What Is Cryptocurrency? How To Invest in the Crypto Market?

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Cryptocurrencies allow you to buy and sell products and services for a profit. In this article, you’ll learn about cryptocurrency, including what it is, how to buy it, and how to protect yourself.

 

Cryptocurrency

Image Credit – kiplinger.com
A cryptocurrency (or “crypto”) is a digital currency that can be used to purchase products and services, but it is secured by an online ledger and strong cryptography. People usually trade these unregulated currencies to make profit, with investors at times skyrocketing the prices.

Here are some of the most important questions to completely understand cryptocurrencies. Let’s find out.

What exactly is a cryptocurrency?

Cryptocurrency is a form of online payment that can be used to buy and sell products and services. Many businesses have created their own currencies called tokens, they can be exchanged for the goods or services that the business offers. They are like casino chips. To use the product or service, you’ll need to trade real money for cryptocurrency.

Cryptocurrencies function using a technology known as “Blockchain”. Blockchain is a decentralised technology that manages and records transactions through several computers. The security of this technology is part of its appeal.

What is the total number of cryptocurrencies? What are they worth?

More than 6,700 separate cryptocurrencies are exchanged publicly that continue to grow in popularity, with initial coin offerings, or ICOs, being used to raise funds. According to the Viralblogs.net research, the total value of all cryptocurrencies was more than $2.2 trillion as of April 13, 2021, and the total value of all bitcoins was about $1.2 trillion.

Cryptocurrencies with the highest market capitalization

These are the top ten traded cryptocurrencies by market capitalization.

Bitcoin
$1.2 trillion

Ethereum
$263.4 billion

Binance Coin
$87 billion

XRP
$81.8 billion

Tether
$45.4 billion

Cardano
$44.7 billion

Polkadot
$39.3 billion

Uniswap
$18.8 billion

Litecoin
$18.1 billion

Stellar
$14.9 billion

(As of April 13, 2021)

What is it about cryptocurrencies that make them so popular?

Cryptocurrencies fascinate their supporters for multiple reasons. Here are some of the most common:
Supporters see cryptocurrencies like Bitcoin as the money of the future, and they’re rushing to purchase them until they become more expensive.
Some supporters like the fact that cryptocurrency frees central banks from controlling the money supply, since central banks tend to devalue money over time via inflation.
Other supporters support the blockchain technology that underpins cryptocurrencies because it is a decentralised processing and storage mechanism that is potentially more safe than conventional payment systems.
Some speculators are interested in cryptocurrencies because they are increasing in value, yet they are uninterested in the currencies’ long-term acceptance as a means of money transfer.

Is it wise to invest in cryptocurrencies?

Cryptocurrencies may appreciate in value, but many investors regard them as speculative investments rather than real investments. Cryptocurrencies, like real currencies, have no cash flow because in order for you to benefit, anyone else must pay more for the currency than you did.

This is known as “the greater fool” theory of investment. Against the crypto investor’s money, a company grows in value over time by increasing profitability and cash flow.

For those who believe cryptocurrencies are the currency of the future, it’s important to remember that a currency has to be stable in order to know what a fair price for products is. Bitcoin and the company have been anything but secure. For instance, while Bitcoin traded at around $20,000 in December 2017, its value then dropped to $3,200 a year later. By December 2020, it was again trading at record levels.

This price volatility poses a problem. People are less likely to invest and circulate bitcoins today if they are worth a lot more in the future, making them less viable as a currency.

How do You buy cryptocurrency?

Although some cryptocurrencies, such as Bitcoin, can be purchased with US dollars, others need bitcoins or another cryptocurrency to be purchased.

To buy cryptocurrencies, you’ll need a “wallet,” which is an online app that stores your investments. In general, you open an account on a cryptocurrency exchange and then use real money to purchase cryptocurrencies like Bitcoin or Ethereum.

Binance is a popular crypto exchange where you can open a wallet and buy and sell Bitcoin and other cryptocurrencies.

Is it legal to trade cryptocurrencies?

Yes, a 100% legal in the United States, though China has banned their trade, their legal status depends on individual countries.

How do you secure your investment?

If you’re interested in purchasing a cryptocurrency via an ICO, read the fine print in the company’s prospectus for the following details:

Who is the company’s owner? A well-known owner is a good indication.
Is it being pursued by some other big investors? If other well-known investors want a slice of the currency, it’s a positive sign.
Will you have a stake in the company or just tokens? This distinction is essential. Owning a stake entitles you to a share of the company’s profits (you’re an owner), while purchasing tokens entitles you to use them like chips in a casino.
Is the currency already established, or is the company seeking funding to do so? The less dangerous a product is, the better its future is.
Examining a prospectus can be time-consuming; the more information it contains, the greater your chances of finding something genuine. However, even legitimacy does not guarantee that the currency will be effective. That’s a whole different question that necessitates a great deal of business knowledge.
Beyond those worries, simply owning cryptocurrency puts you at risk of fraud as hackers try to steal from you. In 2014, a well-known exchange went bankrupt after hackers stole hundreds of millions of dollars in bitcoins.
Should you invest in cryptocurrencies?

Cryptocurrency is a highly risky and unpredictable investment. Investing in existing companies’ stocks is usually safer than investing in cryptocurrencies including Bitcoin. It depends on an individual perception though, whether you like a safe ride or a rollercoaster ride.

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