People buy cryptocurrencies to either buy various goods and services or trade them for profit. But some of us don’t know everything about cryptocurrency. A cryptocurrency, or in short “Crypto,” is a digital currency used to buy goods and services. But it sometimes can be used as an online ledger with powerful cryptography. The purpose of an online ledger with cryptography is to secure online transactions. These currencies are very unregulated these days. But the most interesting part of this unregulated currency is it can trade for profit. That, too, with speculators at times driving prices skyward.
WHAT IS CRYPTOCURRENCY
Cryptocurrency is a payment procedure or form of payment that can be exchanged online for services and goods. You use it instead of money when you are dealing online. But of course, cryptocurrencies are bought with money. Nowadays, many companies have issued their currency which is called tokens. These tokens or currencies can be traded only for the goods and services that the company provides. Of course, you need to exchange real currency for the cryptocurrency that you want to access particular goods and services. Cryptocurrencies work by using a technology which is called “Blockchain.” Blockchain is a decentralized technology spread across many devices or computers that manages and records every transaction that takes place. The most appealing part of this technology is its security.
WHY CRYPTOCURRENCIES ARE POPULAR
These days, cryptocurrencies are getting more and more famous. But there are some reasons behind it. People who use cryptocurrency believe that the future of the world is going to be cryptocurrency like bitcoin. So, they are racing to buy bitcoins before it’s value goes higher. Cryptocurrency removes central banks from managing the money supply, and this is a fact some of the supporters like that. Over time, these types of banks reduce the value of money via inflation. Technology like blockchain is getting highly appreciated by supporters. Because it’s a decentralizing process, and its recording system is more secure than the normal transaction we know. This is a more important fact when it comes to online transactions.
HOW MANY CRYPTOCURRENCIES ARE THERE
More than 6,700 various cryptocurrencies are traded and used in public, according to a market research website called CoinMarketCap.com. Cryptocurrencies raise money through ICOs or initial coin offerings. The total value of the most famous digital currency, all the bitcoins on April 13, 2021, was around $1.2 trillion, according to CoinMerketCap. The value of all the cryptocurrencies was more than $2.2 trillion. There are many digital currencies or cryptocurrencies available. But according to CoinMarketCao, the 10 largest trading cryptocurrencies are Bitcoin, Ethereum, Binance Coin, XRP, Tether, Cardano, Polkadot, Uniswap, Litecoin, and steller. Among all of these digital currencies, bitcoin has the highest market capitalization, around $1.2 trillion. Stellar has the lowest market capitalization, and that is $14.9 billion on 23 April 2021.
HOW TO BUY CRYPTOCURRENCY
Some cryptocurrencies, including Bitcoins, are available for purchase in U.S. dollars. You might need to exchange Bitcoins to buy other cryptocurrencies. You will need an online app called “wallet” that can hold your currency to buy cryptocurrencies. You create an account on an exchange, and then you can transfer real money to buy cryptocurrencies like Bitcoin or Ethereum as much as you want. You also can create both a wallet and buy and sell Bitcoins or even other cryptocurrencies. Many online brokers also offer cryptocurrencies. You can find some on different websites. Some of the brokers are eToro, Tradestation, Sofi Active Investing, and Robinhood. Robinhood offers people free cryptocurrencies, but it is not available in all the U.S. states.
IS CRYPTOCURRENCY LEGAL?
All cryptocurrencies are legal in the United States. But, China has essentially banned the use of cryptocurrency. It doesn’t matter anymore if they are legal or not. It depends on each country. Also, you have to consider how you will save yourself from fraudsters as it is handled online, so some fraudsters use cryptocurrency to bilk investors. Like as always, when you are a buyer, be aware.
HOW WILL YOU PROTECT YOURSELF?
As many fraudsters are waiting online to fraud you, you might want to save yourself from them. If you are thinking of buying a cryptocurrency in an ICO, you should read the prospectus and find all the necessary information. Such as, who is the owner of the company? A well-known and specific owner is a positive sign. Are there any major investors investing in it? It is a good sign you find other well-known investors here. Will you own a stake in the company or just the currency? If you own a stake, it means you are an owner, and you will have its earnings. If you buy tokens or currencies, it means you are entitled to use them. It can take a lot of work to deal with through a prospectus. But always remember the more detailed prospectus, the more legitimate it is. But, being legitimate does not mean the currency will succeed. But it would be best if you had a lot of market savvy to understand this. Here is another thing, having a lot of cryptocurrencies might attract hackers. It puts you at risk of theft. Hackers try to penetrate the computer network that is maintaining all your assets.
The valuation of cryptocurrencies might go up in the future. Still, many investors see them as mere speculations, not real investments, because cryptocurrencies generate no cash flow like real currencies. So, if you want a profit, somebody has to pay more for the currency than you did. This is called the greater fool theory in the world of investment. There is no doubt that Cryptocurrency is an incredibly speculative and volatile buy. But, stock trading of established companies is generally less risky than investing in cryptocurrencies such as Bitcoin. So, think rationally before you choose to invest in digital currencies.