Buying Cryptocurrencies: Is It Something You Should Get Into? - Coindoo

Buying Cryptocurrencies: Is It Something You Should Get Into?

Editorial Team Avatar
Sep 30, 2018
6 min reading time

If you find yourself exploring the global financial market for a while, you’re likely going to keep an eye out for potential investment options. Of course, if you’ve been caught up in the news for a while, you’re also likely to have heard of cryptocurrencies such as Bitcoin. Given quite the stir it’s caused in the financial market, a lot of people are quite divided when it comes to investing or not investing in cryptocurrencies. Where do you draw the line, though? Should you really invest in crypto? This article will give you a quick rundown, so you can make the decision for yourself.

It might help to have a bit of an idea on just how cryptocurrencies work before deciding whether they’re worth investing into or not. Cryptocurrency, as a concept, skyrocketed in popularity back in 2009, when Satoshi Nakamoto released Bitcoin on SourceForge as what he calls an “electronic cash system” that prevents double-spending by using a peer-to-peer network in a decentralized environment. At the time, this was next to revolutionary – in fact, it was revolutionary – as ways to create “third party” digital currencies have failed in the 1990s. Satoshi, whose real identity or identities no one knows, and his Bitcoin propelled the potential of digital currency to be a reliable way to do transactions.

Minus all the buzz about cryptocurrency, it is essentially just the same as a ledger. When you have a ledger, you have it updated continuously with transactions – such as when you get cash in or get cash out. Since you’re in control of the ledger, you’re the one who can modify or make changes to these transactions. In essence, bank accounts work the same way – only the trust given to banks give it the authority to be the one to make the changes to these ledgers. In cryptocurrencies, much of the system is applied, but the third party element is removed in lieu of better security. Cryptocurrencies are appealing because:

  • No one is authorized to modify entries in the digital ledger. When something happens to the ledger, it’s a completely new entry entirely, to be seen and approved by all members. When Person A gives X to Person B, Person A’s private key “signs” the transaction and is sent across the system via a public key. These are basic peer-to-peer technology and public key cryptography.
  • When transactions are made, members verify by contributing a bit of their processing power to something called mining. Confirmation is done when miners solve a cryptographic puzzle using their computers, and they spread it in the network. When they contribute to their process, they get a bit of bitcoin for their service. Everyone can be a miner, provided they have the processing power to support the process.

Cryptocurrencies: Should You Invest?

Before you go off buying cryptocurrencies, you might want to start checking if you have the right information on Bitcoin and other crypto first. This is important, especially since market forces are still in the works behind the scenes as you try to pursue investments, and this is the same thing as with Bitcoin.

Assessing your options properly and planning your moves are integral parts of sailing with buying and selling cryptocurrencies, so you’ve got to know your variables right. Here are some of them:

  • Check if cryptocurrencies actually affect industries you’re interested in: Regardless of whether or not you’re a “hardcore investor or a first-timer”, see if cryptocurrencies actually affect the industry you’re in. Remember, making smart investments mean checking various sources, industry figures, and market trends in order to make sure you’re getting “in” on the right kind of stocks and options. In crypto, it’s the same thing. So, see if the crypto you’re pushing to invest in actually affects industries you know – and see if you’re willing to get into a bit of reading if the crypto you’re interested in isn’t involved much in your niche.
  • Huge gains at the cost of having huge risks: The arrival of cryptocurrencies is revolutionary, especially given the above qualities. A lot of companies have started to get into cryptocurrencies and experience good returns, but cryptos such as Bitcoin do experience extremely low “days” where the value is bad. You have to be prepared for these sorts of risks, and you have to be prepared for these “low days” to happen more often especially with the arrival of more crypto and other forms of technological wonders.
  • See if you want to be on the sidelines, or if you want to have crypto yourself: When you start looking to invest in cryptocurrencies, you don’t necessarily “just” have to invest in a particular cryptocurrency. For instance, you have the option to invest in bitcoin as an “outsider,” or you have the option to partake in the blockchain itself, so you have actual bitcoins at your disposal. Assess what kind of involvement you want to have with the blockchain that interests you, as sometimes active involvement does help motivate you to be more careful with your investments.
  • See if you want to invest in industries related to crypto, and not crypto itself: Sometimes, the smarter option is to play along the sidelines. Instead of investing in cryptocurrency, why not invest in industries directly affected by cryptocurrencies? This way, you’re indirectly checking crypto and evaluating their worth as a potential investment option, but, at the same time, you’re also taking fewer risks given you do not involve yourself with crypto directly.
  • Check if you can afford to lose in crypto: When you invest, it’s important to be just as hopeful as you are cynical. Are you prepared to “lose” in crypto, regardless of the possibility? It might help you to invest in crypto as an additional option, not as an all-in investment with the funding you have. Please take this into careful consideration should you want to invest in cryptocurrencies, as crypto in itself is a volatile market given its mixed reception.

Conclusion: Investing in Crypto May Work for Your Needs

With the above taken into consideration, it helps to understand just what are the potential perks and disadvantages of investing into cryptocurrency before actually making a move with your budget. Hopefully, the above information could provide useful insights into the nature of crypto as an investment platform, aside from just being a form of a commodity used to buy and sell things. Learning this unique dimension of cryptocurrency can at least also give you a better indication if pursuing crypto is also something you should consider.

* The information in this article and the links provided are for general information purposes only and should not constitute any financial or investment advice. We advise you to do your own research or consult a professional before making financial decisions. Please acknowledge that we are not responsible for any loss caused by any information present on this website.
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