Legal Legitimacy in India
In India, the honorable Supreme Court has provided legitimacy to cryptocurrencies, which has propelled the market into a standoff with the Reserve Bank of India. Despite this, the legal recognition has given the digital token market the much-needed credibility boost. This landmark decision has sparked a surge of investor interest, which is evident among startups in the Indian crypto space.
However, cryptocurrencies remain a largely alien concept for many Indians. As such, the market may continue to be met with skepticism until clear regulations and categorizations for digital tokens are established in India.
A Step-by-Step Guide to Crypto Trading
As the cryptocurrency market grows, it's essential to understand how crypto trading works. Below is a comprehensive guide to the seven key steps involved in crypto investment, and the challenges faced along the way:
Step 1: Understand and Allocate Investment
Before diving into crypto, investors must first understand the asset class and the potential risks involved. Given the highly volatile nature of the crypto market, experts suggest allocating only a small portion of one’s portfolio (5-10%) to digital tokens. The value of cryptocurrencies can fluctuate wildly, and some cryptocurrencies have seen significant value drops over the years, with many vanishing altogether.
Step 2: Choose the Cryptocurrency
With more than 5,300 cryptocurrencies available, choosing the right one to invest in is a daunting task. While Bitcoin and Ethereum dominate the market, there are other digital tokens that have shown impressive growth in the past decade. Evaluating each cryptocurrency’s fundamentals, technology, and growth potential is essential.
Step 3: Understand the Cryptocurrency
Each cryptocurrency operates on different blockchain technologies, uses varying mining techniques, and caters to distinct communities. Investors should take time to understand the fundamentals of the digital tokens they are interested in and evaluate their potential long-term viability.
Step 4: Choose the Platform to Buy From
Unlike stocks or other assets, cryptocurrencies are bought and sold on dedicated exchanges. Major cryptocurrency exchanges provide platforms for buying, selling, and trading, with some also offering peer-to-peer transactions. However, investors should note that crypto trading is completely anonymous, which adds another layer of risk.
Step 5: Store Your Cryptocurrency
Cryptocurrencies are stored in digital wallets, either hot (internet-connected) or cold (offline). These wallets store the private and public keys that allow users to access their cryptocurrencies on the blockchain. The type of wallet chosen depends on the balance between security and convenience. Some exchanges also provide wallet options for their users.
Step 6: Secure Your Crypto Wallet
As cryptocurrencies are digital, securing them is a crucial step in the process. This is especially true for those using hot wallets, which are connected to the internet. A VPN (Virtual Private Network) is commonly used to ensure secure and encrypted transactions, adding an extra layer of protection. Data encryption makes it difficult for hackers to access private transactions, ensuring that users' data remains secure.
Step 7: Hold and Sell to Book Profits
Investing in cryptocurrency is a long-term strategy that requires patience. Investors should refrain from treating it as a get-rich-quick scheme. Cryptocurrency markets are still in their infancy, and new tokens are constantly being introduced, often causing a temporary spike in prices before the excitement fades. The key to successful crypto investment is to book profits at the right time and avoid the hype-driven schemes that may arise.
Disclaimer: Liquidity Limited does not endorse the investment or trade of cryptocurrencies. This article is solely intended for educational and informational purposes.
