learn about the market before investing. While many people have doubled and tripled their money in such a short time, there are also those who lost their entire investment.
With enough research, they would have known that it is risky to enter at such high levels without preparing for the lows. FUD on the other hand are emotions which are usually formed when we come across manipulated images online, fake news from social media, and tweets from fake accounts. Some spread FUD in order to dump some coins. Make sure you only follow trusted accounts to avoid the FUD.
Learn about other coins
You hear a lot about Bitcoin. However, there are also other coins that don’t get enough of the press. There are many good projects out there that are worth your time. Ethereum, Litecoin, and Dash are just some of them.
Limitations hindering the wide adoption of Blockchain Technology
The implementation of blockchain technology is being explored in many sectors ranging from financial services to shipping. However despite the excitement surrounding the technology the mass adoption of blockchain is going to take a while due to the fact that there are still a couple of challenges bedeviling it.
One of the limitations that blockchain technology faces is scalability. Currently, the technology is facing problems supporting a big number of users on a network. This has been exemplified by the two leading blockchain networks, Ethereum (ETH) and Bitcoin (BTC), experiencing higher fees and slowed transaction speeds due to the substantial increase in the number of users. To solve the problem of scalability a lot of research has been conducted and this has led to widely varying proposals meaning that it will take a long time before there is agreement on a solution.
While unfair and not representative of the whole picture blockchain technology has long been associated with the criminal underworld. This is because initially one of the places where Bitcoin (BTC) was widely used as a means of exchange was in the dark web and the black market. Since this is how many people came to learn of Bitcoin they have tended to associate blockchain technology and cryptocurrencies with criminals.
While this is not the whole story matters are not helped by the fact that research continues to show that digital currencies are still favored by criminal elements as a money-laundering tool, in purchasing restricted materials, and a means of payment in ransomware cases.
Though all these illegal activities can be carried out using fiat currencies digital currencies are especially convenient for criminals. Blockchain technology must therefore shake off this association with a crime if it is to be widely adopted.
Some blockchain networks are also suffering from inefficient technological design and this is hampering the adoption of blockchain technology. The smart contract platform of Ethereum for example allows the development of decentralized apps (DApps) for a variety of use cases. Though the leading virtual currency is Bitcoin the network of Ethereum lets users integrate real-world applications in the blockchain. But reports demonstrate that some smart contracts deployed on the platform of Ethereum are coded poorly and thus suffer from vulnerabilities.
In the case of the Bitcoin network, there is a tendency to include a lot of information some of which is not essential and makes the blockchain heavy and slow. For blockchain technologies to find more users there is a need to streamline and optimize their design with a view to minimizing the inefficiencies inherent in them.
Since most blockchain implementations apply the proof-of-work concept with a view to achieving consensus, this technique results in massive energy consumption. It has been estimated that Bitcoin miners use up around 0.2% of the electricity in the world annually.
While that would be manageable at current levels, the consumption is increasing rapidly and by 2020 the network of Bitcoin will require more electricity than the world’s total generation capacity.