An Advanced Guide to Understand Everything about Cryptocurrency
The world is moving towards a cashless, paperless economy. Everywhere you look, you will find people using credit or debit cards to make payments or transfer money to one another. Although this is convenient, it is also prone to security breaches. Cryptocurrencies were created to counter this problem and much more.
Also Known as crypto, cryptocurrency is the topic of the decade. But there are still many people who don’t understand it. There are even people who don’t know what it is or how they can benefit from this vast market of digital money. Luckily, this post highlights some important aspects of cryptocurrency, including what it is, how it works, and how to use it in the real world.
What is Cryptocurrency?
If you belong to the group without a clue about what crypto is, then you’re in luck. By simple definition, cryptocurrency is a digital currency that was developed in the year 2009. It is also defined as a virtual currency that uses encryption and decentralized systems to control and manage transactions between users. Miners also use these systems to create new coins on computers and a blockchain database.
There are over 700 different types of cryptocurrencies in existence and they are accepted by many businesses throughout the world. Today, some of the most popular cryptocurrencies like Bitcoin and Litecoin are accepted by businesses such as Microsoft and Subway. These virtual currencies have gained acceptance over the years, enough to create a whole new market for trading enthusiasts to profit from. Today, many individuals and businesses alike, profit from cryptocurrency trading.
Trading Cryptocurrency
For those who know a thing or two about the FX market (buying and selling of currencies), it is not unusual to be curious about cryptocurrency trading. Well, just like ordinary currencies, the prices of different cryptocurrencies fluctuate from time to time. This allows currency traders to make speculations, buy, and sell coins for a profit. You can either trade crypto via a CFD trading account or through an exchange.
- CFD Account Trading: Here, you do not have to actually own the actual digital coins to trade. Rather, you can earn a profit by just speculating on the price movements using your account with a minimal deposit called the margin.
- Exchange Trading: When trading in an exchange, you need to set up an exchange account and purchase the actual coins. It basically involves purchasing digital coins or crypto tokens, keeping them in your digital wallet, and selling them when you think the time is right to reap good profits. Tommy Honan’s guide for trading cryptocurrency vividly explains how to purchase and sell coins via an exchange. He recommends considering several factors when choosing the exchange to trade from, including customer reviews, customer service, fees, spreads, practice accounts, and the types of currencies available.
Common Types of Cryptocurrencies
As earlier hinted, there are potentially thousands of cryptocurrencies today. More than 10K different coins are traded publicly each year, with a total value of several trillion USD. However, Bitcoin, Litecoin, and Etherium are by far the most popular cryptos on the planet at the moment. Just to get you informed a little bit before jumping into the crypto investment bandwagon, you might want to check out the recent estimates by Nerdwallet in August 2021. Here are the top five most famous crypto coins by market capitalization from James Royal and Kevin Voigt’s article.
- Bitcoin – $849.5B
- Etherium – $357.5B
- Binance Coin – $67.1B
- Tether – $64.1B
- Cardano – $63.7B
Note: Crypto prices keep changing, so these numbers might have changed enormously by the time you read this.
Cryptocurrency Wallets
The word wallet should already have given you an idea. A crypto wallet is basically a secure place where you store your virtual coins and valuable digital assets. Apart from just holding your money, these digital wallets allow you to conduct digital transactions, make payments, and transact purchases securely and anonymously.
The wallet can hold multiple types of cryptocurrencies, just like the physical wallet can hold different legal tenders. What’s more, the crypto wallet does not run out of space or restrict you to the amount of money you can hold. It also allows you to keep track of balances and transactions conveniently from a single location or app.
Reasons Cryptocurrencies Are So Popular
Not everyone appears to support cryptocurrency in their economy, but their popularity has been explosive over the past few years. Below are a few reasons why crypto is all the rage right now:
- Security and versatility: They guarantee additional safety and anonymity when transacting digitally compared to traditional alternatives.
- Appreciation: They are increasingly appreciating in value, especially major coins like Ethereum and Bitcoin.
- Diversity: Crypto traders have a broad range of currencies to choose from, and the trading platforms are ever-increasing.
- Decentralization: There is no interference from central banks, thus immune to economic effects like inflation.
Is Crypto A Good Investment?
Over the past few years, cryptocurrencies have shown an enormous increase in value. However, many people have cast doubt over the stability of crypto. Some view it as the currency of the future, while others criticize cryptocurrency trading for the notion that the greater fool investment theory is at play. This is where you purchase an asset trusting that the next buyer will pay more for it.
Despite its incredible performance, growing popularity, and increasing acceptance by everyday vendors, cryptocurrency still has a significant level of criticism and resistance in modern society. Some critics like Warren Buffet actually have justifiable reasons for their sentiments. From a long-term perspective, say twenty years from now, it is tricky to tell with certainty whether crypto is a great investment or not. However, the writing is on the wall, and one thing is for sure. It is safe to say that only time will tell but the earlier you invest the higher you can profit from it.
To sum it all up, crypto cryptocurrencies provide a myriad of perks compared to traditional currencies. Some of these include increased safety, anonymity, accountability, and convenience. Trading investors also get an enormous chance to maximize their gains without worrying about government interference, inflation, and other economic impacts.
Moreover, there are numerous software and technological resources to help miners and traders these days, so you could be making some decent money without doing much lifting. You just have to be keen on the platforms you choose, the coins you pick, and the trading approaches you use.
