What is cryptocurrencies all about?

Cryptocurrencies are quite a new "invention", but there is probably no Internet user who has not heard of them. When looking for a way to make money online, sooner or later you will certainly come across investing in digital money. Why are cryptocurrencies so special? What makes it worth investing in them?

Is investing in cryptocurrencies a recipe for a certain profit?

Not entirely, although it cannot be denied that investments in cryptocurrencies have brought a considerable profit to many investors. If this kind of investing were a sure way to succeed, would everyone be rich already? So why isn't that the case? One of the reasons is probably the example of people who suffered huge losses in order to earn money on virtual money. Such people will certainly not tout the placement of funds in cryptocurrencies, but rather will state that they were dealing with a global scam.

In fact, how many people, so many opinions about cryptocurrencies. For some, it will be the money of the future, and for others a toy. Many times you could hear that the digital currency is a worthless, temporary fad,and now it turns out that more than 10 years after the creation of Bitcoin, cryptocurrencies are still doing well. Some of them are even worth tens of thousands of dollars.

There is no denying that many sentences about cryptocurrencies are far too biased and emotional. Not such opinions are better not to build your own view of digital money. Therefore, it is worth looking for objective opinions on the Internet that will allow you to take a cool and rational look at the issue of cryptocurrencies.

A few words about the cryptocurrencies themselves.

Cryptocurrencies, unlike traditional money, do not have their physical form. They cannot be "printed" and put into circulation. They are fully digital, i.e. saved as a sequence of bits on computer data carriers. How is it possible that you can pay with them?

The condition for making a transaction with the life of a digital currency is the acceptance of this type of payment by the entities participating in the exchange. This is just one way to use cryptocurrencies. However, few people take advantage of this possibility.

A significant part of people interested in the subject of earning on cryptocurrencies treat them as financial instruments that can bring a lot of profit in the future. For example, the price of Bitcoin continues to rise. For more than 10 years, Bitcoin has come a journey where it was initially worth a few cents and now costs several dozen dollars each.

Where did cryptocurrencies come from?

The way to the creation of cryptocurrencies was paved by Bitcoin, created in 2009. As some remember, a year earlier a global economic crisis broke out. In order to prevent chaos and deepening of the recession, central banks saved themselves with massive money printing, which unfortunately deepened inflation and weakened people's confidence in banks and governments.

Unlike traditional money, Bitcoin is a currency with a limited supply,which makes it inflation-resistant. It cannot be printed and put into circulation, causing its value to decrease. Moreover, to the characteristics of Bitcoin should be added its speed and security resulting from the lack of intermediaries, supervision of government or financial institutions.

The creator of Bitcoin is considered to be a person with the pseudonym Satoshi Nakamoto. Although it may well be a group of people, since the true identity hiding under the said nickname has never been revealed. Either way, after the introduction of virtual currency, Satoshi Nakamoto himself moved into the shadows, giving his work to the world.

Alternative cryptocurrencies.

Altcoins, i.e. other cryptocurrencies created after the success of Bitcoin, began to appear at a very fast pace. It is estimated that there are several thousand alternative cryptocurrencies,where the most important can include: Ethereum, Litecoin or Ripple. Among their huge number, one can distinguish both valuable ones and those that are an ordinary scam. However, it is still a fact that none of the altcoins have conquered or revolutionized the market as Bitcoin did. It remains the undisputed king of cryptocurrencies and the gold of the Internet.

Operation of the Bitcoin network.

The undoubted advantages of Bitcoin are the lack of intermediaries, central bank or supervisory institutions needed for the operation of the network. It is a fully independent means of payment that does not require state supervision. Cryptocurrency units come from the mining process. It consists in verifying transactions, adding them to the public register, for which the Bitcoin network "rewards" miners (miners) with new units of cryptocurrency.

The work (digging) is performed simultaneously by many miners, thanks to which the operation of the network is effective, functional and undisturbed. Cutting off one of the miners from the network does not stop it.

Why is it worth getting interested in cryptocurrencies?

Cryptocurrencies are quite a risky way to invest. Despite this, the ups, downs and constant fluctuations of prices make them interesting among futures traders. Besides, a certain unpredictability of cryptocurrency prices has made investing in them more associated with gambling than with thoughtful ways to invest money. After all, a bull market can raise the value of a given cryptocurrency several times only to return to its initial level during a bear market. Thus, along with the chance of a large income, there is a considerable risk of losing financial resources.

The cryptocurrency market offers 2 main methods of earning: trading and futures investments. Among people who store currencies in their wallets, you can notice a tendency to keep up to several dozen of them. Such diversification of the investment portfolio is aimed at protecting against a certain unpredictability of changes in the price of virtual money.

The good news for futures traders is that there is an opportunity to make money on both the rises and falls in the value of the digital currency. What's more, you can play with leverage, although it is burdened with both the possibility of winning and the risk of considerable losses. Beginners are particularly exposed to them, although severe failures also happen to professional investors.

Security of investments in cryptocurrencies.

Some opponents of trading in the cryptocurrency market point out the fact that this market is young, immature and uncontrolled by international institutions under regulations similar to the stock, bond or Forex markets. What's more, in the past there were situations when the entire cryptocurrency exchange suddenly disappeared from the market, and with it the investors' funds. It has been accepted that it is good practice to keep funds in external wallets.

When it comes to alcoins, it is worth bearing in mind that cryptocurrencies can also be issued by dishonest entities. Think a few times before you trust the creators of the newly created altcoin promising you a huge return on investment. However, sometimes it is worth trusting exchanges in the hope that they will take care of their reputation and will not make cryptocurrencies of unclear origin available for trading.

Trading on the cryptocurrency market lasts around the clock and throughout the week. What are the consequences for investors? For example, these can be sudden price movements on weekends and holidays. What's more, as past events show, strong increases or decreases in cryptocurrency cents can be the result of rumors, or short messages of influential people not necessarily related to the investment world. Elon Musk's tweets are given as an example.

How to get cryptocurrencies? A few tips at the end.

The easiest way will be to buy them on the cryptocurrency exchange,where investors from all over the world trade. Another solution may be to buy a given cryptocurrency in a cryptocurrency exchange office.

However, take into account the place of your residence. Not all countries have a positive attitude towards cryptocurrencies. Some want to limit their functioning as much as possible. Others accept them, treating them as ordinary means of payment.

Although being or considering yourself a good trader, you can make a lot of profit, it seems reasonable to invest only the amounts you are able to lose. Moreover, due to their nature, cryptocurrencies should rather be a complement to the investment portfolio and not replace traditional financial instruments.

Author

  • He describes himself as a cryptocurrency investment specialist. He had mined them many years earlier thanks to a self-constructed virtual coin excavator. Privately, he is passionate about hiking in the Karkonosze Mountains. In addition, he is a huge lover of photography, especially taking pictures of the mountains.

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3 Comments

  1. Author

    The worst thing is not knowing what value Bitcoin will have tomorrow. Maybe you can buy a car with it, or maybe just a candy. Due to the unpredictability of prices, no economy can be based on it.

  2. Author

    Cryptocurrencies are junk that should be banned all over the world. Of course, then many millions of dollars would be drowned. But at least that would give some sense to the maddened crowd.

  3. Author

    Currently, Bitcoin is only for speculation. For now, it can multiply the value of ordinary money, but only wait for governments to ban digital currency trading, and its value will drop to the very bottom.

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