The prospect of buying or trading cryptocurrency is exciting.
Although the established currencies are approaching 10 years old, it still feels like an extremely exciting area of finance, a place where the grip of the governments and big financial establishments can’t quite reach.
But you can. You can quickly and simply buy and sell.
That said, if you do decide to trade in cryptocurrency, it’s important that you understand a few fundamentals and arm yourself with the best possible knowledge – so you’re fully informed to tackle this exciting new world of money.
We’ve pooled our collective cryptocurrency advice and recommend you read through, whether you’re just starting out – or you’re a seasoned buyer looking to refresh the basics…
Most crypto is still a work in progress
Bitcoin was the first cryptocurrency and the development of the currency lead to the blockchain technology that underpins many of the more recent products entering the field. Even though Bitcoin is the industry benchmark – it’s still very new, around 9 years old – and as such, you need to understand that you’re going to be dealing with a new concept.
Virtually any product that’s only been on the market a short period of time will see developments, patches and adaptations as it encounters the real world – and Bitcoin is no exception. While Bitcoin has so far proved to be a solid currency (at least from a technical point of view) – that’s not to say that any other, less rigorously tested cryptocurrencies will be the same.
If you want to understand the pros and cons of any product prior to investing, you should either spend a lot of time applying your brain to understanding how it works – or seeking the advice of an expert in the field.
Make sure your wallet is safe and secure
It’s a somewhat patronising comparison to make – but we’re about to make it all the same:
You don’t let strangers go into your real-life wallet unattended – so you should make sure all the measures are in place to make sure they don’t do it with your cryptocurrency wallet.
The reason we make this comparison is because many people don’t take the appropriate steps to secure their Bitcoin wallets, instead, hoping for good luck or trusting in companies they have no relationship with. The right place to begin your security checks is by making sure you’ve read some reviews of the site or product you’re looking at using – like this one covering some Coinbase alternatives.
When you’ve got a feel for the company you’re going to use, you need to choose the appropriate wallet for your plans. For example:
If you’re planning on investing £25,000 and sitting on your investment for some time – seeking a high security ‘cold’ storage wallet is going to be the route to take. Alternatively, if you plan to buy a few quid’s worth of Bitcoin, Ethereum or another crypto – you probably don’t need the hassle and complexity that comes with expensive cold storage devices that make your coin hard to spend again.
Use a wallet that’s designed for your cryptocurrency intention.
Cryptocurrency price is volatile
November 2017 saw Bitcoin’s price pass the $10,000 mark for the first time since its release – and while that’s seriously good news if you bought a few years ago – or even at the beginning of 2017 – it signifies one thing to the financial markets:
Bitcoin has crashed prior to now – and some people say it will do so again.
If you’re looking at Bitcoin as an investment – you need to understand that no matter how exciting, it’s still considered to be high risk. If you can’t afford to lose the money you’re looking at putting into your chosen cryptocurrency, don’t invest.
All that said, if you had invested around £80 in Bitcoin in 2011, you’d be sitting on around 350 Bitcoins now – which would be worth around £2.8 million as they cracked that $10,000 level in 2017… High risk can sometimes equal a very high reward.
Understand the limit of your rights
Now, the fact that Bitcoin and other cryprotcurrencies work on a decentralised ledger means two significant things:
- They’re free from the constraints of government or large financial organisations
- You don’t receive any of the protection you’d get from government or large financial organisations.
So, you take the rough with the smooth – depending on your stance on the world economic situation!
In very real terms, it does mean that Bitcoin transactions are final – and any undoing of a payment would rely on the vendor sending you the same amount of Bitcoin back – no refunds – and not much chance of getting money back if the person isn’t as they seem. The message is this – be careful who you deal with when Bitcoin or other crypto is your choice of payment.
Most cryptocurrency isn’t anonymous
Most people understand Bitcoin to be anonymous – and media outlets will often tell you that it’s the currency of choice for international drug dealers and those looking to employ the services of assassins and hitmen.
Sorry to pop the exciting bubble – it’s not any of those things.
Cash remains the currency of choice for the criminal underworld – as Bitcoin can fall under the same level of scrutiny as any other financial system, i.e. a warrant or subpoena will mean the trail can be examined very carefully.
In fact, for every small criminal transaction that might take place with Bitcoin, there’s another huge number that the blockchain infrastructure probably thwarts – given that it cannot be corrupted or controlled.
The top and the bottom of the issue is this – if you’re looking for a currency that ensures anonymity (and there are plenty of legitimate reasons why you might) – do a lot of research and consider using services that remove your personal details from the transaction. But remember, our second point was about wallet security – and under no circumstances should you let that slip, not least if you’re trying to work with anyone who promises anything cloak and dagger…