It seems that just about everybody is investing in cryptocurrencies at the moment, and the popularity of digital currencies is not likely to diminish any time soon. Here are some basic things to consider before jumping in.
The risks and rewards are real
Many people have somewhat ‘gamified’ cryptocurrency trading, but it is by no means a game. Real fortunes can be won and lost online, and you need to take a significant amount of care if you want to avoid becoming a victim of your investment. Always do your research before investing and resist the urge to make cowboy-style gambles on upcoming coins without looking into the possibility of failure deeply.
You will be taxed
Cryptocurrencies existed in a sort of taxation limbo for many years – meaning that many people could use cryptocurrencies to store and exchange wealth without being subjected to taxes. Predictably, this is now essentially a thing of the past. If you want to trade in cryptocurrencies, you must be prepared to pay taxes if you live in the UK, PRC, and several other nations. Cryptocurrency tax laws can be rather complex, but there are many simple guides to help you work out precisely what you need to pay for.
Trust incremental gains over huge promises
While it may be tempting to gamble and put all your money into one cryptocurrency to make it big, this is far more likely to fail than succeed. The shrewdest investors invest small quantities of cash in several cryptocurrencies and trade between these investments to incrementally make a profit. Although a few people made a tremendous amount of money by getting in early on Bitcoin, this kind of windfall is doubtful today, thanks to the popularity of cryptocurrencies.
Watch out for exit scammers and fake currencies
Scammers have sought to rip off unwary investors because of the largely unregulated cryptocurrency market. If you look out for the right signs, you are very unlikely to get scammed when investing in cryptocurrencies.
One of the most popular scams out there is the ‘fake cryptocurrency.’ For a cryptocurrency to operate with some degree of fairness, it needs to be connected to a blockchain. All trades, transactions, and releases need to be connected to this blockchain, which effectively makes the peaks and troughs of a currency’s value remain relative to performance and uptake. Scammers marketing fake cryptocurrencies offer ‘coins’ that are not connected to a blockchain, meaning that their purported value can be manipulated from the outside. Investors are drawn in by too good to be accurate forecasts, only to find that their newly purchased cryptocurrency has no relative value whatsoever. Scammers usually combine this fakery with an ‘exit scam’ – running away with investors’ money without leaving a trace.
Never trust incredible-looking forecast statistics that come straight from the horse’s mouth. Real cryptocurrencies only rise in value thanks to uptake – not promises of easy cash.
