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Cryptocurrency: A Guide for Beginners

December 27, 2021

A cryptocurrency is a digital form of money that may be used to purchase products and services online. In addition, many businesses have created currencies, which are called tokens.

Tokens pay for the company’s goods and services. For example, Fiat (money) is converted into cryptocurrency to access goods or services.

 

HOW CRYPTOCURRENCY IS CREATED:

The technology that allows cryptocurrencies like Bitcoin and others to exist is a blockchain. One of the reasons this technology is so appealing is because of its security, and that’s why it’s so attractive to investors.

A blockchain is a distributed digital log of transactions that is impossible to hack or manipulate. Instead, a network of computers maintains it. Individuals can transact securely without needing a middleman like a bank, the government, or a third party.

The growing list of records is linked using cryptography. As a result, each transaction is independently validated, time-stamped, and contributed to an increasing chain of data using peer-to-peer computer networks. Moreover, the info can’t be changed once recorded.

Blockchain technology offers applications in various industries, including banking, medical, property rights, and more. It also has potential uses in advertising, finance, law enforcement, and other industries.

 

THE NUMBER OF CRYPTOCURRENCIES AND HOW MUCH THEY ARE WORTH:

CoinMarketCap.com, a market research website, lists over 14,500 cryptocurrencies. On Nov. 19, 2021, the entire market capitalization of all cryptocurrencies was more than $2.5 trillion, down from an all-time high of $2.9 trillion just a few days earlier.

The most popular digital money, Bitcoins, was estimated to have a total market value of roughly $1.1 trillion.

 

CRYPTOCURRENCY’S RISE IN POPULARITY:

For many reasons, cryptocurrency has grown in popularity. Here are a few of the best reasons:

  • cryptocurrencies such as bitcoin are the currency of the future, and supporters are hurrying to purchase them before they become more valuable
  • some proponents like that bitcoin takes responsibility from central banks managing the money supply, as central banks tend to devalue money over time through inflation.
  • others favor blockchain technology because its process and recording system is decentralized and has the potential to be more secure than current payment methods.
  • cryptocurrencies have sparked the interest of some investors because their value is rising, but they are unconcerned about the currency’s long-term adoption as a form of payment

 

INVEST OR NOT TO INVEST:

Because cryptocurrency generates no cash flow, for you to profit, others must pay more for the cryptocurrency than you did. With that said, crypto needs to be stable for merchants and customers to know a fair price for goods.

Unfortunately, Bitcoin and other cryptocurrencies have been everything but stable for much of their history.

Bitcoin surged around $20,000 in December 2017 before plummeting to about $3,200 a year later. By December 2020, it was trading at all-time highs once more.

Individuals who believe bitcoins will be much more profitable in the long run are less inclined to spend and circulate them today, lowering their currency’s viability.

Why would you spend a bitcoin if its value has the potential to quadruple next year? On the other hand, there are some reasons you should invest in crypto. Here are a few:

  • Cryptocurrencies are a transformational technology that has the potential to revolutionize a wide range of sectors
  • Cryptocurrencies may also serve as a secure store of wealth because they cannot be printed or scanned

 

WHERE YOU CAN PURCHASE CRYPTOCURRENCY:

You’ll need a “wallet,” an internet application that stores your money to purchase cryptocurrencies. First, you open an account on a cryptocurrency exchange. Then, after registering, you buy cryptocurrency with real money.

Coinbase is a popular cryptocurrency trading platform to buy and sell cryptocurrencies. In addition, a rising number of online brokers, such as eToro and Tradestation, offer cryptocurrency.

 

HOW TO SAFEGUARD FROM SCAMS:

If you want to invest in a cryptocurrency through an ICO, examine the fine print in the company’s prospectus for the following information:

  • Who is the company’s owner? A well-known and identifiable owner is a good sign.
  • Is it being backed by any other large investors?
  • Will you have a share in the firm, or will you only have currency or tokens? When you own a stake, it grants you a portion of the company’s income (you are an owner), whereas purchasing tokens gives you the right to utilize them.
  • Is the currency already created, or is the company raising funds to construct it? The further along the product, the lower the risk.

 

THE BOTTOM LINE:

Cryptocurrency is an incredibly speculative and volatile investment. Even legitimacy doesn’t guarantee the success of the currency. Stock trading in established corporations is less dangerous than investing in cryptocurrencies like Bitcoin, but it is still risky.

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