In recent years, the cryptocurrency market has grown in size and popularity in the world. Each country has different regulations for cryptocurrency. Due to the increased demand for bitcoin and cryptocurrencies, nations have to update the appropriate legal regulations day by day.
With the rapid growth of the Internet, the use of cryptocurrencies is an inevitable trend. No country can completely ban this financial type. People can do cryptocurrency transactions secretly on the Internet. It is hard for the government to track cryptocurrency users or cryptocurrency exchange.
If you invest in crypto, buy bitcoin, or are interested in this investment, you should learn about the rules and how regulations may affect you. While some cryptocurrency regulations can slow down the buying, selling, and use of cryptocurrencies, others support the growth of this new asset class. Even an announcement about crypto regulation can cause prices to rise or fall dramatically.
Here are essential rules and regulations that investors must consider before buying cryptocurrency.
What is cryptocurrency?
Cryptocurrency is a medium technology of financial exchange with cryptographical functions on the Internet. Cryptocurrencies use blockchain technology to achieve decentralization, transparency, and immutability.
Cryptocurrencies are not controlled or regulated by any authority. And the cryptocurrencies’ price is determined by the supply and demand of their market. It is the most significant feature of a cryptocurrency. Due to the decentralized nature of blockchain, cryptocurrency is immune to government administration.
How is the cryptocurrency transaction?
Cryptocurrencies can be deposited directly between the two parties through the use of private and public keys. This transfer can be done with minimal processing fees, allowing users to avoid the hefty fees charged by traditional financial institutions.
Cryptocurrency properties
– Irreversible: Once you’ve confirmed, a transaction cannot be reversed. If you send money, you send it. If you sent your money to a scammer or if a hacker stole them from your computer, you could not take it back. There is no safety zone.
– Permissionless: No one can stop you. No need to ask anyone to use cryptocurrencies. It is just a piece of software that anyone can download for free. Once installed, you can buy Bitcoin or other cryptocurrencies.
– Fast and global: Transactions are spread almost instantly across the network and confirmed in minutes. Since they happen in a global network of computers, they don’t care at all about your specific location.
– Virtual pseudonym: Neither the transaction nor the account is connected to the user identity in the real world.
– Security: Cryptocurrency funds are locked into a public-key cryptosystem. Only the owner of the private key can send cryptocurrency. The strong code and the magic of the big numbers make it impossible to break this scheme. A Bitcoin address is more secure than Fort Knox.
Why should you invest in cryptocurrency?
Cryptocurrencies have been popular for many years. However, the majority of people are not aware of it. As a result, people don’t think about trying to invest or trade cryptocurrencies.
Of course, cryptocurrencies are risky – just like any other investment with a high potential return. However, it also offers the following obvious benefits.
You are the owner
There is no other electronic cash system where your account belongs to you.
Fraud protection
Once the cryptocurrency is created, all confirmed transactions are stored in a public ledger. All the identity of the coin’s owners is encrypted to ensure the legality of record keeping. Because money is decentralized, you own it. Neither the government nor the bank has control over it.
Identity theft
The ledger ensures that all transactions between “e-wallets” can calculate the correct balance. This public ledger is also known as the “transaction blockchain”. Blockchain technology ensures secure digital transactions through encryption and “smart contracts” that make entities virtually vulnerable to attack and free of fraud.
Instant payments
Blockchain has brought value to cryptocurrencies. Ease of use is the reason why cryptocurrencies are in high demand. All you need is a smart device, internet connection, and instantly become your bank making payments and money transfers.
Accessible
More than two billion people have access to the Internet but do not have access to traditional exchange systems. These individuals are entering the cryptocurrency market.
Which cryptocurrency to invest in?
Although Bitcoin is a famous cryptocurrency, investors and users should know about other cryptocurrencies. Furthermore, some aspiring cryptocurrency traders have also found that investing in IOTA can be a fantastic way to diversify their portfolios. Accordingly, if you would like to learn more about das IOTA Potential (the potential of IOTA) then you can find plenty of helpful resources on the Coincierge website. For now though, let us discuss the most popular cryptocurrencies today.
Bitcoin
Bitcoin is the first and most famous cryptocurrency.
Bitcoin is known as the top digital standard through the entire crypto industry. Now, people use Bitcoin as a global payment. Cybercriminals also sell or buy Bitcoin in the darknet markets or ransomware. For seven years, the Bitcoin price has increased from zero to 650USD and more than 200,000 daily transactions.
Ethereum
Ethereum takes second place in the cryptocurrency top ranking. It is a product of Vitalik Buterin. Unlike Bitcoin, its blockchain not only can process the complicated transaction but also complex contracts and programs due to its function of validation in so-called states.
Ripple
Although Ripple has a native cryptocurrency – XRP, it is more about a network that processes IOUs than the cryptocurrency itself. XRP, the currency, does not act as a vehicle for storing and exchanging value but also acts as a token to protect the network from spam.
Ripple, unlike Bitcoin and Ethereum, has no mining activity as all coins are pre-mined. Ripple has found immense value in the financial space as a lot of banks have joined the Ripple network.
Litecoin
This is a viable alternative to bitcoin. It was created in 2011 by Charlie Lee. After bitcoin, it ranks third in terms of time and lifetime of cryptocurrencies. Even if litecoin did not get as much attention as expected, we still have to admit that litecoin is much faster than bitcoin and that its transaction fees are almost zero.
Dash
Dash was launched in 2014 and has become one of the largest peer-to-peer networks of master nodes. Hence, Dash can provide additional storage and a secure environment for users.
Rules and regulations when buying cryptocurrency
1. Reading is the basic knowledge first
You should spend time to read what cryptocurrencies and blockchain technology is, and the different types of coins, wallets, and transactions.
Update the latest information on cryptocurrencies in trusted and reputation media channels.
By building up your knowledge, you will make decisions and take opportunities confidently.
2. Only invest what you are prepared to lose
If you are a beginner, you should start a small investment first. Buying Bitcoin or any other crypto is volatile. You can gain much, but you might lose what you have invested in too.
3. Consider carefully the type of cryptocurrency you buy
Research the crypto price. The circulating supply and the real-world will value the coin.
Large supply often dilutes the price of a coin, and if such a cheap coin has little to no practical utility, then there is no reason to assume it will magically rise in price.
Read about the coin’s background, its origins, how it fits into the larger business plan of the supplier, and how the crypto community accepted it. You have to follow the crypto-related events and hard fork updates, as these events tend to influence market trends.
4. Consider carefully where to buy crypto
You can buy cryptocurrencies from online strangers (not recommended), over-the-counter (OTC) kiosks online, at stores affiliated with Bitspark, at crypto ATMs, or on an exchange.
Wherever you buy, be sure of the seller’s credibility. You must look up recent reviews, comparison sites, and user ratings. If you are going to buy in OTC consider using escrow service, so you will not transfer money without ever getting your cryptocurrency back. If it’s an exchange, find out if it’s easy to trade into other coins, what coins they support, and what you need to do if you want to transfer your money to another wallet or revert to fiat.
Lastly, you have to understand the fees you will pay when buying or trading coins.
5. Ensure security
In the cryptocurrency market, you keep the key, and you control the coin.
Do not store your keys in a wallet that isn’t entirely yours.
Buying cryptocurrencies from a centralized exchange and some OTC, usually means your money is not under your control. If an exchange gets hacked, you lose money.
If you have more than $500 in cryptocurrency make sure you buy a hardware wallet like a Trezor or Ledger and get in the habit of storing a large portion of your money in an ‘offline’ device. This way will keep your money safe from hackers.
In addition to security considerations, when handling your cryptocurrency and transferring it to another wallet, double-check the address you’re sending. Transferring money to the wrong account means it’s very hard to get it back.
6. Remember to buy low, sell high
As you increase your knowledge of cryptocurrencies, you will value coins by themselves by their value and read the market depending on your understanding. While buying when the price is low and selling when it is high seems sensible, it is really about distinguishing the hype from solid trends and seeing the whole picture.
Instead of chasing the market trend, you should anticipate or wait until the hype passed before buying: work on vision, instead of emotion.
7. Do not overtrade
Instead of choosing between buying and selling regularly or holding a currency for an extended period, you should find an intermediary path and dedicate part of your investment to well-established currencies.
However, you should not “over-trade” constantly switching to other currencies due to worries about low trading volumes. When trading, be sure you will place orders with enough liquidity. Don’t forget that the transaction fees to recover the losses.
In conclusion
As with any other highly profitable investment, cryptocurrencies carry a specific risk – but they are even more offset by its independence and high profitability.
Investing in cryptocurrency is similar to exchanging your money in a new country. Bitcoin, Litecoin, and Ether are a few examples of “forex” that operate in a very specific context in certain online communities.
Just remember that exchanging any currency is built on shared trust.
We hope the basic information provided above can help you understand the rules and regulations when buying cryptocurrency.
Provided By VAT reporting software company, Sovos
