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This article is not intended to constitute financial, business or investment advice. This article is informative and has educational purposes only. It does not protect against any financial loss, risk or fraud.
Cryptocurrencies have been a big part of financial conversations over the past decade.
At their core, cryptocurrencies are digital or virtual currencies designed with high-level cryptography to ensure secure financial transactions. This cryptographic mechanism plays a pivotal role in verifying asset transfers.
Transactions happen on a more intricate technology called a blockchain. A blockchain is a distributed ledger system recording each transaction on a vast network of computers.
A defining characteristic of cryptocurrencies is their decentralisation. Unlike well-established fiat currencies issued by central banks, cryptocurrencies aren’t controlled by an authority, institution, or government.
Instead, they rely on a decentralised network of computers, commonly referred to as nodes. These nodes collaborate to validate and record each transaction on the blockchain.
Cryptocurrencies have been around for just over a decade, with Bitcoin, the emblematic figure of this digital currency revolution, making its debut in 2009.
However, as with any nascent industry, it’s faced initial challenges. The regulatory landscape for cryptocurrencies is still developing, resulting in a market that experiences significant volatility. Events like cryptocurrency exchange bankruptcies and headline-grabbing hacks have further intensified these fluctuations.
10 factors to consider before buying cryptocurrencies:
1. Research: Look into the nuances of the cryptocurrencies that catch your interest. Immerse yourself in understanding the technology, its practical applications, the team behind its development, and the level of community support it receives.
2. Market volatility: Cryptocurrencies experience a roller coaster of price movements. Assess your risk tolerance and consider how you’d react to significant price swings.
3. Security: The security infrastructure of the cryptocurrency platform or exchange you choose is extremely important. Pay attention to features like two-factor authentication, cutting-edge encryption, and a robust approach to custodianship.
4. Liquidity: High liquidity ensures smoother transactions. Gauge the liquidity of your chosen cryptocurrency; it will tell you how much can be bought or sold without notably impacting its price.
5. Regulation and compliance: The legal landscape surrounding cryptocurrencies varies globally. Familiarise yourself with the regulatory situation in your country and associated tax obligations.
6. Platform or exchange reputation: Opt for a cryptocurrency purchasing site with a well-established reputation. Investigate its operational history, previous security breaches, user feedback, and the overall experience it offers.
7. Diversification: As the saying goes: don't put all your eggs in one basket. Spread your investments across various cryptocurrencies and perhaps even different asset types.
8. Long-term potential: Consider the cryptocurrency’s longevity. Does its underlying technology, current adoption rate, and practical application suggest a bright future?
9. Fees: When it comes to investments, every penny counts. Examine the range of fees, from transaction costs to withdrawal charges. Understanding the fees that you’ll need to pay now can significantly influence your long-term returns.
10. Personal objectives: Clearly define what you expect from this venture. Is it a long-term investment strategy, a short-term experiment, or are you simply backing a project you really believe in? Maintain clarity in your goals.
Getting started with cryptocurrencies
With an intuitive interface, Skrill serves as your gateway to over 40 cryptocurrencies. Here are some reasons to choose Skrill:
- Stay updated with real-time price alerts.
- Experience the ease of trading with conditional orders.
- Build your portfolio with recurring orders.
Ready to get started on your crypto journey with Skrill? Want to buy cryptocurrencies? Learn more and register.