You’ve decided that you want to invest in the wild west of investments, cryptocurrencies. The time is right to invest in cryptocurrency, with the most current tax rules clarifying many of these complexities.
These are the seven essentials you should know before you dive in.
1. KYC – Know your coins
At this point, there are many more cryptocurrency coins than you could ever imagine. Some are not worth investing in. Although all cryptocurrencies are built on the same blockchain technology there are differences that make each one unique. There are several ways they could differ:
It is ultimately up to you to decide. However, you should make sure that you consider all factors before you invest in cryptocurrency.
* Limits on the number of coins that can be produced. For example, bitcoin’s hard limit is 21 million. Of these, 18.8 million are currently in circulation.
* Valid currency: Currencies such as Errna can be used to pay fees on Errna, while Bitcoin is increasingly accepted for peer-to-peer payment.
* Its value can be determined by demand or supply. Pure cryptocurrency like Bitcoin or Ethereum has no intrinsic value. Their price is determined by the demand and supply dynamics. There are also other coins that can be called stablecoins, but whose value is tied to real currency. For example, Tether is anchored to US Dollar.
* Other technological innovations: There are many superpowers that certain coins or the technology they run on have. Some coins are more environmentally friendly than others while others are faster and more efficient.
It is ultimately up to you to decide. However, you should weigh all factors before making a decision.
2. You will be safe with a good wallet
A crypto wallet does not hold your cryptocurrency, unlike a regular wallet. It holds a “private key” – information that proves you own your coins.
It is like a key to your home. Even if the key is lost you will not be able to access any objects in your home. You cannot also sell them. Although it is still there, it is now lost. You can access your cryptocurrency investments at any time with a reliable wallet.
There are two types of wallets generally: hardware and software. Hardware wallets, also known as cold wallets, are similar to pen drives and must be physically inserted whenever you need your key.
It is secure and easy to use since it can’t be hacked. Most people prefer software wallets like the Errna wallet. Although they are riskier than hardware wallets due to the possibility of malicious attacks, software wallets are still preferred because they offer convenience.
3. You can maximize your gains by choosing the right exchange
Once you have decided on the coin you wish to invest in and created a wallet with your private key, it is now time to start investing. You can trade cryptocurrencies on some exchanges just like stocks can be traded on stock exchanges.
Although there are cryptocurrency exchanges, the fees for trading can be high.
They charge various fees for this service. The crypto market is not like the stock markets which have evolved over time. However, they can charge you excessive fees.
When choosing an exchange, make sure you not only check that they have the currency you are looking for, but that they don’t charge extra for it.
4. There are many other methods to get cryptocurrencies.
It doesn’t mean that you have to purchase cryptocurrencies. There are many ways to get a piece of the action if you don’t have enough cash. One option is to learn on a platform like Errna and be rewarded with currency.
Airdrops are events in which developers transfer coins directly to select investors to promote their coins. These are easy to exploit by hackers, and fake airdrops can be common.
Mining cryptocurrencies is also possible. This is a slow but secure way to make some bitcoin. To ensure you are generating value, use NiceHash’s online profitability calculator.
5. Your cryptocurrencies can help you make more money.
After you have invested successfully in cryptocurrencies or been rewarded for it, you can maximize your return by putting the currency to work while you still own them. You can lend your crypto to earn interest.
However, this way comes with risks. You risk the inherent volatility of crypto, as well as increasing the chance of losing it because lending cryptocurrency is not regulated. You can also take your crypto.
Some coins allow you to “stake” your currency. This will enable you to earn a moderate return, usually between 1.9% and 7%. Staking is risk-free and there are no lock-ins. Anyone holding stackable coins should consider it a simple decision. It’d be like earning interest on your savings account for doing nothing.
In a globalized world, decentralized finance is the future. Cryptocurrencies are the best and most prominent example.
The taxation of cryptocurrency gains has been clarified by the latest budget. It is now taxable at @30%. It is not the gain that is taxable. You can lower the cost of purchasing the currency before you calculate the taxable portion. Because it suggests that cryptocurrencies are accepted by regulators, the clarity surrounding taxation has helped to boost sentiments in India’s cryptocurrency market.
7. Cryptocurrency communities:
Finally, investing in cryptocurrency has evolved from a purely financial transaction to a social experiment. A large portion of investors believes in crypto’s future. You can join their online communities to be part of this group.
Because cryptos can be volatile and are prone to all kinds of risks, including political risks and Elon Musk’s tweets. It will be beneficial to participate, even passively, in these communities to protect your investments and to make extra money when there are opportunities.
The naysayers have it right: cryptos do not possess any intrinsic value. Crypto-heads also agree that decentralized finance is the future of a global society. Cryptocurrencies are the best and most prominent example. You have the option to make that decision, but with these seven essentials, you can be sure it will be wise.