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Common Questions About Cryptocurrency Investing

The meteoric rise of Bitcoin and its continued growth has thrust cryptocurrencies to the fore as far as investment opportunities are concerned, and everybody wants a piece of the action. Millions of people are actively looking for the next cryptocurrency that will replicate Bitcoin’s feats, and if you are one of those people, then you have to be asking some of the questions outlined below.

Here are some frequently asked questions about cryptocurrency investments, and the most insightful and unbiased answers can be found in this post:

What are cryptocurrencies and how are they valued?

Cryptocurrencies are digital currencies/electronic money that are used as a means of exchange. Transactions involving them are secured by cryptography, and they have dedicated servers for verification of transactions and the creation of extra units. The most popular of them are Bitcoin, Ethereum, Litecoin, etc. All cryptocurrencies are valued by price action, and as a result, almost total control is in the hand of the investing public.

What makes cryptocurrency so exciting?

Think of all the problems associated with conventional money transfer in the world today…these problems are non-existent in cryptocurrency transactions. Money can be transferred to anyone in the world within minutes; with negligible charge, and with little or no needless bureaucracy.

Another exciting point is the fact that cryptocurrency values are dependent on the public. What this means is: the ceiling for cryptocurrencies are very high, as it can be seen with Bitcoin’s current valuation.

What are the dangers of investing in cryptocurrency?

Ironically, the factors that makes cryptocurrencies attractive combine to make it dangerous. By nature, all cryptocurrency transactions are encrypted, and you cannot view the profile of the person you’re transacting with; that poses some concerns. Furthermore, if you lose your details or you have any complaints, there are no physical offices where grievances can be tendered.

Also, because price is determined by the general public, there is likely to be constant fluctuations and public bias can crash prices.

I’m new to cryptocurrencies, can I still make profits? Where do I start?

If you are new to the world of cryptocurrency, and you don’t know where to start from, fret not, there are platforms that will help you manage your portfolio for a small fee (some platforms are even free). Make some findings about these platforms and pick the one that suits you the most. In addition to this, check out online chat rooms and forums, there are lots of insight to be gained from the experience of more experienced investors.

Where can I buy cryptocurrencies? Where can I sell them?

There are many platforms that exchange dollars for cryptocurrency and vice versa, and you can exchange almost any cryptocurrency you want at any of Coinbase, Bitfinex, Binance, Bittrex, Bitstamp among many other cryptocurrency exchangers.

Are cryptocurrencies legal? Am I allowed to trade them?

No country has passed a law that illegitimates cryptocurrencies, however, because cryptocurrency networks are decentralized, some countries limit its use. All this means however is: it is hard to transact in cryptocurrencies in those countries, it is not illegal.

Of recent, the use of cryptocurrency is growing so much that its heft is no longer deniable. As a result, many of the regulations that restrict its use around the world are being relaxed.

When is the best time to buy?

As with all investment opportunities, the best time to buy is when price is low.

When is the best time to sell?

Of course, you can do some technical analysis to ascertain whether it is a good time to sell or not, but in layman terms, the best time to sell is when price is high enough and you feel, personally, that you have made a tidy profit.

Where can I get the latest cryptocurrency prices?

There are many platforms where you find the latest cryptocurrency prices. The most popular among them is CoinMarketCap, though there are many others such as CryptoCompare, CoinGecko etc.

DigitalAssetDB offers a complete suite of cryptocurrency research tools for individual investors and financial advisors wanting to research and be conversant on cryptocurrency investment opportunities.

What is cryptocurrency mining? How does it work?

In order to buy/sell cryptocurrency, a user has to broadcast the transaction to the whole network. For the transaction to be deemed successful, it must be recorded on the blockchain (the cryptocurrency’s financial record book). The act of recording a transaction as successful, and adding it to a cryptocurrency’s ledger, is called mining.

It is called mining because with every transaction recorded on the blockchain, a new corresponding unit of that cryptocurrency is created. So, by verifying and recording a transaction, the miners are basically mining new crypto coins.

What are cryptocurrency wallets?

A cryptocurrency wallet is an encrypted digital wallet that can be used to save, send and receive cryptocurrency; you can’t own cryptocurrency without first creating a wallet. Almost all cryptocurrencies have dedicated wallets, and those that do not, recommend secure third-party wallets to their users.

As far as owning cryptocurrency is concerned, the wallet is of utmost importance. Special care must be taken to ensure that no one else has access to your wallet, because if they do, they have complete and unrestricted access to your money.

If investing in cryptocurrency is so good, why aren’t more people involved?

As it stands now, there are more people are dealing in cryptocurrencies than there were ~2 years ago. People were initially hesitant because they do not understand how cryptocurrencies work, but knowledge and information on various cryptocurrencies are being disseminated faster, and more people are learning about, and taking advantage of the profits to be made from cryptocurrencies.

As of right now, millions of cryptocurrency transactions are processed on a daily basis, and the numbers are expected to keep growing.

I already have a bank account, a credit card and an online payment account. Why do I need cryptocurrency?

Cryptocurrencies have many advantages over the payment options outlined above. For one, with cryptocurrencies, there is no centralized third-party with control over your money. You can move it at will, and your account can never be frozen. Furthermore, you can send money instantly to anyone in the world and you will only be charged a small transaction fee.

Finally, cryptocurrencies cannot be counterfeited or forged, and buyers cannot defraud sellers with a chargeback; transactions are irreversible.


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Disclaimer: The information contained herein is not intended to be a source of advice and the information and/or documents contained in this website do not constitute investment advice.

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