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And with all the expansion of this market, a big question often arises: is it good to invest in cryptocurrencies?
To clarify this point, today we are going to explain how crypto investment works and bring the main advantages and risks of investing in cryptocurrencies. Check out:?
Cryptocurrencies are fully digital currencies protected by cryptography . They can be freely transferred between people, without the control or intermediation of governments and central banks.
Cryptocurrencies emerged to facilitate the exchange of values and to bring more financial freedom to people. Thus, they can be used in transactions to any part of the world, with the advantages of bringing greater transparency, autonomy and lower fees.
Now that you know what cryptocurrency is, let’s start talking about investing in digital currencies. Let’s go:
Generally speaking, the core idea is the same as in stock market investing: buy low to sell high .
That is, the objective is to buy a crypto at a lower price, wait for it to appreciate, and then sell it at a higher price. The difference between the two trades will be your profit.
This can be done in a short period of time, as many traders do. There is also the possibility of saving a cryptocurrency for years and decades, seeking greater appreciation in the long term.
However, this profit is not predictable, as the value of cryptocurrencies will depend on market supply and demand . This means that the price of a crypto fluctuates according to people’s interest in holding or selling it.
For this reason, it is so important to understand market dynamics and know how to use technical analysis tools to understand why a cryptocurrency appreciates or depreciates. That way, you are more likely to find good opportunities.
Investing in cryptocurrencies can bring great benefits to investors. The main ones are:
The price of crypto assets can vary at very high levels, which enhances the chances of appreciation and return on this investment.
Especially when we talk about more consolidated cryptocurrencies on the market, such as Bitcoin , in the long run these assets can be considered very promising.
Factors such as the economic context favorable to riskier assets, media attention and large companies entering this market are some of the factors that can boost the price of cryptocurrencies more suddenly.
In the long term, it is mainly the fundamentals of a cryptocurrency , the ability to develop its technology and offer more utility to people that can help in the valuation.
Precisely because of the appreciation we just mentioned, when people discover that 1 Bitcoin is worth around one hundred thousand reais at the current exchange rate, they end up being amazed.
But the good news is that you don’t have to buy a whole Bitcoin to invest . The same goes for other cryptocurrencies.
As we commented at the beginning of this article, cryptocurrencies are decentralized, that is, they are not controlled by a central entity, such as governments and banks.
All verification and registration of transactions with cryptocurrencies, as well as the issuance of new currency units, are done through the Blockchain , a kind of public and digital ledger.
In this way, cryptocurrencies reduce bureaucracy while offering security to your funds.
It is possible to trade and transfer currencies 24 hours a day, without depending on bank hours. Everything is done in an automated and secure way through Blockchain technology.
In addition, you have the advantage of being your own bank, deciding the best way to store and transfer your funds without always depending on a financial institution.
Like any other investment, investing in cryptocurrencies also has risks, such as:
Volatility indicates the frequency, intensity and speed with which the price of an asset changes in the market . In the same way that it can help with the potential appreciation of cryptoassets, it also contributes to this investment being riskier than fixed income products, for example.
Cryptocurrencies are assets that have a lot of volatility. This means that your price quote varies more frequently and more intensely . This feature makes the risks higher, both for profit and for loss.
One of the ways to minimize these effects is precisely by creating a diversified portfolio, avoiding putting all your equity invested in a single asset.
One of the advantages brought by cryptocurrencies is the autonomy of being able to act as your own bank. But this also ends up becoming a risk if you don’t take the necessary care.
In the crypto market, you are the only person in control of your own money and your cryptocurrency wallet recovery phrase is the only guarantee that only you have access to your coins . If you lose those words, you won’t be able to get them back.
Likewise, if you mistakenly send your coins to the wrong address, you will have nowhere else to turn to get them back.
Therefore, study and attention are two very important points for anyone who wants to start investing in cryptocurrencies.
Cryptocurrencies have an extremely secure system, thanks to the Blockchain. But that doesn’t mean the market is free of malicious people who seek to take advantage of investors.
Therefore, the recommendations for anyone who invests in crypto is not to share data and passwords related to your cryptocurrency wallet and your brokerage account with anyone. Do not even save or write down this data on devices with internet access.
