In 7 matters, we explained all you need to know about cryptocurrencies, which can be used to buy the services but have cryptography to secure online transactions.
Table of Contents
What Is a Crypto Currency?
How Many Cryptocurrencies Are There? What Are Their Values?
Why Are Cryptocurrencies So Popular?
Are Cryptocurrencies a Good Investment?
How Can You Buy Cryptocurrency?
Are Cryptocurrencies Legal?
How Do You Protect Yourself?
A cryptocurrency is a digital currency that can be used to buy goods and services but uses an online ledger with strong cryptography to secure online transactions. The interest in these unregulated currencies is to trade for profit, with speculators occasionally raising prices to exorbitant prices. As you know, the most popular cryptocurrency, Bitcoin, experienced volatile price movements this year. It reached nearly $65,000 in April before losing nearly half of its value in May. In recent weeks, the bitcoin price has dropped to the $45,000 range. In today's blog post, we'll talk about seven important things about cryptocurrency and what to watch out for.
1-) What Is a Crypto Currency?
Cryptocurrency is the name given to a form of payment that can be exchanged online for goods and services. Many companies have issued their currencies, often referred to as tokens. These can be traded specifically for the goods or services the company provides. Think of them like you would toss coins or casino chips. To access the product or service, you need to exchange real currency for cryptocurrency. Cryptocurrencies work using a technology called a blockchain. Blockchain is a decentralized technology spread over many computers that manage and records transactions. The reason why this technology is attractive is that it is reliable.
2-) How Many Cryptocurrencies Are There? What Are Their Values?
According to CoinMarketCap.com, a market research website, over 10,000 different cryptocurrencies are publicly traded. However, cryptocurrencies continue to proliferate by raising money through initial coin offerings or ICOs. According to CoinMarketCap, on August 18, 2021, the combined value of all cryptocurrencies exceeded the April high of $2.2 trillion. The total value of all bitcoins, the most popular digital currency, has stabilized at around $849 billion, recovering some from recent price drops. And also, Bitcoin's market cap fell from its April high of $1.2 trillion.
3-) Why Are Cryptocurrencies So Popular?
Cryptocurrencies appeal to their supporters for a variety of reasons. Here are the reasons why it is so popular:
- Supporters see cryptocurrencies like Bitcoin as the currency of the future and are likely racing to buy them now before they become more valuable.
- Some supporters are happy that cryptocurrency is moving central banks away from managing the money supply, as over time these banks tend to devalue money through inflation.
- Other supporters feel that it is a decentralized processing and registration system and maybe more secure than traditional payment systems.
- Some speculators love cryptocurrencies because their value is rising and they are not interested in their currency being accepted as a long-term way of carrying money.
4-) Are Cryptocurrencies a Good Investment?
Cryptocurrencies may rise in value, but many investors see them only as speculation, not real investments. This is because, like real currencies, cryptocurrencies do not provide cash flow. That's why you need someone to pay more for the currency than you do to make a profit.
Some prominent voices in the investment community have advised investors to stay away from them. For those who see cryptocurrencies like Bitcoin as the currency of the future, it should be noted that a currency needs stability so that traders and consumers can determine what a fair price is for goods. Bitcoin and other cryptocurrencies have been anything but stable for most of their history. For instance, while Bitcoin was trading close to $20,000 in December 2017, its value dropped to around $3,200 a year later. Until December 2020, it was again trading at record levels.
5-) How Can You Buy Cryptocurrency?
Some cryptocurrencies, including bitcoin, can be purchased with US dollars, while others require you to pay with bitcoin or another cryptocurrency. If you want to buy cryptocurrencies, start by having a "wallet", an online app that can hold your currency. You usually create an account with an exchange, and then you can transfer funds to buy cryptocurrencies like Bitcoin or Ethereum.
Coinbase is a popular cryptocurrency exchange where you can both create a wallet and buy and sell Bitcoin and other cryptocurrencies. Also, a growing number of online brokers offer cryptocurrencies such as eToro, Tradestation, and Sofi Active Investing. In addition, Robinhood offers free cryptocurrency trading.
6-) Are Cryptocurrencies Legal?
There's no doubt they're legal in the United States, but China has essentially banned their use, and whether they're ultimately legal varies from country to country. Also, consider how to protect yourself from scammers who see cryptocurrencies as an opportunity to deceive investors. As always, be careful as a buyer.
7-) How Do You Protect Yourself?
If you want to buy cryptocurrency in an ICO, carefully read the text in the company's prospectus for this information.
- Who owns the company? An identifiable and well-known owner is a positive sign.
- Are there any other big investors investing in this? It is a good sign that other well-known investors want a piece of the currency.
- Will you own a stake in the company or just currency or tokens? This situation is very important. Owning a share means you participate in its earnings while buying tokens means you have the right to redeem them like chips in a casino.
- Is the currency already developed, or does the company want to raise money to develop it? The further along with the product, the less risky it is.
Reviewing a prospectus can sometimes mean wasting a lot of time. But remember, the more details it has, the better your chances of being legitimate. But even legitimacy does not mean that the currency will succeed. That's a whole separate question and that requires a lot of market knowledge. Beyond these concerns, owning cryptocurrency exposes you to the risk of theft as hackers try to infiltrate the computer networks that protect your assets. A high-profile exchange declared bankruptcy in 2014 after hackers stole hundreds of millions of dollars in bitcoin. These are not typical risks for investing in stocks and funds on major US stock markets. We hope that this blog post will be beneficial for you. We will continue to create useful works to get inspired by everyone. We are sure that we will achieve splendid things altogether. Keep on following Finage for the best and more.
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