Thanks to Bitcoin, cryptocurrency is slowly becoming a household term. Yet, with all this popularity, there are still many people that do not know how to exchange or trade cryptocurrency. Some people think it would be as easy as trading stocks, but it’s not like that. One of the main problems is that there are over 9,000 cryptocurrencies to pick from. Besides, each country has its own regulations for buying/selling cryptocurrencies.
If you wish to become an active cryptocurrency user, here are a few tips to follow so you do not get into unnecessary trouble. These tips might be helpful to both first-time cryptocurrency buyers, and those who already own some.
Check what your country’s regulations say
Every country has its own views on cryptocurrencies and, consequently, its own regulation policies.
For example, the UK and the US both have a relatively positive stance on cryptocurrency. The UK allows its citizens to buy and sell cryptocurrency, while trading of crypto derivatives is banned. The US authorities do not consider cryptocurrency a legal tender, but crypto exchanges are allowed. Still, regulations vary across states. Nigeria, on the other hand, has banned cryptocurrencies.
For that reason, you must check how your country treats cryptocurrencies. Additionally, check what regulations have to say about paying taxes for cryptocurrency investments. That way, you do not find yourself on the wrong side of tax collection bodies.
Evaluate the cryptocurrency exchange platform
Let’s say you want to convert TRX to BTC. There are many ways to do this, but one would involve finding a good TRX to BTC exchange. But how do you evaluate whether your exchange platform is good or not? Here are four things to check to keep you out of any trouble.
Is it regulated?
In countries where cryptocurrencies are regulated, exchange platforms are evaluated for their safety and security. It would therefore be wise to check if your exchange platform of choice is regulated. Trading on an unregulated platform may not cause you trouble with the law, but it could leave you vulnerable to losing your investment if the company were to close.
Is it local or international?
A company may be regulated but in a different country from yours. As was mentioned, lack of government control leaves you vulnerable. In most cases, a company that is recognized in more than one country may be more secure than one regulated but in a country with lenient rules.
Cryptocurrency exchanges are required by law to collect your personally identifiable information. This helps them stay accountable to the governing body, but it also means that you may not be able to hide your transactions. If you do not want tax collection bodies, moneylenders, or any other institutions to find out about your transactions, it may be better to find an anonymity-focused cryptocurrency exchange.
Getting into trouble is not just about breaking laws. It’s also about losing your hard-earned money to bad players. Make sure that your crypto exchange platform has stringent security measures in place, as an attack on them could translate to a loss of your money.
Evaluate the cryptocurrencies
There are many cryptocurrencies around, and this makes the research process tougher for traders. The best thing to do is to evaluate the available coins and get the right ones for you. Here are some factors to consider
Does it have potential?
What makes your cryptocurrency of choice stand out from all the others? Sure, the cryptocurrency market is affected by speculation but is there a reason this particular cryptocurrency would sway speculators? Is it any different from the other cryptocurrencies?
Who is the team behind it?
You want to invest in a cryptocurrency that has an experienced team behind it. Don’t get impacted by big-name founders. Instead, research the people who worked on the project and evaluate their credibility.
Check the supply
You want to invest in a coin that you can easily liquidate. There is no point in getting stuck with an overpriced coin you cannot sell.
Remember that it is important to diversify your portfolio. Yes, you may think that you have found the next Bitcoin, but cryptocurrencies are very volatile. You stand to lose everything if the price charts of a particular cryptocurrency do not behave as you predicted.
Evaluate the storage
Most people don’t know that there are different types of wallets in which cryptocurrencies are stored. For example, there are multi-currency wallets and single currency wallets. As the names imply, multi-currency wallets can store different cryptocurrencies in the same wallet, while single currency wallets can only store one. Additionally, there are cold wallets (offline) and hot wallets (online).
Use your own evaluation criteria to decide which type of wallet would serve you best and which one is the safest. Additionally, analyze if there are any fees associated with the different types of wallets.
Because the world is so divided about cryptocurrencies, you could easily get into trouble if you go about buying, selling, and trading cryptocurrencies without a plan. The tips listed in this article will help evaluate the cryptocurrencies you want to exchange and all associated aspects of exchanging. This will ensure your peace of mind as you buy and sell.