Is investment in bitcoin safe for beginners?

Introduction

The popularity of cryptocurrencies is skyrocketing. Just a few years ago, they drew a pretty specific audience, but now everyone and their grandmother wants to learn how to invest. You are most certain to come across a news piece about the newest Bitcoin price or investing advice on social media.

And the expansion exhibits no signs of slowing down. The worldwide cryptocurrency industry was worth 332 million dollars in 2017, has increased to 3.67 billion dollars in 2020, and is expected to reach 394.60 billion dollars by 2028.

The guide to trading cryptocurrency is for you if you want to learn more about cryptocurrencies, including what they remain, how they work, and how to invest in them. Continue reading to learn how it works, what your alternatives are, and how to invest in digital money in the best and safest way possible.

What Is Cryptocurrency and How Does It Work?

Cryptocurrency is a wide word for digital assets that are confirmed and recorded by a decentralised blockchain system utilising encryption, rather than by a centralised authority such as a Visa credit card or a bank. As a currency that serves as a store of value, Bitcoin is the most widely used cryptocurrency today.

Although cryptocurrency is not yet commonly recognised as a form of money, some early adopters are beginning to recognise it as a real-world unit of account. NBA franchise owner Mark Cuban The Dallas Mavericks have announced that they would now accept Dogecoin as payment for online tickets and merchandise. Bitcoin and other cryptocurrencies are now accepted by several centralised payment services, such as PayPal.

What Are Cryptocurrencies and How Do They Work?

When a new bitcoin transaction occurs, it is recorded in a decentralised network of computers called - blockchain, which acts as a digital ledger of all other transactions. Blockchain computers,' can be distributed globally and have variable degrees of centralization and decentralisation.

Before a new transaction can be included in blockchain, these nodes authenticate the new data, or "block," by comparing it to each other's records.

As a result, the blockchain is extremely secure and nearly impossible to hack. To falsify a transaction, someone would have to hack 51 percent of the nodes in a network, which would be far too time-consuming and costly to ever be worthwhile.

Cryptocurrency Investing

Before we go into how to invest in cryptocurrencies, it's crucial to realise that there are good reasons and bad reasons to get involved. Keep in mind that for every person who earned a fortune trading Bitcoin in a single day, there are countless others who have failed miserably.

However, if you're genuinely interested in how cryptocurrencies can forever change the way we deal with money, and you're prepared to study and handle the risk, keep reading.

Why Should You Invest in Cryptocurrency?

You feel that cryptocurrencies are the way of the future and that they will eventually replace traditional fiat money; if this occurs, you want to be well-informed, prepared, and experienced.

You agree with the societal vision of cryptocurrencies, which is that the currency should be decentralised and controlled entirely by the people who use it.

You're familiar with blockchain technology and respect the peer-to-peer element of transactions, as well as its security and confidentiality.

Is Investing in Cryptocurrency a Good Idea?

Cryptocurrency marketplaces are significantly more volatile than stock exchanges. Because cryptocurrencies have less liquidity and greater speculation than traditional financial markets, their value might fluctuate by 30 percent or more in a single day.

Furthermore, crypto exchanges are open for trading 24 hours a day, 365 days a year. Unlike the NASDAQ or LSE, there are no evenings or weekends off.

If you've been hearing a lot about cryptocurrencies lately, you might think it's a smart way to make a quick buck. However, if you simply jump on the bandwagon without learning about how the technology and the market work, you risk losing money.

Take, for example, Bitcoin, the first and by far the most popular cryptoasset.

Millions of dollars have been made by early Bitcoin investors. Bitcoin's price has risen from $7,000 USD in April 2020 to nearly $60,000 USD in April 2021 in just one year! Consider how much money people who bought Bitcoin in 2013 when it was only $100 USD made.

Even if that sounds exciting, it is far from the complete storey. Take a look at the whole graph, which depicts Bitcoin's price changes from October 2013 through the end of May 2021. It isn't a straightforward ascent.

The price of bitcoin increased from $18,000 in December 2017 to $3,000 in December 2018. And here's an even faster decrease: if you were one of the folks who was enthused by all of Bitcoin's early 2021 rise, you would have seen it plummet from $64,000 in April to $35,000 in May 2021, only one month later.

The point is that, in the short term, cryptocurrency prices can be exceedingly volatile and impossible to anticipate. An announcement from a major corporation or a tweet from Elon Musk is all it takes for the currency's value to surge or crash in a matter of hours.

As a result, you should only ever gamble with money you can afford to lose.

Conclusion

Before you invest in cryptocurrencies, you must first educate yourself so that you may make the best decision possible at the correct time. Or, to put it another way, DYOR (do your own research).

Taxing Bitcoin is achievable, but complicated, if you use a good exchange and keep account of your trades. Not only from bitcoin trading, but also from using Bitcoins to pay for items, you must quantify every single profit.

But that's just the start. When it comes to Altcoins, things get a lot more difficult. For tax purposes, an Altcoin is treated the same as Bitcoin.

In most nations, this signifies it is a property rather than a financial product. You must tax the difference if you buy it with Bitcoin and sell it for Bitcoin, but not in Bitcoin, but in Dollars or your national paper money.