Cryptocurrency

6 Important Questions to Ask Yourself Before Buying Cryptocurrency in 2023

It's been a rough go for crypto investors of all expertise levels as 2022 winds down, and the bear market shows no signs of abating. While this is not unprecedented in the cryptocurrency market, the 2021 rise and subsequent 2022 crash and bear market were enormous in terms of dollar value. The magnitude of profits made solely from the overall market cap nearly reached a near $3 trillion figure during the bull market in November 2021 and quickly listed over 65-70% of it in the following year, falling below the $1 trillion mark is unprecedented and has never been seen before.

Now that we have established the background let’s look at some of the questions you should ask yourself before investing in cryptocurrency in 2023.

Question 1: How Should a Crypto Potential Investor Manage Their Risks?

A man is watching charts

The cryptocurrency market’s inherent instability is a major risk for investors. This is because there are still relatively few people trading on the market, and fewer are part of the market on an institutional level. These factors all contribute to the fact that investing in a young sector like the cryptocurrency market has several potential downsides. The potential payoff may be substantial, but so are the potential drawbacks. Extreme market volatility, fraud and deception, and a lack of clarity and education are all potential threats in the cryptocurrency market. 

So, investors must take precautions to reduce the likelihood of suffering a total loss of investment capital when taking advantage of the market’s various opportunities.

Question 2: How Should Smart Crypto Investment Goals Be Set?

currency

Setting investment objectives is not unique to cryptocurrencies and should be done with all asset classes. Simply put, your investment objectives are the outcomes you hope to achieve through your financial commitments. It might work out differently for each individual! One of these reasons is retirement, but there are plenty of others. This list may go on forever.

But the crypto market is unlike any other market or asset class. When it comes to investing, there are tried-and-true methods that have been around for over a century and have consistently produced returns for equity investors. There has been cryptography for fewer than 15 years. However, regardless of the specifics of the investing strategy, a few elements should be taken into account while establishing goals.

Question 3: Should You Be Involved in Crypto Investing or Trading in This Market?

crypto trading

Let’s define both of these concepts before proceeding with the solution. The term “investing” refers to a strategy for generating income from the market in which one makes a long-term financial commitment to a certain asset class after conducting extensive research into that asset as a class and mastering its fundamentals. This period can be as short as one month or long as several years.

The second phrase, trading, refers to a different way of making money in an open market, in which a “trader” merely trades off a change in the price of an asset without worrying too much about the meaning of the more or the fundamentals of the commodity.

Both of these approaches, however, necessitate special training and mindsets, making them infeasible for the vast majority of people. Trading carries a far higher risk of loss than investing, but profitable trading operations can generate much larger and more efficient returns. Comparatively, investment is a strategy with lower risk but also lower potential returns.

Question 4: How Do I Pick a Reliable Cryptocurrency Exchange to Invest in?

different crypto coin floating in the air

One cryptocurrency exchange for another is a vital part of the cryptocurrency market. It’s the point at which you can acquire the coin of a specific cryptocurrency project and join its ecosystem. It’s true. However, the recent catastrophic failure of the FTX crypto exchange has.

Because of this, it is more crucial than ever to carefully select a trustworthy cryptocurrency exchange before depositing any of your hard-earned cash or cryptocurrency there. Researching the crypto exchange and finding out the levels of transparency it works with, how secure it is, what its order book volumes are, and where it is located will give you peace of mind as a consumer.

Question 5: What is the Current Status of Cryptocurrency Taxes in India?

bitcoins

As Indian citizens investing in the cryptocurrency market, you must be cognizant of the many tax obligations you are subject to. In India, crypto assets, sometimes known as “virtual digital assets,” are subject to two different types of taxation at the moment. The first is an annual cryptocurrency capital gains tax of 30%. Gains from trading cryptocurrency are subject to this rule, and losses incurred inside the cryptocurrency market cannot be deducted from annual gains.

Second, we have a Tax Deducted at Source mechanism set up so that the government can keep tabs on VDA deals. All cryptocurrency transactions are subject to a 1% TDS, which is also potentially refundable at year’s end.

Question 6: How Should I Select a Crypto to Invest in?

investment charts

Choosing which cryptocurrency to put money into is a huge challenge. Simply put, unlike with equities, little information is available to help guide your investment decisions. As a result of the market’s volatility and unpredictability, it is difficult to find a cryptocurrency worth investing in. There are, however, some steps you can take to ensure that your investment in a cryptocurrency is well-considered.

A prospective crypto investor should look into the whitepaper, the legitimacy of the project’s founders or founding team, and the market and supply capital.

Conclusion

To summarize, these are some of the most prevalent concerns voiced by those entering the cryptocurrency market. It’s important for anyone involved in the crypto space to have answers to these sorts of questions, whether they’re complete crypto newbies or seasoned veterans.

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