7 things to consider when investing in cryptocurrency in 2024

Before investing in cryptocurrencies, investors need to learn about the legality of the project, how to value the currency and verify information.

Cryptocurrencies have had their ups and downs since their launch in 2009. Today, they remain a controversial topic among investors, largely due to their volatility and lax regulation.

However, cryptocurrencies are increasingly attracting investors. Forbes cited data from crypto.com saying that by the end of 2021, there were about 300 million people globally owning cryptocurrencies.

This week, the U.S. Securities and Exchange Commission (SEC) approved several Bitcoin ETFs, which could help the number of cryptocurrency investors continue to grow. On Go Banking Rates, financial experts offer eight things to consider if you want to invest in cryptocurrency this year.

Legality and safety

Bitcoin symbol coin. Photo: Bao Lam — Bitcoin symbol coin. Photo: *Bao Lam*

Not all cryptocurrencies are created equal. Some projects are more sketchy and risky. That’s why it’s important to do your research on each cryptocurrency project. Make sure it’s legitimate and safe.

“Look for projects that have a clear roadmap, a capable development team and a transparent business model,” said Dmitry Mishunin, CEO of blockchain consultancy HashEx.

You should make sure the project has been thoroughly audited by a reputable company. “This is very important for smart contracts, to prevent the system from being hacked,” says Mishunin.

Pricing Challenges

One of the reasons why cryptocurrencies are difficult to understand, especially for newcomers, is that they don’t follow traditional valuation models. “Cryptocurrency prices are less driven by fundamentals than by perceptions, such as the fact that many people view Bitcoin as digital gold,” said Daniel Krupka, director of research at Coin Bureau.

So beware of overly rosy stories about cryptocurrencies. Focus on what you learn.

Information quality

Another thing to consider when investing in cryptocurrencies is that the quality of information is difficult to verify. Krupka said this comes down to each person’s perspective and understanding of the technology.

“To invest successfully, you need to do comprehensive, independent research and understand the story behind cryptocurrency projects,” Krupka said.

Bull and Bear Markets

Cryptocurrency bull and bear markets are not like traditional stock markets. “Bull markets tend to be gradual increases, but corrections are sharp. Bear markets are similar, with gradual declines, but sharp increases. This has significant implications for investment strategies,” Krupka said.

The Potential of Bitcoin ETFs

When looking to invest in cryptocurrencies in 2024, it’s important to consider the potential of Bitcoin ETFs. The U.S. Securities and Exchange Commission (SEC) approved the listing of several spot Bitcoin ETFs this week.

This decision has been long-awaited and is considered a turning point for the cryptocurrency market. It could have a major impact on future cryptocurrency regulations and investment trends in this market.

Bitcoin ETFs would allow investors to invest in Bitcoin without having to worry about the complexities of direct ownership, such as managing wallets or complying with exchange regulations. Liam Hunt, director and analyst at Sophisticated Investor, believes that these funds would help increase the number of investors in Bitcoin, thereby helping this asset gain wider acceptance and more stable prices.

The Risks of Bitcoin ETFs

Hunt said that Bitcoin ETFs also have risks, such as liquidity and market volatility. "The cryptocurrency market is notoriously volatile. Bitcoin prices can also fluctuate rapidly in a short period of time. In addition, the legal environment for cryptocurrencies in the US is still in the process of forming. This means that legal risks still exist, even though Bitcoin ETFs have been approved," he said.

Cryptocurrency community and project team support

The final point to consider when investing in cryptocurrencies is who the community is using that coin and how supported the project team is.

“A strong, active community and a timely support team are signs of the health and viability of a cryptocurrency project,” Mishunin said.

Ha Thu (according to Go Banking Rates)

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