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Are you interested in investing in cryptos but have little information about what they are or how exactly they work? Stop, take a pause! Cryptos are definitely an exciting investment opportunity and can give you good gains if you DYOR properly. However, if you’re a beginner or a new investor, the risk of losing your capital increases. You will also be prone to being lured by scammers, who can dupe you into giving away your money just like that.
In 2020 and 2021, crypto investments saw a dramatic increase in popularity, which enabled many of the top cryptos to reach all-time highs. Bitcoin (BTC), the most significant of them all, increased from roughly $7,000 in January 2020 to over $69,000 in November 2021. But in 2022 and 2023, things changed abruptly; the crypto space went through a rough “crypto winter.”
Prices began to fall when the Federal Reserve implemented economic tightening measures, and investors turned away from riskier assets. The market then had a string of setbacks, and the prices fell even further after each. The collapse of the Terra (LUNA) network was one such incident that had repercussions on the market for several months afterward.
However, as 2024 began on a good note, the most anticipated Bitcoin halving event took place, shooting Bitcoin to its all-time high of $73,000 in March 2024. Various new projects were launched, and institutional adoption grew; investors and traders were full of excitement and hopeful that the worst was over and crypto investment would be profitable again.
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But, for new investors and beginners, we did some digging and prepared a list of critical questions for you to consider before buying crypto in India in May 2024. Let’s quickly have a look at them.
Q 1. What is your ultimate investment goal?
Your investment goal matters the most, so you should consider your investment goal before buying any crypto. Do you want to make an instant profit, or do you want to hold them for the long term? If your goal is to make a quick profit, then you may want to consider day trading or investing in high-risk, high-reward cryptos. On the other hand, if you are interested in holding for the long term, then you may want to consider investing in established cryptos such as Bitcoin or Ethereum.
Related read: Understanding Cryptocurrency Trading Strategies: Scalping, Swing Trading, and HODLing
Q 2. How much are you aware of the current market scenario?
The crypto market is famous for its high risk and volatility, so it is crucial to study the current market conditions before investing carefully. Is the market bullish or bearish? Is there a lot of volatility, or is the market relatively stable? Understanding the current market condition can help you make better investment decisions.
Related read: Understanding the Differences Between a Bull and Bear Market
Q 3. How much are you willing to take investment risks?
Crypto investments are considered risky, but it’s important to consider your risk tolerance before you make any crypto investment decisions. How much are you willing to take on the high-risk investments, or how comfortable are you with low-risk, low-reward investments? This way, you can easily come to a conclusion about the type of crypto you should consider investing in.
Related read: 6 Ways to Minimize Risks When Investing in Crypto
Q 4. How strong is the technology behind the crypto?
Before you choose a crypto for investment, you should definitely consider the technology behind it. What is the underlying technology of Crypto? Is it based on blockchain technology or some other type of technology? Answers to these questions will help you make a better investment decision for the crypto you want to buy.
Related read: Unlocking the Synergy: Exploring the Intersection of Blockchain Technology and Web3
Q 5. What is the regulatory environment surrounding the crypto you want to buy?
The regulatory environment surrounding crypto is also an important factor to consider before investing. Are there any regulatory hurdles that crypto may face in the future? Understanding the regulatory environment can help you make better investment decisions.
Related read: The Crypto-Regulatory Landscape: A 2023 Overview
Bottomline
Nobody can exactly predict crypto prices. However, with the upcoming regulations, there may be short-term volatility, even if it helps to strengthen the crypto market in the long run. The crypto winter is over, and the current market has recovered.
If you plan to invest in crypto, do not make the decision based on expectations of a similar surge like that of 2021. Instead, make crypto investment decisions after having a thorough understanding of blockchain and its potential applications in the future. However, even then, it is crucial to follow the golden rule of crypto investing and invest only the money you can afford to lose.
Happy Trading!
Frequently Asked Questions
Is Cryptocurrency Legal In India?
In India, cryptocurrencies are legal; anyone can purchase, sell, and trade cryptocurrencies. They are currently unregulated; India does not have a regulatory framework in place to regulate its functioning. According to the Ministry of Corporate Affairs (MCA), companies must now declare their crypto trading/investments during the financial year, according to the Ministry of Corporate Affairs (MCA). Cryptocurrency transactions have been taxable in India when people receiving such gains are Indian tax residents or where the crypto is considered to be domiciled in India
What Is Cryptocurrency?
A cryptocurrency is a digital currency secured by encryption, due to which chances of activities such as counterfeiting and double-spending taking place get close to impossible. Cryptocurrencies get created on blockchain technology ( a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are unique in that they do not get issued by any central authority. The term "cryptocurrency" comes from the encryption techniques used to keep digital currencies and the network safe.
How To Invest In Cryptocurrency?
There are two ways of investing in cryptocurrency, mining and via exchanges. Cryptocurrency mining is considered the procedure of verifying and adding transactions to the blockchain public ledger. Another option is via cryptocurrency exchanges. Exchanges generate money by collecting transaction fees, but there are alternative websites where you can interact directly with other users who want to trade cryptocurrencies.
Is Pi Cryptocurrency Safe?
Pi Network captured the crypto community’s interest even before it officially debuted. Its innovative mobile mining approach and user-friendly design simplify crypto adoption for a broader audience. Some users see this as a chance to get engaged in the crypto from the beginning and profit in the future, similar to how early Bitcoin adopters made huge profits by mining and keeping the coin. Other users have compared Pi to a worthless multi-level marketing (MLM) scheme.
How Cryptocurrency Works?
Cryptocurrencies use cryptography technology to keep transactions and their units (tokens) secure. Cryptocurrency works via a technology called the blockchain. A blockchain is a decentralized technology that handles and records transactions across numerous computers. The security of this technology is part of its value.
Is crypto legal?
Crypto is legal in most countries, including India. While nations like the U.S. and many in Europe have regulatory frameworks, others like China have strict bans.
What Is Virtual Currency?
Virtual currency is a type of uncontrolled digital currency that can only be used online. It is exclusively stored and transacted using designated software, mobile or computer applications, or unique digital wallets, and all transactions are conducted through secure, dedicated networks. Because digital currency is just currency issued by a bank in digital form, virtual currency is not the same as a digital currency. Virtual currency, unlike ordinary money, is based on a trust structure and cannot be issued by a central bank or other banking regulatory organization.
Is Cryptocurrency Banned In India?
No, cryptocurrency is not banned in India. India has seen its ups and downs in the crypto sector concerning its legal status. The Reserve Bank of India (RBI) issued a circular in April 2018 advising all organizations under its jurisdiction not to trade in virtual currencies or provide services to assist anyone in dealing with or settling them. A government committee proposed outlawing all private cryptocurrencies in mid-2019, with up to ten years in prison and severe penalties for anyone dealing in digital currency. The Supreme Court overruled the RBI's circular in March 2020, allowing banks to undertake cryptocurrency transactions from dealers and exchanges.
How Safe Are Cryptocurrencies?
Cryptocurrencies can be safe, but your crypto wallets can be hacked if proper security steps are not performed. There are also dangers and uncertainties associated with investments, and we cannot declare any virtual currency investment risk-free. Buying and selling cryptocurrencies does not have to be dangerous if the trader is well-versed in the market and treats his coins with care.
How Many Cryptocurrencies Are There?
There are over 5000 other digital currencies available on the internet in addition to Bitcoins. The only problem is that they haven't gotten the users' attention. Besides Bitcoins, a few other digital currencies have gained popularity among users. It's been more than ten years since Bitcoins were first released, and now they've achieved new heights thanks to their phenomenal success.
