Cryptocurrency is the latest jargon that you hear whenever you talk about investing money these days. But what is it all about? The words Bitcoin, Litecoin, Dogecoin, or Ethereum, are very popular nowadays. These are all digital money or cryptocurrencies. But the question that arises in everyone’s mind; is it worth investing in cryptocurrency? Cryptocurrency is a worthy investment if you wish to gain exposure in the digital currency space. However, a safer bet is to buy stocks of companies that have exposure in the cryptocurrency space.
What Is Cryptocurrency?
Cryptocurrency is a digital asset that works due to an online ledger involving strong cryptography to ensure the security of the transactions. You can use this form of payment to purchase goods and services online. Cryptocurrency bases itself on blockchain, a decentralized technology that helps manage all the transaction records online. Each coin termed cryptocurrency has a unique code, and no one can replicate it, making it easy and convenient to identify and track.
How Does Cryptocurrency Work?
Cryptocurrency does not involve any intermediary for transacting on the web. The banks or government have no role to play in the entire process. Cryptocurrencies are decentralized, so the government exercises no control over its functioning, the market cap, or how people exchange them.
How To Store Cryptocurrency?
A digital wallet stores digital currency. A digital wallet is in the app or portal used for the purchase and sale of the coins. Every wallet comes with a private key having a unique code to operate the exchange of currency. The blockchain technology that acts as a ledger shows the entire history of transactions made by you.
There has been tremendous growth in terms of different cryptos that are trading in the market. Cryptocurrencies generally raise money from an initial coin offering. The total market value of cryptocurrencies currently is more than $1.6 trillion. Bitcoin is the most popular cryptocurrency in the market, but other significant players include Ethereum, Dogecoin, Litecoin, and many others.
What Makes Cryptocurrencies Popular?
Cryptocurrencies are the future of investment, and people believe the value will grow tremendously. Since cryptocurrency is decentralized, people think the market cap will not be affected by inflation. Blockchain technology is also seen as an advantage as it is a decentralized process that is more secure than traditional systems. The valuation of cryptocurrencies has been increasing each day, but some people treat it to be speculation since there is no real cash flow involved. A currency needs to be stable, but cryptocurrencies have been volatile.
Cryptocurrencies like Bitcoin or Ethereum can be purchased using U.S. dollars. Some others can be purchased using Bitcoin or some other cryptocurrency. To buy cryptocurrency, you must have a digital wallet in your investment app. You fund the wallet with dollars and then purchase the currency through the exchange. Coinbase is a popular cryptocurrency exchange. A lot of online brokers also deal with the trading of cryptocurrencies.
Advantages and Disadvantages Of Cryptocurrency
There are both advantages and disadvantages involved in the field of digital assets.
- Blockchain offers complete transparency.
- 24/7 accessibility for trade.
- You can view data at any time.
- Growing choice for investment.
- Great way to diversify the portfolio.
- Great potential to give high returns.
- Trading is fast and inexpensive.
- No third party is involved.
- Complete decentralization.
- Difficult to understand the in-depth concepts.
- Very volatile.
- Less stability.
- The idea of blockchain is not easy to understand.
- Market fluctuations are not manageable.
- No security of money since the government is not involved in the functioning.
- Vulnerable to illegal activities and black marketing.
- Rate of return is not stable.
Risk And Protection
While purchasing cryptocurrency through an ICO, you must minutely go through the company’s profile to know about the owner, investors, stakeholders, and the methods adopted by the company to raise money, the legality of the currency, etc., to ensure that your funds are safe.
The Future For Cryptocurrency
The values of many cryptocurrencies have touched a record high in recent years. The value of Bitcoin has become two times while Ethereum has almost reached four times its base price. But the answer to sustainability is a must-have. Many people feel it to be mere speculation, but the number of digital market players is continuously growing. The future of cryptocurrencies depends on market value, stability, and security. You must assess the risk factors involved and instability of cryptocurrency before investing. While there are both advantages and disadvantages to cryptocurrency, integrating technology with funds persuades everyone to go for a purchase. If you wish to go for a diversified investment, you must evaluate the benefits and risks involved. Diversification of funds is the best way to increase the value of your investments.
Diversification is a must-have when you talk of a great investment strategy, and it is true in the case of digital currencies. Investing should never be like having all the funds in one basket. Don’t put all your funds in cryptocurrency. Analyze the risks and stability. There are numerous options available for investment, and it’s best to invest in diversified sectors. It will generate long-term benefits for you. Wealth creation is a long-term goal. Be wise and choose safely.