Many people claim that despite some of the risks taken when investing in cryptocurrencies, they give a chance to achieve huge profits. Almost a decade ago, Bitcoin, the world's most famous cryptocurrency, was worth about $1. Currently, the purchase price of its purchase exceeds 40 thousand. USD. So you should not be surprised that some of the investors may even want to take out a loan to become the owner of virtual money.
What are cryptocurrencies?
It is worth to start by explaining what exactly cryptocurrencies are. In this way, the so-called virtual currencies, based on cryptographic methods, are determined. They can be stored, for example, on a computer or smartphone. Cryptocurrency units have been secured against copying or misuse through cryptographic codes. As can be deduced, cryptocurrencies are only information stored in a computer,and at the same time do not have a physical form in the form of traditional cash.
Digital currencies exist across national borders and are not assigned to a specific country. Their existence is independent of any central bank or financial institution. Cryptocurrency transactions are not subject to supervision, so it is not possible to block a cryptocurrency account or seize by a bailiff.
The cryptocurrency market is characterized by a lot of freedom. For some time, crypto exchanges have also been created. Through them, customers can buy or sell various cryptocurrencies, not just Bitcoin.
Why do cryptocurrencies work at all?
Many people want to invest in cryptocurrencies, completely ignoring the rules of their functioning. As we mentioned earlier, cryptocurrencies are called virtual money in the form of an IT code, additionally encrypted thanks to the methods of modern cryptography.
Each of the cryptocurrency users has their own private key, used to confirm the transactions performed. Since cryptocurrencies operate in an equal P2P network,there is no central server storing data. The data is saved on the computers of users of the entire network, creating a distributed database of information. Since the executed transactions are arranged into blocks,they form chains together and hence the name blockchain, i.e. the blockchain. Transactions are forever saved in blocks. When the block is full, another one is created.
Types of cryptocurrencies.
Although there are thousands of different cryptocurrencies, not all of them are of interest to investors. Despite the dynamic situation on the market, Bitcoin remains the "king" of the digital currency. It is the first cryptocurrency that appeared in 2009 thanks to a person with the pseudonym Satoshi Nakamoto. Admittedly, it could just as well have been a group of people, because the identity of the creator was never determined. The creator of Bitcoin decided to create a digital money that will be free from the negative sides of traditional currencies. It was supposed to enable instant transactions without commissions, delays and external influence of governments on the value of virtual money.
Thanks to Nakamoto's efforts, Bitcoin has become more than just a means of payment, namely an investment instrument. Since the amount of Bitcoin has been limited in advance to 21 million units, it is resistant to inflation in contrast to traditional money, which can be "printed" and put into circulation. The high value of Bitcoin makes it the digital gold of the internetfor a reason.
A few years after the creation of Bitcoin, new cryptocurrencies called altcoins appeared. Some of them, such as Ethereum, Ripple or Litecoin, are also very popular among people investing capital.
Is it profitable to deal with cryptocurrencies?
If you ask whether it is worth investing in cryptocurrencies,then unfortunately we are not able to answer unequivocally. This type of investment is very risky. You can gain a lot and lose a lot. The rapidly rising prices of cryptocurrencies do not necessarily reflect the actual value of the digital currency, they may turn out to be a growing speculative bubble that, when it bursts, will plunge many investors.
People who are certainly encouraged by price increases certainly decide to invest. What if the interest in cryptocurrencies ends? In this case, the charts will go down significantly. The same would happen if people started selling Bitcoin en masse in order to make a profit.
What's more, it is very likely that many fictitious platforms were created only to extort money from their customers.
|Despite the threats, specialists agree that virtual money technology will continue to be developed. Perhaps in the future, more and more places in the world will allow payments with digital currency.|
When investing in cryptocurrencies, it is still worth remembering that the most important investment is knowledge. It is also worth considering reducing risk by diversifying the portfolio. When investing in cryptocurrencies, you should know about significant price fluctuations. Certainly, this can be considered to be influenced by the lack of supervision by the institutions. Moreover, they are still not accepted as a common means of payment. In addition, they can be easily used as criminal activities due to the lack of control. History shows that there have also been cases when cryptocurrency services disappeared irretrievably,taking their users' money with them.
Before you start investing in cryptocurrencies, keep in mind the risks that come with them.