WHAT IS CRYPTOCURRENCY?

 What Is Cryptocurrency? Here’s What You Should Know

With cryptocurrencies, you can buy goods and services or trade for a profit. Here you can learn more about what cryptocurrencies are, how to buy them, and how to protect yourself.

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Cryptocurrency is digital currency that can be used to buy goods and services, but uses online books with strong cryptography to protect online transactions. Much of the interest in these unregulated currencies is to trade for profit, with speculators sometimes raising prices.

What are cryptocurrencies?

Cryptocurrency is a form of payment that can be exchanged for goods and services online. Many companies have issued their own currency, often referred to as a token, and they can be traded specifically for the products or services the company offers. Think of it as arcade tokens or casino chips. You need to convert real currency to cryptocurrency to access the product or service.

Cryptocurrencies use a technology called blockchain. Blockchain is a decentralized technology common to many computers that manage and record transactions. Part of the appeal of this technology is its security.

How many cryptocurrencies are there? How much does it cost?

According to CoinMarketCap.com, a market research website, more than 10,000 different cryptocurrencies are publicly traded. And cryptocurrencies continue to spread and raise money through initial coin offerings or ICOs. The total value of all cryptocurrencies was more than $1.9 trillion as of August 18, 2021 - a drop from April's high of $2.2 trillion, according to CoinMarketCap. The total value of all bitcoin, the most popular digital currency, is set at around $849 billion, taking several positions back from recent lows. However, Bitcoin's market value has dropped from its April high of $1.2 trillion.

Why are cryptocurrencies so popular?

• Cryptocurrencies attract their followers for various reasons. Here are some of the most popular:

• Proponents see bitcoin in cryptocurrency as the currency of the future and are vying to buy it now, perhaps before it becomes more valuable

• Some proponents like the fact that cryptocurrencies remove central banks from money supply management because these banks tend to depreciate in monetary value through inflation over time.

• Other proponents like the technology behind cryptocurrency, blockchain, because it is a decentralized system of processing and record keeping and can be more secure than traditional payment systems

• Some speculators like cryptocurrencies because they are growing and are not interested in long-term adoption of currencies to move money

Is Cryptocurrency a Good Investment?

Cryptocurrencies may become more expensive, but many investors see them as pure speculation rather than real investments. The reason? Just like real currencies, cryptocurrencies do not generate cash flow. So to make money, someone has to pay more for that currency than you.

This is known as the "bigger stupid" investment theory. Compare this to a well-managed company that grows in value over time by increasing profitability and operating cash flow.

Several prominent voices in the investment community are advising potential investors to get rid of them. It should be noted that legendary investor Warren Buffett compared bitcoin to paper checks: “This is a very effective way to transfer money, and you can do it anonymously and so on. Checks are also a way to transfer money. Do checks cost a lot of money? Just because they can transfer money? "

For those who see cryptocurrencies as Bitcoin as the currency of the future, it should be noted that currencies need stability so that traders and consumers can determine reasonable commodity prices. Bitcoin and other cryptocurrencies have been far from stable for most of their history. For example, when Bitcoin traded for nearly $20,000 in December 2017, its value dropped to around $3,200 a year later. It will trade at record levels again in December 2020.

This price volatility creates a mystery. If bitcoin is potentially more expensive in the future, people are less likely to spend it and distribute it today, making it less profitable as a currency. Why spend Bitcoin when next year it could triple in value?

 How do I buy cryptocurrency?

While some cryptocurrencies, including Bitcoin, are available in US dollars, others require you to pay with Bitcoin or other cryptocurrencies.

To buy cryptocurrency, you need a "wallet", an online application that can store your currency. You usually create a swap account and then transfer real money to buy cryptocurrencies like Bitcoin or Ethereum. Find out more about investing in Bitcoin here.

Coinbase is one of the most popular cryptocurrency exchanges where you can create a portfolio and buy and sell bitcoin and other cryptocurrencies. In addition, more and more online brokers are offering cryptocurrencies such as eToro, Tradestation, and Sofi Active Investing. Robinhood offers free cryptocurrency transactions (Robinhood Crypto is available in most but not all US states).

Are cryptocurrencies legal?

There is no doubt that although China has essentially banned their use, they are legal in the United States, and whether they are ultimately legal depends on the individual country. Also, consider how you can protect yourself from scammers who see cryptocurrencies as an opportunity to attract investors. As always, buyers beware.

How can I protect myself?

If you want to buy cryptocurrency in an ICO, check out the fine print in the company prospectus for this information:

• Who owns the company? An identified and known owner is a positive sign.

• Are there other big investors investing in it? This is a good sign if other big name investors want something from the currency.

• Will you own shares in the company or will you only own the currency or tokens? This difference is important. Having a bet means that you can take part in the winnings (you are the owner), while buying tokens means that you have the right to use them as chips in the casino.

• Is the currency already developed or does the company want to raise money for development? The further away the product is, the lesser the risk.

Publishing a prospectus can be a lot of work; The more details there are, the better your chances of being legit. But legitimacy does not mean that currency will also succeed. This is a very separate topic and requires a lot of market understanding.

But despite these concerns, only the presence of cryptocurrencies poses a risk of theft as hackers try to break into the computer network that supports your assets. The famous exchange went bankrupt in 2014 after hackers stole hundreds of millions of dollars in bitcoins. It is not a typical risk to invest in stocks and funds on major stock exchanges in the United States.

Do you need to buy cryptocurrency?

Cryptocurrencies are highly speculative and volatile purchases. Trading stocks of established companies is generally less risky than investing in cryptocurrencies like Bitcoin.