It is almost impossible to imagine life without them these days and almost everyone is talking about them these days: crypto currencies. It’s actually quite remarkable to realize that before the end of 2008 no one had ever heard of this and that it has now become quite a popular commodity and means of payment. Are you also thinking about entering the crypto market? Then read the three tips below, so that you can start this adventure well prepared.
Read up on the different terms that are used
Within the world of crypto, different terms are used, terms that can be quite complicated for a layman. Our very first tip is therefore: familiarize yourself with the various terms that are used. Terms you should be familiar with are:
- Wallet: a kind of bank account where you can keep your cryptos
- Blockchain: this lists all transactions that have been carried out with a crypto
- Mining: recording new crypto transactions in the blockchain
- exchange service: company that converts cryptos into ‘real’ money (fiduciary or fiat money)
Take a good look at the possible risks associated with it
Just as investing in stocks carries risks, so does crypto currency. Perhaps even more so as these digital currencies can be quite unstable and unpredictable. If you are lucky, you can earn large sums of money with it, but with a bit of bad luck you can also lose (a large part of) your bet at one time or the other.
So do your research thoroughly into the possible risks associated with it and don’t just look at what it can bring you. After all, it is by no means certain that you can expect mountains of gold. But if you are well prepared, the chance of this is of course much greater than if you just do something at random.
Compare the different coins before making a choice
While Bitcoin was once the first and only crypto currency, today it is different. You can trade dozens of different virtual currencies today, including Ethereum, Ripple, and Litecoin. Of course, all these currencies have their own price and certain price expectations. For one currency, this expectation will be positive, while it looks less rosy for another currency.
In order to reduce the risks as much as possible, it is therefore important to compare the different currencies with each other before making a choice. You can reduce these risks even further by investing in a diversified manner.