What is Cryptocurrency? Cryptocurrency (or “crypto”) is a digital currency that can be used to buy goods and services, but it is secured through the use of an online ledger and strong cryptography. The majority of interest in these unregulated currencies is for profit trading, with speculators sending values high at times.
Here are questions to ask about cryptocurrencies, as well as some things to avoid. This is an educational content.
1. What’s is Cryptocurrency?
People normally ask what is Cryptocurrency? Cryptocurrency is a form of electronic money that may be used to purchase and sell items over the internet. Many companies have developed their own currencies, referred to as tokens, that can be traded for the goods or services they provide. Assume they’re casino chips or arcade tokens. You’ll need to exchange real money for cryptocurrency in order to utilize the item or service. The technology that allows Bitcoin to work is known as blockchain. Blockchain is a distributed ledger that records and manages transactions across several computers. Security is part of the appeal of this technology.
2. How many cryptocurrencies do we have and what are they worth?
According to CoinMarketCap.com, a market research website, there are over 6,700 distinct cryptocurrencies publicly traded. And cryptocurrencies continue to grow in popularity, with initial coin offerings, or ICOs, being used to raise funds. According to CoinMarketCap, the total worth of all cryptocurrencies and all Bitcoins was more than $2.2 trillion on April 13, 2021 and the value of the most popular digital currency, Bitcoin, was estimated to be over $1.2 trillion.
3. Why are cryptocurrencies so popular these days?
For a number of reasons, cryptocurrency advocates are drawn to it. Here are a few of the most well-known:
• Supporters regard cryptocurrencies like Bitcoin as the money of the future, and they’re rushing to acquire them before they grow more valuable.
• Some proponents prefer the idea that bitcoin frees central banks from controlling the money supply, because central banks tend to devalue money over time through inflation.
• Other advocates favor the blockchain technology that underpins cryptocurrencies because it is a decentralized processing and recording system that is potentially more secure than traditional payment methods.
• Some speculators are interested in cryptocurrencies because they are increasing in value, but they are uninterested in the currencies’ long-term adoption as a means of money transfer.
4. Is it wise to invest in cryptocurrencies?
Here is my thoughts, Cryptocurrencies may increase in value, but many investors consider them to be speculative rather than long-term investments. What is the rationale behind this? Because cryptocurrencies, like real currencies, have no cash flow, someone else must pay more for the currency than you paid in order for you to gain.
The “greater fool” investment hypothesis is what it’s called. In contrast, a well-managed firm grows in value over time through increasing profitability and cash flow.
“For those who see cryptocurrencies such as bitcoin as the currency of the future, it should be noted that a currency needs stability.”
Cryptocurrencies like Bitcoin, as NerdWallet authors have pointed out, may not be as safe as they appear, and several prominent voices in the finance industry have cautioned would-be investors to avoid them. Warren Buffett, the famed investor, likened Bitcoin to paper checks, saying, “It’s a pretty effective means of moving money and you can do it anonymously and all that.”
Those who believe that cryptocurrencies such as Bitcoin will be the currency of the future should keep in mind that a currency must be stable in order for merchants and buyers to know what a fair price for goods is. Bitcoin and other cryptocurrencies have been everything but stable for much of their existence. Bitcoin, for example, was valued about $20,000 in December 2017, but only $3,200 a year later. By December 2020, it was trading at record highs once more.
This price fluctuation is a problem. People are less inclined to spend and circulate bitcoins now if they are worth a lot more in the future, making them less viable as a currency. Why spend a bitcoin when it may be worth three times its current value the following year?
5. How do I buy cryptocurrency and can I buy a cryptocurrency in Ghana?
While certain cryptocurrencies, such as Bitcoin, may be purchased using US dollars, others need bitcoins or another cryptocurrency to be purchased.
To purchase cryptocurrencies, you’ll need a “wallet,” which is an internet tool that stores your funds. In general, you open an account on a cryptocurrency exchange and then use real money to purchase cryptocurrencies like Bitcoin or Ethereum.
Coinbase is a well-known cryptocurrency exchange where you can open a wallet and buy and sell Bitcoin and other cryptocurrencies. Cryptocurrencies are also available via an increasing number of online brokers, including eToro, Tradestation, and Sofi Active Investing. Free cryptocurrency transactions are available through Robinhood. (Robinhood Crypto is available in most, but not all, U.S. states). https://www.cnbc.com/2019/06/27/how-to-buy-bitcoin.html
For people in Ghana the video below explains how you can buy a cryptocurrency.
6. Is Cryptocurrency even legal?
They are without a certain lawful in the United States, while China has effectively outlawed their usage, and whether they are lawful in other countries is ultimately a matter of national sovereignty. Also, think about how to protect yourself from scammers that view cryptocurrency as a way to defraud investors. Buyer beware, as always.
7. How can I protect myself before investing?
If you’re interested in purchasing a cryptocurrency through an ICO, examine the fine print in the company’s prospectus for the following details:
- • Who is the company’s owner? A well-known and recognized owner is a good indicator.
- • Is it being pursued by any other significant investors? If other well-known investors want a piece of the currency, it’s a good indicator.
- • Will you have a share in the company or will you only have access to cash or tokens? This is a crucial difference to make. Owning a stake entitles you to a share of the company’s profits (you’re an owner), whilst purchasing tokens entitles you to utilize them like chips in a casino.
- • Is the currency already built, or is the firm seeking funding to do so? The more advanced a product gets, the less dangerous it becomes.
Examining a prospectus may be time-consuming; the more information it has, the higher your chances of finding anything authentic. However, even legality does not guarantee that the currency will be successful. That’s a whole other subject that needs a great deal of market knowledge.
Aside from such difficulties, merely possessing bitcoin puts you at risk of theft, as hackers try to break into the computer networks that keep your money secure. After hackers stole hundreds of millions of dollars in bitcoins, a well-known exchange fell bankrupt in 2014. These aren’t the typical risks linked with stock and mutual fund investing on major US stock exchanges.
8. Should you invest in cryptocurrencies?
Cryptocurrency is a highly speculative and volatile investment. Investing in known firms’ stocks is often safer than investing in cryptocurrencies like Bitcoin.
Learn more here https://www.investopedia.com/terms/c/cryptocurrency.asp
Disclosure: The author held no positions in the aforementioned securities at the time of publication and the author is not a financial advisor. It basically an educational content.
