Navigating the Digital Frontier: Illuminating Crypto Insights for Investors

When studying the history of cryptocurrencies we usually notice some noisy facts, like the mysterious personality of the creator, innovative concepts, and decentralized approach. But did you ever think that crypto was born out of the Great Recession? Central bank powers were not a reliable system, and users were looking for a way to decentralize money. And they got blockchain — a technology that relies completely on math, computing, and community. With a decentralized ledger, people don’t need a bank system to conduct and control their transactions. 

The people’s trust was directly reflected in the price movements of Bitcoin, which was the first cryptocurrency ever created. BTC started with a value of less than a penny and reached its all-time high of $68,000 in 12 years. This incredible price volatility attracted investors looking for a quick way to create their wealth. Additional catalysts were the simplicity of transactions and 24/7 market availability. 

Institutional crypto investing is made simple with some regulated exchanges providing a wide range of trading instruments and deep liquidity. 10 years after its creation, Bitcoin joined the investment portfolios of institutional investors like Tesla and MicroStrategy. How crypto investors are making their decisions and where do they look for insights? Let’s see. 

• Blockchain

Blockchain is an online network of crypto wallets that keep historical records of all transactions performed. It’s supported by the users and joins all computers and devices connected to the network spreading the copy of records to everyone instead of keeping it on a single server. 

• Cryptocurrency

A cryptocurrency is a digital form of cash and an alternative form of payment created using encryption algorithms. To use digital assets, you need a cryptocurrency wallet, which can be software or a mobile device. Wallets are a tool where you store your encryption keys that verify your identity and reference your cryptocurrency.

• Smart Contracts

Ever wish you could automate agreements with your business partners? Meet smart contracts — self-executing programs with terms directly embedded into lines of code. They take “trust” out of the equation by automatically completing transactions once predetermined conditions are met.

• Research

Investing in crypto isn’t just about buying low and selling high. You need to learn the industry deeply and do your homework to achieve good results and prevent possible money loss. Start by reading whitepapers, analyzing market trends, and following reputable crypto news outlets.

• Diversification

Don’t put all your eggs in one basket. Have you already heard that? Well, you should have, this rule is often called the golden one in the world of money. Investing in a variety of assets can help you mitigate risks, that’s why it’s essential. 

• Wallets and Exchanges

You’ll need a digital wallet and an exchange account to buy, hold, and sell cryptocurrencies. Make sure to choose platforms that are secure and reputable, the ones with which you can trust your money. 

In the early stages of the crypto era, it was nearly impossible for government tax authorities to track them. That’s because of the distinctive feature of blockchain transactions — anonymity, i.e. it is impossible to confirm the identity of the buyer or seller.

In 2014, the IRS stated that cryptocurrency should be treated as property for federal income tax purposes. Although the agency itself has yet to release official estimates, an analysis by Barclays Bank shows that the IRS is losing roughly $50 billion a year in taxes owed on digital assets.

Buying and holding cryptocurrency is not considered a taxable event in the U.S. Residents can buy and hold cryptocurrency for as long as they like, although you must disclose it on their tax return. However, once a user decides to sell (in other words, to make a profit or loss) they will need to report the amount of the gain or loss on the sale.

• Market Volatility

The crypto market is famous for its extreme volatility — prices can skyrocket in a day, sometimes in an hour, but they can also plummet. Be prepared for a rollercoaster ride. 

• Regulatory Concerns

Government regulations can affect the crypto market and also limit your access to digital assets. Stay updated on legal changes in your jurisdiction.

• Security Risks

From hacking to scams, the crypto world also suffers from this dark side of the Internet. Protect your investments by using secure wallets and being cautious of phishing attempts. Make sure to use a crypto platform with enhanced security measures to keep your digital assets secure. 

• Poor Consumer Protection

A survey of fintech regulators points to a lack of transparency and inappropriate or dishonest sales practices as the top risks for crypto users. The lack of consumer protection, including recourse and compensation, is also a cause for concern. Many other analytics believe that fraud-related misconduct and possible losses due to price volatility are the biggest risks to consumers through digital assets.

Cryptocurrency has grown in popularity in recent years, however, the digital market is still incredibly volatile, and rising interest rates in 2022 caused a selloff in Bitcoin as cautious investors unloaded speculative assets. 

To be able to act as a medium of exchange, an asset should have a relatively stable value. Thus, the idea that crypto can be both used for profit and functional cash for transactions contradicts each other. 

So far, El Salvador and the Central African Republic recognize cryptocurrency as legal tender, although both countries have had significant problems with its implementation.