Can Cryptocurrency Become The New Money
Before answering this question, we need to know what money is.
In the book Sapiens A Brief History of Humankind, Yuval Noah Harari writes that Money is anything that people are willing to use in order to represent systematically the value of other things for the purpose of exchanging goods and services.
For anything to work as money, it should have limited supply, easy transfer, and wide acceptance.
The current form of money is called fiat money. It is not backed by any material like gold, silver, platinum, etc. It holds its value because government organisations like RBI control it.
Cryptocurrency like fiat money is also not connected to any physical material, nor it is backed by any government organisation. There is no central authority to control it. It works on basis of a pre-defined algorithm.
If fiat money can be widely accepted, why cant crypto be? There are several reasons for the acceptance of fiat money that crypto cant compete with.
What More Institutional Adoption Means For Investors
While paying for things in cryptocurrencies doesnt make sense for most people right now, more retailers accepting payments might change that landscape in the future. Itll likely be much longer before itll be a smart financial decision to spend Bitcoin on goods or services, but further institutional adoption could bring about more use-cases for everyday users, and in turn, have an impact on crypto prices. Nothing is guaranteed, but if you buy cryptocurrency as a long-term store of value, the more real world uses it has, the more likely demand and value will increase.
Cryptocurrency Helps You Learn New Skills
When you start buying bitcoin and/or trading cryptocurrencies, you will find yourself learning as you seek to master the art of crypto investing. This knowledge will impact heavily on your financial decisions and trading skills. You might not become rich from cryptocurrency investment but you can apply the knowledge in other areas of your life in your habits, emotional self-control, discipline, reactions, etc. No knowledge gained is a waste. The new knowledge will set you apart from your contemporaries and can make you become a financial consultant to them.
Read Also: Which Crypto Uses Least Energy
Entry Barrier Is Getting Lower
A few years ago, you needed to be technologically literate to invest in crypto. This is finally changing and today anybody can buy digital coins. The time when you needed to know programming just to launch a crypto wallet is long gone. We live in the age of convenient mobile applications that let you buy stuff in one tap.
Buying coins today may be easy but you still need to know what to buy. We created an infographic with starter-portfolio templates with 4 most popular beginner crypto assets. The infographic explains why you should consider each coin from the list and suggests two portfolio options with different risk levels.
Cryptocurrency Investment Can Lead To High Returns
Perhaps the main motivator for people to invest in cryptocurrency is the possibility to make a profit. Like it or not, money makes our world spin and is one of the main reasons to invest in cryptocurrency.
Though crypto trading is relatively new, cryptos can lead to higher returns compared to other assets, such as stocks. Cryptocurrencies are highly volatile, which means that one can potentially achieve high returns from a single trade.
At the same time, lets not forget that volatility also means that traders can lose it all in a second. So always consider potential risks! As cryptocurrency investing can be highly demanding, one of the first steps to success is to devise an effective risk management strategy to limit losses.
Recommended Reading: Why Crypto Market Is Down Now
As The Cryptocurrency Market Evolves Investing In Virtual Coins Has Become Much Easier Than It Used To Be A Few Years Ago While Investor Interest Has Peaked After The Cryptocurrency Boom Of 2020 There Are Several Critical Issues That Need To Be Addressed
- May 25, 2021
Investing in cryptocurrencies has become a subject of debate over the past few weeks, owing to the high level of volatility seen in the virtual coin trading space several rounds of ups and downs have been witnessed in the crypto market in a matter of two weeks.
On Tuesday, cryptocurrency prices recovered after plunging sharply on Sunday. Bitcoin, the worlds most popular cryptocurrency, has bounced back after falling almost 12 per cent.
Earlier last week, another devastating bout of volatility hit cryptocurrencies and led to a sharp erosion in the market capitalisation of popular virtual coins. This was largely due to Chinas tight crackdown on cryptocurrencies and Tesla CEO Elon Musks tweets about the environmental impact of mining the virtual coins.
But anyone who has been investing in cryptocurrencies will tell you that drastic price movements are normal in the cryptos and may increase as prices continue to rise.
Lets take into account the rise and fall of Bitcoin over the years to understand the dynamics of crypto trade.
The market for cryptocurrencies was almost non-existent a decade ago when Bitcoin, the first virtual coin, emerged. In 2009, its value was $0 after it was introduced. It was only two years later that the value of Bitcoin touched $1 for the first time and in two more years, Bitcoins value surged to $1,000.
Cryptocurrency Fraud And Cryptocurrency Scams
Unfortunately, cryptocurrency crime is on the rise. Cryptocurrency scams include:
Fake websites: Bogus sites which feature fake testimonials and crypto jargon promising massive, guaranteed returns, provided you keep investing.
Virtual Ponzi schemes: Cryptocurrency criminals promote non-existent opportunities to invest in digital currencies and create the illusion of huge returns by paying off old investors with new investors money. One scam operation, BitClub Network, raised more than $700 million before its perpetrators were indicted in December 2019.
“Celebrity” endorsements: Scammers pose online as billionaires or well-known names who promise to multiply your investment in a virtual currency but instead steal what you send. They may also use messaging apps or chat rooms to start rumours that a famous businessperson is backing a specific cryptocurrency. Once they have encouraged investors to buy and driven up the price, the scammers sell their stake, and the currency reduces in value.
Romance scams: The FBI warns of a trend in online dating scams, where tricksters persuade people they meet on dating apps or social media to invest or trade in virtual currencies. The FBIs Internet Crime Complaint Centre fielded more than 1,800 reports of crypto-focused romance scams in the first seven months of 2021, with losses reaching $133 million.
Don’t Miss: How To Build Crypto Exchange
Effective Tool For Portfolio Diversification
Diversification means dividing your investment into various asset classes.
When you put your savings in different asset classes, you reduce risk.
Exposure to various unrelated assets helps you balance your risk and goal.
Diversification helps you balance risks vs goals.
A decade ago, investors would diversify only in stocks, bonds, mutual funds, real estate, etc., Now the list includes assets like cryptocurrencies.
Research by Bitwise indicates that a small percentage of cryptocurrency in your investment portfolio could increase your returns significantly. Suppose you allocate 2.5% of Bitcoin , your regular traditional portfolio, which holds 60% equity and 40% bonds. In that case, the average returns from your investments in three years could be boosted by 15.8%.
In traditional investment terminology, the increase in the performance of this portfolio is brought by something called Sharpe Ratio. This ratio is the additional return you get for over and above the risk taken.
Bitcoin is the only asset with a Sharpe ratio > 1 , making it an ideal investment to own.
You Do Not Want To Miss Out
Cryptocurrencies, much like the internet, are changing the way we do business. Financial institutions and governments are gradually coming to grasp this reality.
This could be a great point to invest in cryptocurrencies even though you do not have a million dollars in your account, as many of them are going for a bargain. Several of these digital assets remind us of the dot-com buzz that birthed the likes of Google, Amazon, and Apple. Imagine investing $1000 in each of the companies when they initially launched.
That same feeling is what cryptocurrencies will feel like in the next couple of years. So, it is never too late to add cryptocurrencies to your portfolio, given their growing adoption.
67% of all retail investor accounts lose money when trading CFDs with this provider.
Don’t Miss: How To Make Millions From Cryptocurrency
Never Too Late To Invest In Cryptocurrencies
Whether you are a successful Bitcoin investor or a crypto enthusiast, its never too late to start investing in cryptos. Though some believe that the time to make millions has passed, the truth is that crypto investing is still a hot topic.
Actually, cryptocurrency and blockchain have a long way to go, so even in 2021, you can still be considered an early adopter. The feeling of investing in something so innovative is simply overwhelming!
Is Cryptocurrency A Good Investment Four Things To Know
Before you say good-bye to your dollars and hello to Bitcoin, Ether or Doge, there are a few things you need to know up front.
1. Cryptocurrency is unstable.
Its truecrypto is about as hot tempered as a 12-year-old. Its value swings way up, only to come plunging back down, and you never really know what youre going to get each day. The value of cryptocurrencies goes through extreme ups and downs. Theres no denying that some are really hot right nowbut for how long? Someone sneezes and the price drops! Investing in cryptocurrency is risky, to say the least.
But heres the crazy thing: A recent study by Piplsay shows that 50% of Americans think investing in cryptocurrency is safe.2 Fifty percent! News flash: Cryptocurrency definitely isnt a sure thingit carries a huge amount of risk. Lets be real here, all investing comes with some level of risk. But why jump all the way to the deep end with something this up and down?
2. Cryptocurrency has lots of unknowns.
Theres still a lot that needs to be ironed out with how cryptocurrencies work. Think about it: Nobody even knows who the founder of Bitcoin is! Only a small percentage of people in the world really understand the system and know how to operate it. Ignorance makes you vulnerable. We always tell people that if you cant explain your investments to a 10-year-old, you have no business investing in them to begin with. Youre setting yourself up for a big mess.
3. Cryptocurrency makes fraud easier.
You May Like: How To Delete Your Blockchain Account
Cryptocurrency Has A Low Entry Threshold
One of the reasons why you should invest in cryptocurrency is the low entry threshold it offers. While some other types of investments such as real estate and stocks require huge capital to start up, you can start trading with as low as $100.
You can start buying and selling cryptos with little funds and grow them over time to huge amounts. There is no need for paperwork and complicated procedures with cryptocurrency investments.
I hope this piece has thrown light on the subject of investments in cryptocurrency. Before you start any form of cryptocurrency investment, I advise that you do your research and understand the volatility of the market.
You can make a lot of money from cryptocurrency investment as well as lose a lot of money. You need to study the coins and tokens that you want to invest in, get to know their use cases and the platforms that you trade on.
Gain awareness of the key roles in the cryptocurrency industry, know the proper exchange to trade with, etc. Cryptocurrency investment has been referred to as the future of finance and hence you need to plug in so as not to be left out. The world has gone digital with digital assets and we are living in interesting times.
Crypto Is Not Regulated
Many crypto-assets and other digital assets are commonly not considered to be financial products. Because of this, the platforms where you buy and sell crypto may not be regulated by ASIC. This means you may not be protected if the platform fails or is hacked.
When a cryptocurrency fails, investors will most likely lose all the money they put in. In most countries, cryptocurrencies are not recognised as legal tender. You’re only protected to the extent that they fit within existing laws.
Also Check: How Can I Cash Out Bitcoin
Consider Why You Are Investing In Cryptocurrency
Perhaps the most fundamental question you should ask yourself before making a cryptocurrency investment is why you’re doing it. There are myriad investment vehicles available at this point .
Are you interested simply because of the trendiness of the cryptocurrency craze? Or is there a more compelling reason for an investment in one or more specific digital tokens? Of course, different investors have various personal investment goals, and exploring the cryptocurrency space may make more sense for some individuals than for others.
Investing In Cryptocurrencies Stop Making These Five Mistakes Right Now
2 min read.Vivek Punj
Along with massive returns, cryptocurrencies come with their fair share of difficulties too, like extreme volatility and more
|Listen to this article|
Driven by investors’ enthusiasm, cryptocurrency market recently crossed the $3 trillion mark for the first time. This puts in perspective the craze around digital currencies, which have emerged as a lucrative investment tool. However, along with massive returns, cryptocurrencies come with their fair share of difficulties too. The asset remains extremely volatile, which often discourages investors from putting their money on it.
Considering the pros and cons of cryptocurrencies, as a crypto investor you need to be mindful of avoiding these mistakes if you intend to be make big money out of it:
Trading without any knowhow
Cryptocurrencies are more nuanced than they might seem. It is not advisable to enter the crypto market as a complete novice without any knowledge of how it works. To begin with, one must have fundamental knowledge and technical analysis of cryptocurrencies before investing in them. Paper trading, where a novice investor can learn the basics through trading simulators, can be a good way to start. Similar simulators are also used for learning stock market trading.
Investing without a goal
Jumping without a plan
Also Check: How To Mine For Bitcoins
Should We Invest In Cryptocurrency
In recent months, cryptocurrency, particularly Bitcoin has been a hot topic. When Elon Musk announced that they bought US$1.5 billion Bitcoins and that Tesla will accept Bitcoins, its price surged 20% to become US$42,000. Today, Bitcoin has crossed US$60,000. So, should we invest in cryptocurrency? To answer this, we first have to understand what cryptocurrency is in the context of money.
At Providend, we always say that money is an enabler of life goals. But to be an enabler, money needs to fulfill 3 fundamental roles: a store of value a medium of exchange and a unit of account. Today, money as a store of value is stored in a physical form through notes and coins but strictly speaking, these notes and coins do not have intrinsic value. It is what people collectively agree on what constitutes money that gives money value. There are 6 characteristics to consider when we gauge the quality of different forms of money:
An ideal form of money should have all these 6 characteristics.
The edited version of this article has been published in the Money Wisdom Column of The Business Times Weekend on 20th March 2021.
Can You Get Cryptocurrency For Free
Yes, you dont have to buy a cryptocurrency to own one. You can also gain cryptocurrency by solving cryptographic equations through the use of computers. This process involves validating data blocks and adding transaction records to the blockchain.
It is also worth noting that some cryptocurrencies like Bitcoin are finite in supply, meaning that there is a maximum number of coins that will ever be in circulation. Others like Ethereum do not have a maximum cap but limit the number of new coins that can be generated each year.
You May Like: What Is Blockchain Technology For Dummies
Blockchain Is Here To Stay
What you have to understand about blockchain, is that Bitcoin and other crypto, are built on Blockchain in the same way Facebook or Google are built on top of the internet. Its what makes crypto possible but theres more to blockchain than crypto.
We think that crypto is proof enough that blockchain is going to become more important. But just in case you needed more lets just look at all the other things blockchain is being used for.
Big business is using it to record data. Companies like Pfizer, Walmart, Siemens, Unilever use it to keep data which is too complex for a spreadsheet to record. Healthcare providers use it to store their patients medical records safely. And theres potential for it to grow in records of property ownership. And in elections, to keep track of votes and take away the need for recounts. Yep, that one would have come in handy in 2020.
Reasons You Should Invest In Cryptocurrency Now
Cryptocurrencies have grown in popularity despite the global pandemic and the subsequent lockdowns. Even though the nascent industry has attained a trillion-dollar valuation, many people are still skeptical about investing in space. If you are in this clique, we will highlight five reasons why we think you should invest in cryptocurrencies now.
Don’t Miss: How To Create My Own Crypto Coin