In recent times, we have been hearing a lot about phrases and terms such as "trading cryptocurrencies," "investing in cryptocurrencies," or names like the digital currency Bitcoin. So, what do all these mean? What are cryptocurrencies? What can you do with them? And is Bitcoin the only digital currency in the world? We will answer all of these questions in today's article, so all you need to do is keep reading until the end.
What are cryptocurrencies?
A cryptocurrency is a form of
virtual currency that is encrypted, allowing you to purchase goods and services
online. It utilizes a digital ledger on the internet with strong encryption to
ensure and protect online financial transactions. The growing interest in these
virtual currencies is due to what is known as "cryptocurrency
trading," where these currencies are bought and sold to generate real
financial profits.
Types of cryptocurrencies and their prices:
Some people believe that
there is only one type of cryptocurrency, namely Bitcoin. However, this is not
true. According to CoinMarketCap.com, there are more than 6700 digital
currencies being traded and dealt with publicly, and the cryptocurrency market
continues to see increasing growth every day.
While Bitcoin is considered
the most well-known and valuable digital currency, many companies have begun
issuing their own digital currencies, which you can use to purchase services
and products from those specific companies. It's similar to earning points when
you buy goods from a specific website, which you can later exchange for real
money to use for purchasing products from the same website (not any other site).
Here is a list of the most popular types of cryptocurrencies and their prices, with Bitcoin leading the list, with a market capitalization of approximately $969 billion.
-Bitcoin: Market
capitalization of $969.9 billion
Ethereum: Market
capitalization of $222.3 billion-
-Tether: Market capitalization
of $33.1 billion
-Binance Coin: Market
capitalization of $30.5 billion
-Cardano: Market
capitalization of $28.3 billion
-Polkadot: Market
capitalization of $28.1 billion
-XRP: Market capitalization of
$24.4 billion
-Litecoin: Market
capitalization of $15 billion
-Chainlink: Market
capitalization of $13.3 billion
-Bitcoin Cash: Market
capitalization of $13.1 billion
Importance and Advantages of Cryptocurrencies
Cryptocurrencies have
garnered the interest and support of many people worldwide for various reasons,
including the following:
1-Potential Future Currency
Many supporters of
cryptocurrencies believe that they, especially Bitcoin, will become the
official currency in the future. For this reason, they rush to buy them now
before their value and price increase. But is this really what will happen? We
will address this in the next section related to investing in cryptocurrencies.
2-Decentralization
Cryptocurrencies are not tied
to any central authority or entity like banks, for example. Therefore, digital
financial transactions do not require an intermediary, eliminating transaction
fees. This is something that many supporters of encrypted digital currencies
appreciate.
3-Security and Difficulty of Counterfeiting
As mentioned above,
cryptocurrencies rely on blockchain technology, which is a decentralized technology
for recording and transferring financial transactions. This technology makes
cryptocurrency transactions one of the safest methods of payment and money
transfer, as the blockchain network cannot be easily hacked, forged, or
counterfeited. This aspect makes dealing with cryptocurrencies a preferred
option for many.
Investing in Cryptocurrencies
You might be wondering about the topic of cryptocurrency trading, and perhaps you're thinking to yourself: Is investing in cryptocurrencies a wise choice?
In fact, although the price
of cryptocurrencies may rise in the future, these investors see this as nothing
more than mere speculation. Why? Because cryptocurrencies, like real
currencies, do not create any cash flow. To make a profit from them, you must find
someone willing to pay more than what you paid to buy these digital currencies.
Therefore, investing in
cryptocurrencies differs from investing in a well-thought-out real project that
increases in value over time, along with increasing liquidity and profits.
Not only that, but many
experts believe that investing in digital currencies like Bitcoin is not
entirely safe. Some prominent voices in the investment community have advised
potential investors to stay away from them.
Some may ask again here: But
isn't Bitcoin a future currency?
It is true that this possibility exists, but it is worth mentioning that for a currency to be adopted as the currency of the future, it must be stable. Stability is something far from Bitcoin and other cryptocurrencies.
For example, the price of
Bitcoin (its trading price) was around $20,000 by the end of December 2017, but
its value plummeted to around $3,200 just one year later, only to rise again to
unprecedented levels in 2020.
Due to the significant
instability in the prices of Bitcoin and cryptocurrencies in general, it is
unlikely that they will be spent and used at present. Those who buy these
currencies will likely hold onto them, hoping for their value to increase
multiple times in a year or less.
All of the above factors make
investing in and trading cryptocurrencies a bad choice, at least for the
present time, due to the significant risks involved in this investment process.
How to Buy Digital Currency?
Even after becoming familiar
with all the risks associated with investing in digital currencies and heeding
experts' advice to stay away from this field, you may still wish to purchase
digital currency and hold onto it for the future.
Who knows, things might
really change, and trading digital currencies could become a safer option.
That's why it doesn't hurt to know how to buy these currencies.
You can actually purchase
some digital currencies for real fiat amounts in US dollars, while other types
of cryptocurrencies require payment using Bitcoin or any other digital currency.
To buy cryptocurrencies, you need a digital wallet and an online application to store your funds, where you'll first need to create an account with one of the digital currency trading platforms. Then, you'll transfer real fiat amounts to it to buy the digital currency you want, such as Bitcoin, Ethereum, or others.
Thus, we find that the
digital currency market is not as straightforward or entirely safe as some may
think. Like any other trading market, it involves numerous risks alongside its
advantages and positives.
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