To a lot of people, there is still a lot of misinformation about the crypto market. You could be thinking about investing in cryptocurrency but you’re not really sure of where you should be starting. It is imperative that you’re learning as much as possible about the industry before committing your money. One thing that should be clear from the onset is that cryptocurrency is highly volatile and you can lose everything in a flash. There are some key things you should know before investing in cryptocurrency and we’re going to highlight some of them.
Making Money With Crypto is Not As Straightforward as it Used to Be
Early adopters did capitalize on the market to make a kill. Things have changed since then and you should not be hopeful about making money easily. You’ll need to delve deeper into the different dynamics that control the investment instrument. This could mean checking out bitcoin billionaire best review so that you’re aware of what you’re dealing with right from the onset. There are regulatory bodies that have come in to try and bring normalcy to the industry that hasn’t been so transparent.
Regulations Stalled
One of the reasons why you’ve not seen any new boom in the last couple of months is because SEC regulations have come to a halt. The SEC so far denied 9 Bitcoin EFTs which has hampered the growth of the crypto. With the stalling of changes, the effect is felt across the board and you can’t expect the conditions to be the same compared to a couple of years ago. If Bitcoin EFTs are to be legalized, there will be no need for buying coins in order to trade. This could be a game-changer in itself.
The Notion That it is a Short-term Investment
A lot of people view cryptocurrency as a short-term investment which is not the case. It is all a matter of perception. Those who invest in crypto are always looking for quick returns. That is why the market is always volatile as everyone wants to get in and out as quickly as possible. You should not invest in cryptocurrency if the sole purpose is to make a quick return on the investment.
Market Manipulation is a Big Problem
Although it is a common problem across different types of investment, it is widespread when it comes to cryptocurrency trading. One of the ways crypto traders have been known to make money is through fraudulent “pumping and dumping” schemes. This is easy to accomplish for cryptocurrency trading because there are smaller market caps. It gets more complicated when there are bigger players involved in the manipulation of the market. Since there is no centralized system, the supply and demand will depend on the exchanges.
Risk Diversification is Not Possible
One of the reasons why some investors might choose to shy away from cryptocurrency trading is because the diversification of risks is still not a reality. Even if it does work, it is not the same way that a lot of investors would prefer. It is also not easy to convert the standard currencies like USD into cryptocurrency without going through an exchange.
Lack of Liquidity
As much as a Bitcoin has been gaining mainstream attention, there are still liquidity issues that prevent widespread adoption. The same can be said with other types of cryptocurrencies. An increase in liquidity will mean stable prices. This something that a lot of people would prefer if cryptocurrency is to gain widespread acceptance.
Security is Still a Concern
Cryptocurrency has taken security to another level but there is still room for improvement as far as trading is concerned. There has been bad press about hacking and a lot of Ponzi schemes that could scare away any potential investor. If you’re thinking about putting your money on cryptocurrency, it is crucial that you’re doing due diligence when choosing the exchange. If you choose a reputable exchange, you’re not likely to have a hard time with the trading.
Conclusion
The biggest challenge with cryptocurrency can also be seen as its biggest strength. The fact that it is still new means that there is a lot of figuring out to do. It has shown massive potential but there still areas that need to be improved if it is to gain mainstream acceptance. The more institutions get on board and back crypto, the more valuable it will become. It is just a question of when.