What is Cryptocurrency ? Should I invest in it ?

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A cryptocurrency (or crypto) is a non-physical, digital, and decentralized asset that is issued by private systems and remains out of the purview of the government. It is a peer-to-peer system that can be enabled anyone anywhere to send and receive payments. It can stored in a digital wallet. At present, there are over 4,000 different cryptocurrencies in circulation worldwide, including the market giants Bitcoin, Ethereum, Litecoin, and Dogecoin. Much of the interest in these unregulated assets is to trade for profit, with investors/speculators at times driving prices skyward.

Cryptocurrencies work using blockchain technology, a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security. Transactions cannot be altered or deleted and are hard for hackers to tamper with. In addition, transactions require a two-factor authentication process. The investor can add more and more digital transactions and the blockchain gets updated automatically.
To trade in cryptocurrencies, you need to open a crypto trading account on a cryptocurrency exchange. A cryptocurrency exchange, such as WazirX, CoinDc and Coinbase, helps in the trading of cryptocurrencies in various currencies and provides wallet services. It acts as a broker and facilitates transactions between the buyers and sellers, while their main sources of revenue are transaction fees and commissions. Once the account is opened and KYC formalities are completed, you can deposit money in the cryptocurrency exchange via card transactions or direct bank transfers to purchase cryptocurrencies, against a fee.

While crypto trading is the current rage and may even yield potentially high returns, you must understand that cryptocurrency is an incredibly speculative and a volatile buy. The market is still in its infancy. Investing in something that’s new comes with challenges, so you must be prepared for ups and downs, including some dramatic swings. Before investing, think about these 6 questions:

1. Can you afford to lose your entire crypto investment?
2. Are you tech-savvy and ready to learn how to keep your crypto safe?
3. Are you ready to spend a good amount of time every single day researching cryptos and monitoring your portfolio?
4. Can you wrap your head around the fact that crypto prices depend more on tweets by billionaires like Elon Musk and less on logic and economics?
5. Are you ready to understand the meaning of stuff like this? — "Sharpe Ratio is the average return earned more than the risk-free rate per unit of volatility. Volatility measures the price fluctuations of a cryptocurrency and is usually calculated using variance and standard deviation."
6. Are you ready to spend time looking at complicated graphs ?

If you say “no” to any of these questions and your risk appetite can’t handle these fluctuations, then cryptocurrency might not be a wise choice for you.

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