The total value of all cryptocurrencies in circulation has now dropped below $1 trillion. The decline provides an opportunity for convinced investors to allocate funds to the space at cheaper prices than a few months ago.
Are you considering investing in cryptocurrency amid the bearish trend? In this article, we’ll give you an overview of things you should know before investing in cryptocurrencies during this bear market.
Seven Things to Know Before Buying Crypto
- Cryptocurrencies are a volatile investment
You likely already know that cryptocurrencies are volatile assets. But how volatile can it get? The value of Bitcoin, for example, has fluctuated dramatically since its creation in 2009. In the early days, one Bitcoin was worth less than a dollar. Today, one Bitcoin is worth around $23,000.
In addition to Bitcoin, there are thousands of other cryptocurrencies. Some of these have also seen tremendous growth. Ethereum, for example, has increased in value by more than 3,000% in the last year.
However, it’s important to remember that their prices can also drop dramatically due to uncertainty. In 2022, so far the prices of most cryptocurrencies have fallen by more than 60%.
Potential advisors should check their conversion rates before investing. For instance, there are many websites where you can check the conversion from BTC to PKR or any other country’s currency. You will not have to worry about dropping cryptocurrency rates as you have already cashed out.
- Governments do not regulate cryptocurrencies
Another thing to know before investing in cryptocurrencies is that governments do not regulate them. It means that there’s no government backing your investment. Hence, if a cryptocurrency’s value plummets, you could lose all of your investment.
However, some governments are now starting to regulate cryptocurrencies. For example, China has recently banned Bitcoin exchanges. And in the United States, the Securities and Exchange Commission (SEC) is beginning to crack down on initial coin offerings (ICOs). The reason for this is that many investors have been defrauded through ICOs. But despite these crackdowns, cryptocurrencies remain largely unregulated.
- You could lose your entire investment
Another thing to know before investing in cryptocurrencies is that you could lose your entire investment. This is because, as we mentioned earlier, cryptocurrencies are a volatile investment. Governments also do not regulate them, so there’s no safety net if something goes wrong.
Hence, if you’re thinking of investing in cryptocurrencies, you should only invest what you’re willing to lose. But that doesn’t mean that you shouldn’t take steps to protect your investment. For instance, many hackers target cryptocurrency exchanges and wallets.
And if they’re successful, they can steal all of the funds stored in them. That’s why it’s important to keep your cryptocurrencies in a secure wallet. So what should you do? Simple! Store your cryptocurrencies in a digital wallet that’s not connected to the internet to protect your investment from hackers.
- Cryptocurrencies mostly come in handy for speculation
At this point, you might be wondering why anyone would invest in cryptocurrencies.
People invest in cryptocurrencies because they believe that the price will increase in the future. That’s because at the moment cryptocurrencies are a common trade for speculation. In other words, people are buying cryptocurrencies in the hope that they will be able to sell them at a higher price in the future.
It’s important to remember that just because the price of a cryptocurrency has increased in the past, this doesn’t mean that it will continue to grow.
- You need to be careful of scams
According to a report by the Better Business Bureau, there have been more than 1,000 cryptocurrency scams since 2017. And these scams have cost people millions of dollars. So, what are some of the most common scams?
One common scam is an initial coin offering (ICO) scam. In an ICO scam, a company will claim to be raising money by selling cryptocurrency tokens. However, instead of using the money to develop their business, they will pocket it. Another common scam is known as a fake cryptocurrency exchange. People will set up a phony website that looks like a legitimate cryptocurrency exchange; however, once people have deposited their money into the conversation, they will disappear.
So, how can you avoid these scams? The best way to prevent them is to be careful. Make sure that you do your research before investing in any cryptocurrency. And if something sounds too good to be true, it probably is.
- Cryptocurrencies are not a get-rich-quick scheme
Many people believe that cryptocurrencies are a get-rich-quick scheme. However, this is not true. Cryptocurrencies are a risky investment, and there’s no guarantee that you will make money from investing in them. And the reason is simple: the price of cryptocurrencies is unpredictable.
So, suppose you’re thinking of investing in cryptocurrencies. In that case, you need to be ready for the possibility that you could lose all of your investment.
- There’s no guarantee that most cryptocurrencies will be around in the future
Another thing to remember is that there’s no guarantee that most of the current crop of cryptocurrencies will be around in the future. They could become worthless one day as has already been the case with hacked projects and other projects that failed to reach full-scale adoption.
Unfortunately, there’s no way to know which cryptocurrencies will survive or not. Now, this doesn’t mean that you shouldn’t invest in cryptocurrencies. But you need to be aware of the risks involved.
Today, people are buying cryptocurrencies in the hope that they will be able to sell them at a higher price. Cryptocurrencies are a risky investment, and you could lose all of your money.
Even if it’s a bear market, make sure that you understand the risks before investing. And if you do invest, be prepared for the possibility of losing everything. The main thing to remember is that you should never invest more than you can afford to lose. However, if you’re prepared to take on the risks, investing in cryptocurrencies could be a profitable move.