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What Is Cryptocurrency And Why Do You Need To Invest In Crypto?

What Is Cryptocurrency?

Cryptocurrency is a digital currency that can be used to purchase goods and services, but  an online ledger with strong encryption is used to secure online transactions. Much of the interest in these unregulated currencies is traded for profit, and speculators sometimes raise their prices.

Cryptocurrencies work using a technology called Blockchain. Blockchain is a  technology distributed across multiple computers that manages and records transactions. One of the appeals of this technology is its safety.

Many companies have issued their own currencies,  called Tokens, that can be traded specifically for goods or services offered by the company. Think of them as slot machine tokens or casino chips. In order to access a product or service, you must exchange real currency for cryptocurrency.

Bitcoin, the most popular cryptocurrency,  has been volatile  this year, reaching nearly $65,000 in April and losing nearly half of its value in May. By mid-October, prices skyrocketed again. After breaking the all-time high of $66,000, it fell slightly.

How many cryptocurrencies are there? What are they worth?

More than 13,000 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs.

Best cryptocurrencies by market capitalization

These are the 10 largest trading cryptocurrencies by market capitalization

CryptocurrencyMarket Capitalization
Bitcoin$1.1 trillion
Ethereum$497.6 billion
Binance Coin$81 billion
Tether$70.1 billion
Cardano$66.4 billion
Solana$59 billion
XRP$49.7 billion
Polkadot$41.6 billion
Dogecoin$41.2 billion
SHIBA INU$36.5 billion

Why are cryptocurrencies so popular?

Cryptocurrencies appeal to their supporters for a variety of reasons. Here are some of the most popular:

  • People see cryptocurrencies as the currency of the future and are racing to buy them now.
  • People also like the fact that cryptocurrency removes central banks from managing the money supply, since over time these banks tend to reduce the value of money via inflation.
  • The technology behind cryptocurrencies, the blockchain, because it’s a decentralized processing and recording system and can be more secure than traditional payment systems, people are backing crypto.
  • Some just want to be part of the trend and are purchasing Crypto to avoid FOMO.

Are cryptocurrencies a good investment?

Cryptocurrencies can go up in price, but many investors see it as speculation rather than a real investment. cause? As with real currencies, cryptocurrencies do not generate cash flow, so someone has to pay more for the currency than you do to make a profit.

This is the so-called ‘most foolish’ investment theory. Compare this to a well-run business that increases its profitability and operating cash flow, increasing its value over time.

“For those who see cryptocurrencies such as bitcoin as the currency of the future, it should be noted that a currency needs stability.”

Bitcoin and other cryptocurrencies have not been stable for most of their history.

For example, Bitcoin traded nearly $20,000 in December 2017, but dropped to  $3,200 a year later. By December 2020, it was again trading at record levels.

This price volatility creates a mystery. If Bitcoin could be much more valuable in the future, people would be less likely to use and distribute Bitcoin today, making it less valuable as a currency.

How do I buy cryptocurrency?

Some cryptocurrencies, including Bitcoin, can be purchased in US dollars, while others require payment in Bitcoin or other cryptocurrencies. To purchase cryptocurrencies, you need an online application that allows you to store your currency, a “wallet”.

Coinbase is one of the popular cryptocurrency exchanges where you can create wallets and buy and sell Bitcoin and other cryptocurrencies. There is also an increasing number of online brokers offering cryptocurrencies such as eToro, Tradestation and Sofi Active Investing. Robinhood offers free cryptocurrency trading. Not all traders are available in every country, so do research which traders are reliable in your country.

Here’s something everyone keeps asking, Are cryptocurrencies legal?

The legality of its use varies from country to country, but it is legal in the United States. There are no laws that prohibit (or allow) trading in crypto in India. China has banned all sorts of Crypto.

Also, don’t forget to think about how to protect yourself from scammers who see cryptocurrencies as an opportunity to deceive investors. As always, buyers beware.

How Secure Is Cryptocurrency?

Cryptocurrencies are usually created using blockchain technology. Blockchain describes how transactions are recorded in “blocks” and timestamps. This is a rather complicated technical process, but as a result, it is difficult for hackers to forge the  digital ledger of cryptocurrency transactions.

Transactions require two-factor authentication. For example, you may be prompted to enter your username and password to initiate a transaction. You may then be asked to enter a verification code, which will be sent in the form of a  text message to your personal cell phone.

How do I protect myself from being scammed

Investments are always risky, but some experts say cryptocurrency is one of the riskier investment choices out there.

Here are some tips,

  • Before you invest one dollar, learn about cryptocurrency exchanges. These platforms provide the means to buy and sell digital currencies, but there are 500 exchanges to choose from, according to Bitcoin.com. Do your research, read reviews and talk with more experienced investors before moving forward.
  • Check who owns the company. Recognizable and well-known owners are a positive sign.
  • Check the major investors. If other well-known investors want the currency, this is a good sign. Will you own a stake in the company, or will you only own the currency or tokens? This distinction is important. Owning means you can participate in that return (you are the owner), and buying a token simply means you have the right to use it like a chip in a casino.
  •  Is the currency already developed, or do you want your company to finance its development? The lower the product is, the less dangerous it is.
  • Legitimacy doesn’t mean the currency will succeed.
  • Diversification is at the heart of any good investment strategy, and the same is true when  investing in cryptocurrencies. For example, don’t invest all  your money in Bitcoin just because you know the name. There are thousands of options, and it is best to diversify your investment across multiple currencies.
  • Investing in something  new can be tricky, so be prepared. If you plan to get involved, do your research first and invest conservatively.

Conclusion

The advent of Bitcoin has sparked a debate about its future and the future of other cryptocurrencies. Cryptocurrencies that want to be part of the mainstream financial system must meet very different standards.

Some of the limitations that cryptocurrencies are currently facing-for example, the fact that  a computer crash could wipe out digital assets, or that hackers can search virtual vaults. The number of merchants accepting cryptocurrencies is steadily increasing, but they are still a minority.

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Rakesh Koli

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