You are probably excited to get started in the world of cryptocurrency. It is a lucrative market and you could earn millions if you are successful. With that said, it is important to be aware of common mistakes people make when investing in cryptocurrency.
For a crypto investor of any expertise level, things are very confusing as 2022 draws to a close yet with no end in sight for the crypto bear market. Cryptocurrency markets have experienced these conditions, but the 2021 rise, which was followed by the 2022 crash and bear market, was significant in terms of pure dollar worth.
The amount of money produced only based on market cap, which almost reached a $3 trillion figure at the peak of the bull market in November 2021 and quickly listed over 65-70% of it the following year, going down below the $1 trillion mark, is unprecedented in history.
Now that the context has been established, let's try to address some queries you should think about before purchasing cryptocurrency in 2023.
There are hundreds of promising blockchain projects and cryptocurrencies on the market today. Many people are now taking part in the cryptocurrency revolution, investing their hard-earned money on a hunch that it might just be the next big thing.
For some this means earning huge returns and for others this means losing everything they own. There are many questions you should ask yourself before investing in crypto currency like: Is it too late to get involved? Will this trend continue, how soon will it be replaced by something even better? Are there any regulations surrounding cryptocurrencies? And is it just a scam?
Let's briefly review the definitions of both of these phrases before responding to this question. A way of gaining money in the open market known as "Investing" entails placing your money in a class of assets after carefully researching it, comprehending all of its essential characteristics, and committing to it for a period of time that is at least somewhat prolonged. The duration can be anything from a month to a year or even across a number of years.
The second word, "Trading," is another way to profit from an open market in which a "Trader" effectively trades off of a change in asset price without actually worrying about the fundamentals of the commodity itself or the significance of the price shift.
Setting investment goals is a good idea for all asset classes, not just cryptocurrencies. Investment goals are nothing more than the objectives you hope to accomplish with the money you are investing. For various people, it might be different! There are many other reasons, such as money for children's education or retirement.
In contrast to other markets and asset classes around the world, the cryptocurrency market is a whole distinct species. There are established strategies to invest in and profit from equities, which have been around for more than a century. With fewer than 15 years of history, cryptocurrency. Nevertheless, one must adhere to a few fundamental principles in any approach for creating investment goals.
Indian investors in the cryptocurrency market need to be very mindful of the kind of tax obligations they are responsible for in their home nation. We presently have two tax types in place in India for crypto assets, also known as "Virtual Digital Assets" in our nation.
The first is a flat 30% cryptocurrency tax applied to all profits realised during the specific fiscal year. This also states that losses incurred in the cryptocurrency market cannot be offset by gains realised throughout the year. It applies to profits or gains from trading in crypto assets.
To help the government track VDA transactions, we also have a TDS, or Tax Deducted at Source, mechanism in place. All cryptocurrency transactions are subject to a 1% TDS, which is refundable at the end of the year.
The cryptocurrency market is by its very nature very unstable. This is because, one, the market is still highly undercapitalized, and second, there aren't many market players overall, especially institutional participants. Due to these factors, investing in a developing sector like the cryptocurrency market has a number of risks. Even while the dangers are substantial, the rewards also tend to be. Extreme volatility, dishonesty and fraud, as well as a lack of understanding and knowledge, can all be risks in the cryptocurrency market.
The exchange of cryptocurrencies is a crucial part of the entire crypto economy. It functions as an entry point into the ecosystem where you can purchase a specific coin from a specific cryptocurrency project and join that ecosystem. While that is true, the recent catastrophic collapse of the FTX cryptocurrency exchange has changed that.
As a result, it is now even more crucial to carefully select a cryptocurrency exchange before depositing your cash or cryptocurrency funds there. By doing your homework on the cryptocurrency exchange, finding out about its levels of transparency, security, order book volume, and location, you can be sure that you, as a customer, are in good hands.
Choosing a cryptocurrency to invest in can be a very difficult process. This is due to the obvious fact that, unlike with equities, you don't have a lot of history or business fundamentals to consider. The unpredictable and volatile nature of the market makes it particularly challenging to find a cryptocurrency to invest in. Before investing your hard-earned money in a cryptocurrency asset, there are a few things you can do to make a better-informed decision.
As a general rule, you can verify the whitepaper of the cryptocurrency project, determine the legitimacy of the founders or founding team, and assess the market and availability of funds.
By Akhilesh Kumar Yadav