Can you go into debt with cryptocurrency?

 Many people are wondering if they can go into debt with cryptocurrency, and the answer is yes. However, as a loan should be treated with care, it's important to understand how seasoned users are managing their finances until the new currency matures. The blog discusses some of the pitfalls experienced in ICOs and other cryptocurrencies: what risks to look out for and ways you can mitigate them.

Playing it safe with ICOs

As cryptocurrency was a completely new concept, it was inevitable that some ICOs were scams. The question of whether a particular coin is a genuine investment opportunity vs an attempt to lure in innocent investors' hard-earned cash has divided the cryptocurrency community, and there are still heated debates online. As more and more users enter the market, there are fewer investors willing to gamble on vaporware, which means that companies sponsoring ICOs have to be very careful about what they present.

The most obvious advice is to do your homework before you invest. This means checking the team's background and brief history, their vision and goals, finding out more about the technology they are working on and its market potential, and of course looking at the technology itself. But even with thorough research there is no guarantee that a coin will work exactly as it says on paper. There have been plenty of cases where something has looked very promising in the first few days after launch only to collapse due to flaws in the game engine or programming code.

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There are also some basic rules that apply to all investments, including cryptocurrencies. The most important one is never to invest more than you can afford to lose. This is good advice that should be observed by any investor, not just those in the crypto market. There are still plenty of ways you can lose money in crypto even if your investment is a cautious one: price fluctuations, exchange issues and blockchain errors can all lead to losses.

But it's also important to limit your risk by diversifying. For example, you can buy more than one currency at the same time and hope your loss is low. If the market suddenly collapses due to a bug in the code, you'll still hold a few currencies that are worth more than the others, and so you will reduce your losses very quickly.

The second rule for investment with cryptocurrency is to never invest money that you can't afford to lose if things go wrong. The more money you have to invest, the more conservative you should be. At the same time, some people are willing to take big risks with their money. If you are old enough to remember the dot-com era of the late 90s, you might know that this is nothing new. Everyone has heard about Mark Zuckerberg and his $200 million investment in Facebook.