What is unclear about investing in crypto for the majority?
2 min read
According to the study conducted by London-based investment firm IW Capital, reveals that only five percent of British crypto investors realize a profit. But only 38% of the general population has any understanding of cryptocurrency or the underlying technology.
The data reveals that, fundamentally, Brits do not have enough information or knowledge on the topic of investing in crypto. In fact, many have no knowledge about the subject whatsoever.
Despite a widespread dearth of knowledge surrounding this particular asset class, disconcertingly facts appeared. One in 20 Brits – nearly 3 million – have invested in cryptocurrency without fully understanding it. Only 5 percent have taken advice from a financial adviser when investing in cryptocurrencies.
Crypto is unpredictable
As promising as crypto can be, however, it’s also been labeled one of the riskiest investments of 2018.
It simply crypto seems to be unpredictable.
We will show you how to be prepared for investing in crypto on the example of bitcoin, the most popular and largest one.
Some believe bitcoin was a bubble that has burst and is now fading away slowly, and others think it’s going to run to new highs.
Yes, bitcoin is risky, but it is still a popular investment option.
Should you be considering this risk these are some of the things you can do to prepare.
If you try to figure out what exactly influences bitcoin’s price for years now, the answers are not immediately obvious.
Bitcoin is global, decentralized, and unbound by sweeping restrictions. It can develop in different ways in different places. That said, some factors that influence the price have become clearer over time, and government regulations are at the top of the list.
Government rulings that affect the trade of bitcoin can by extension affect the price immediately. Imagine that all governments suddenly made it illegal to deal in cryptocurrency (some already did it). This would in a minute remove a massive market, reducing demand for a short time.
Everyone should follow regulatory news.
What is unclear about investing in crypto for the majority
Those who learn why it’s useful, and where its value comes from, can be a little bit puzzled by exchanges. There are a lot of them out there. They handle bitcoin transactions in different ways, with different fees, different acceptable payment methods. And varying selections of additional cryptocurrencies that can be handled. That’s why investing in crypto can be unclear for the majority.
However, it’s still worth keeping an eye on. Because changes in exchanges can also impact the price simply by making bitcoin more accessible. Or, in some cases, by increasing visibility for competitors.
For example, the positive effect would be if a major new exchange emerged for bitcoin, or an existing service started facilitating bitcoin purchases. But the negative effect could come about if an existing exchange. With a broad user base announced that it would begin supporting a cheaper alternative to bitcoin.
The more bitcoin is accepted as payment, the more demand there will be for it.
Last year has been bitcoin’s emergence as a widely trusted payment method for online casinos. They do a great deal of business internationally.
Many platforms started looking for more secure and anonymous ways of accepting money, and bitcoin-only casinos started to emerge. A major shift like this can give millions of people a new incentive to use bitcoin. You should keep an eye out for these types of stories.
Crypto volatility
Although crypto might offer more volatility than most, the crypto market landscape shares fundamental characteristics with other investment markets.
For example, the figures of losses are not wildly different from Forex, where new traders would often be better off flipping a coin or the stock market, where, according to science, 95% of all traders fail.
Amateur trading and investing have led to countless tales of monetary losses. Most derive from the human capacity to make decisions based on emotions. Rather than research or tried-and-tested methods.
In both, the trading and investment worlds, this story plays out time and time again, making the profitable trader a statistical anomaly. And leading the average individual investor to underperform the market index by 1.5 percent.
So, where the problem is? In lack of education.
What can you do?
You need to make sure that you’re in the right financial situation before you start investing in any asset or commodity.
If you’re in a position where you’re still paying off any debts your money would be better invested in a savings account rather than in cryptocurrencies.
However, if you have substantial savings account on hand, you may find yourself in a much better position to be able to invest in this volatile, but forever exciting, commodity.
But, before you ever place down the first cash sum, you must understand what cryptocurrencies are, how they work and how their market typically behaves. You have to understand what Blockchain is, how it works and, where possible. And how some country’s sudden ban or adoption of any cryptocurrency can affect the entire market.
And practice.
There are plenty of platforms and brokers who will offer you a free practice account, without risking any of your own money. This way, you can get a much better feel for what you will be doing with your own funds.
More about how to pick a good platform you may find here.
An unfortunate fact of the industry is that cryptocurrencies are volatile. Prices for any cryptocurrency can rise and fall at incredibly fast rates. Provide a monetary shock absorber to ensure you don’t land in financial trouble.
But whatever you do, be prepared for potential disappointment if the market begins to crash. On that way, trading and investing in cryptocurrencies will be much easier to handle.
With the right platform, with the understanding of just what to expect from cryptocurrencies and a good personal financial situation, you can try your hand at investing in cryptocurrencies with limited risk.
Risk Disclosure (read carefully!)
