What are cryptocurrencies?
Cryptocurrencies are, in other words, a type of digital money that was created on the basis of an algorithm. They use cryptography, a type of digital encryption, to secure transactions and generate new monetary units. The most well-known cryptocurrency so far, Bitcoin, was launched in 2009. Currently, there are more than 1000 different cryptocurrencies available on exchanges, and the most well-known of them are:
• ETH - Ethereum; • LTC - Litecoin; • XRP - Ripple; • USDT - Tether; • ADA - Cardano; • DOT - Polkadot;
and many more.
The most important premise for the creation of cryptocurrencies was to provide an alternative way to make transactions on the network. So far, their use has aroused extreme emotions, all due to the large fluctuations in exchange rates and frequent manipulations to which they are subjected in the market.
Bitcoin is considered to be the first decentralized cryptocurrency and is also the "king" of this market. It was developed by Satoshi Nakamoto, who is not sure if he is one person or a larger group. Like the cryptocurrencies that follow Bitcoin, it is based on blockchain technology, which is used to collect and transmit information about transactions. Publicly available online trainings provide a lot of information about how it works.
How to invest in cryptocurrencies?
The basic way to make money on cryptocurrencies is simply to buy them, while we expect the price to increase in a given period of time. The purchase is made online and is available in the following places:
• mobile currency exchange; • cryptocurrency exchange, for example, Binance.
To purchase cryptocurrencies, you need a specially dedicated crypto wallet. Most of them are available in the form of special mobile apps, such as Trust Wallet or Coinbase. To be able to use them legally, you need to complete the so-called KYC, i.e. identity verification.
When using a cryptocurrency exchange, you should be aware that it will not always be possible to make a transaction directly in PLN. This means that you may need to carry out an additional exchange transaction for USD.
An alternative to hosting, and a slightly more intriguing option, is trading, i.e. CFDs (contracts based on exchange rate differences) that can be concluded on platforms that offer intermediary services in trading - with so-called brokers.
The main difference between buying and holding cryptocurrencies on an exchange and trading is that in the latter case, you can make money on both increases and decreases. In short, you make a "bet" with the broker and speculate on whether the price of an asset will fall or rise. To do this, you enter a long (buy) or short (sell) position. If the trader takes the right direction, they will make money in the market.
What's more, being a client of a broker, you can take advantage of the so-called leverage, for example, 1:30 or 1:100, which will increase your potential profit in the market. Unfortunately, this kind of tool can result in big losses on your bill.
Risk assessment
Cryptocurrencies are an investment field that presents many opportunities. Like any capital investment, they involve a certain amount of risk. To begin with, these are undoubtedly volatile assets and it is difficult to talk about their liquidity on the market. This means that you can make really impressive profits with them, but at the same time, suffer severe losses. The last 2 years have clearly shown the volatility of the cryptocurrency market. We are talking about Bitcoin's ATH (the highest peak), which was over 68 thousand US dollars, while now its value is only half of this amount.
As a beginner investor, it is important to have a thorough understanding of the specifics of this market, for example by using training platforms such as Webinar Unvierse. The beginning of the cryptocurrency path is also about determining the level of acceptable risk, the amount of capital for the investment and setting a goal in a given time horizon.
Pros and cons of cryptocurrencies
Trading cryptocurrencies, as opposed to trading other assets such as stocks or currency pairs, has one undoubted advantage. Trades can be executed around the clock, 7 days a week, while trading in other instruments takes place only on business days. Transaction costs are also relatively low.
If you gain sufficient knowledge of technical analysis, for example through online training, you can enter into both downward and upward positions, whereas in the stock market, this is not possible.
The choice of different cryptocurrencies is very wide, so each investor can choose the one whose behavior is most understandable to him. In the world of virtual currencies, you can also find cryptocurrency games, as well as the metaverse and memecoins.
First of all, it should be remembered that the cryptocurrency market is not one of the most stable. The prices of individual assets are heavily manipulated. This is why education is so important, for example through the Webinar Unvierse learning platform, as well as diversifying your crypto portfolio (distributing funds across multiple cryptocurrencies) to reduce investment risk.
The crypto industry, despite being around for quite a long time, is still in its early stages of development. This means that it's not entirely possible to predict which coins will survive and which will disappear.
Another threat is the numerous scams using cryptocurrencies, the so-called scams. However, this is not strictly related to this market, as it is legal in itself, but to people who, taking advantage of the ignorance and gullibility of others, try to expose them to traps.
Bitcoin and its successors are undoubtedly a huge investment potential. Unfortunately, cryptocurrencies are not widely accepted as a medium of exchange today. On a daily basis, they face significant constraints that make it difficult for them to fully develop in the market. However, it is not excluded that they will find more use over time. The potential use of blockchain technology, which is behind cryptocurrencies, also remains a mystery. It is possible that it will be used for other purposes that are not yet known today.