Cryptocurrency has been popular in the last few years; however, there are still many people who are yet to understand how it works. If one follows the news, it has been seen that Bitcoin and other cryptocurrencies have witnessed unprecedented growth in the last couple of years. Since this growth has been awe-inspiring, many people are considering making investments in them for lucrative profits. 

Kavan Choksi- investing in cryptocurrency and what should you know 

Business and investment expert Kavan Choksi states that before making any investment, people must know their basics first and consider whether it is ideal for their portfolio or not. There are risks to consider and the time horizon one wishes to take for making these investments. One should know how cryptocurrency works first so that wise investment can be completed successfully. 

Your individual circumstances should be considered

Before making any investments, you should always consider your individual circumstances first. The second consideration should be the type of investment asset you are choosing. When you know more about it and how it works, you will prevent losses in the market. When it comes to the subject of cryptocurrency is a virtual or digital currency that deploys cryptography for protection. They are decentralized and do not fall under the government or any financial institution’s control. In 2009, the world’s first cryptocurrency, Bitcoin, arrived in the market, and today the world of cryptocurrencies has evolved to such a considerable extent they can be used for buying products and services. 

Understanding the blockchain technology 

Cryptocurrencies function with blockchain technology which is a sort of digital ledger for the transactions done with them. This technology is deployed to protect and verify these cryptocurrency transactions. Bitcoin and the rest of the cryptocurrencies you see in the world are made via a process known as mining. Here, miners deploy special software to resolve complicated problems in Math and are rewarded with cryptocurrencies for their efforts.

How do cryptocurrencies differ?

He further adds that investing in cryptocurrencies is different from bonds or stocks. When you invest in cryptocurrencies, you are not purchasing company shares or lending cash to a company; you are buying digital tokens for purchasing products and services or having them traded on a cryptocurrency exchange. 

According to Kavan Choksi, cryptocurrency is still a novel asset class, so it is crucial for one to be aware of the risks before investing. One of the primary risks of cryptocurrency is that the prices are volatile. For example, take the instance of Bitcoin; in December 2017, there was a price swing of more than $1000. This means that if one invests in cryptocurrency and could lose your investments in the short term. 

Besides the above, he cautions that cryptocurrencies are not under government regulations, so this means in case something does go wrong with your investments, there is no protection. For instance, if you buy cryptocurrencies in an exchange that has been hacked, you will lose all of your money.