Economy

What You Need to Know Before Buying Crypto

Today, many people are beginning to show interest in cryptocurrency. According to the global cryptocurrency benchmark study, it is estimated that there are between 2.9 -5.8 million active crypto users. Crypto is a form of digital currency considered by many users as secure, convenient, and fast. Since it runs on blockchain technology, it is not easy to manipulate.

Although cryptocurrency has been popular of late, it is important to research widely before investing your hard-earned money in it. You are more likely to lose your money if you don’t understand how to use crypto. Here is what you should know before investing in cryptocurrency.

selective focus photo of Bitcoin near monitor

Source: Unsplash

1. High Volatility 

The cryptocurrency market is very volatile, which makes it riskier investing for beginners. Right from the beginning, the crypto market has always been volatile, making it wild for millions of investors across the world. The market faces sudden down drums and bubbles that have lead many people into losing their money. Here are some reasons why the cryptocurrency market is very volatile:

  • The crypto market is still new.
  • Blockchain technology is developing.
  • Unlike currency and commodity, crypto is a purely digital currency not backed with anything physical.
  • There is a lot of speculation in the crypto market, with most investors betting that the price of crypto is likely to go down.
  • There are low barriers to entry into the crypto market.

Because of its volatility, you should look into security for your bitcoins when accessing your wallet.

2. Need for Strong Cybersecurity 

Cryptocurrency is a digital currency that is normally stored online. The fact that it is stored online makes it more vulnerable to cyber-attacks. Because crypto is more prone to cyber-attacks, you should install a tool called VPN (Virtual Private Network) to remain secure when accessing your bitcoin wallet. According to ExpressVPN’s guide to what is a VPN, it is a tool that protects users from online snooping and cybercrime and ensuring their privacy and security online.

Apart from installing a VPN, you should also set a strong password for your bitcoin account to secure it from hackers, use private keys when you log in to your bitcoin account and avoid accessing your bitcoin account on a public network or Wi-Fi because they are more susceptible to external attacks.

3. Bitcoin Runs on a Blockchain Technology 

Blockchain is a system of recording and storing information that makes it difficult to copy, hack, or cheat the system. It is the foundation of cryptocurrency, the reason crypto is more secure than most types of currency.  

What makes blockchain a bit secure is the fact that it is a decentralized ledger. No information is stored in a central place which makes it difficult to hack. It is not possible to lose your bitcoin wallet because of this technology. 

Cyber attackers cannot control the currency because not all the information is stored in one central hard drive. Different servers across the world have bits of information, making it difficult to hack.

Although it is secure and transparent, blockchain is a developing technology that means it is bound to have integration issues. Sometimes blockchain faces issues with slow verification and transaction speed.

4. Big companies are showing interest in crypto 

Today, a significant number of brand names are already testing the relevance of crypto. Blockchain technology is more inspiring to most people, but still, most people would argue that it is one of the most secure ledgers. 

Some large companies are already collaborating with crypto-backed blockchain in pilot projects. At least 200 organizations have teamed up to join hands in the Enterprise Ethereum Alliance in testing the reliability of crypto.

The long waiting Libra, a digital cryptocurrency by Facebook, is still under development and is expected to launch anytime. Amazon, the giant online store, is also preparing to launch its cryptocurrency. Many companies are looking forward to investing in crypto technology which shows that it has a bright future.

5. Hot and cold wallets 

Before investing your money in cryptocurrency, you should know the difference between hot and cold wallets. The difference between hot and cold wallets is that a hot wallet is connected to the internet, while a cold wallet does not require an internet connection. Hot wallets are the most popular types of bitcoin wallets today because they are easy to access from any device.

Conclusion

There is a lot to learn about cryptocurrency. As the technology behind the currency keeps developing, crypto is bound to face a lot of challenges.  In this article, we have discussed the basics of bitcoin and how you can stay safe when using it. 

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