The topic of digital coins is quite extensive and it includes a lot of aspects. It is hard to believe, but many people around the world still have no idea what cryptocurrencies are, how they work and what they are used for. In this article we will briefly tell you about the main aspects of this topic. It should be noted that this material will be useful only to those people who absolutely do not understand anything about cryptocurrency. If you are not a complete novice, then this article will not reveal you anything new.
1. What is cryptocurrency?
If you are reading this article, then it is likely, you have already heard such words as: Bitcoin, cryptocurrency, blockchain, etc. Let’s try to figure out what it is. Some people compare digital coins with electronic money. To some extent this is true, but it should be mentioned that cryptocurrency cannot be compared with funds that are on debit or credit cards, as well as WebMoney, PayPal, etc. The main difference between cryptocurrency and traditional electronic money is the lack of regulation and any governing body. The main essence of cryptocurrency lies in its decentralization, that is, transactions here occur directly from one user to another. Also, digital currency prices are not tied to any physical material object or to economy of any country in the world.
So how then do digital coins work? Cryptocurrencies operate using special cryptography technology that helps to encrypt data. All information about wallets, balances, transactions is stored in a distributed registry or in other words in blockchain. The Bitcoin network and almost any other cryptocurrency are based on the principle of equality between users. Each member of the network has its own blockchain copy. It is impossible to change or delete information that has entered the registry. This feature guarantees security and full transparency. But because of this, cryptocurrency has one not pleasant consequence: the irrevocability of transactions. That is, if you make a mistake in at least one character of receiver`s wallet number, you will lose your money.
2. How to buy a cryptocurrency?
Nowadays, investing in digital currency can be done in just a few minutes. This can be realized with the help of exchangers, or by direct contacting with a person who wants to sell a cryptocurrency. Let’s take a closer look at each way to purchase cryptocurrency.
- Cryptocurrency exchangers
This method will suit you perfectly, if your main goal is simply to buy digital coins (without further trading). Digital currency exchange is a fairly profitable business. That is why there is a huge number of different exchangers on the market in our time, they offer their services for converting fiat money into cryptocurrency and vice versa. But remember that along with good services, there are many scammers. Therefore, the choice of exchanger should be taken with all responsibility. The easiest and most convenient way to find a good exchanger is to use various aggregator sites (for example, bestchange.org). There you may find all the necessary information about the exchanger and read reviews about its work.
- Cryptocurrency exchanges
If you want to make money on coins rates fluctuations, that is, on digital currency trading, then a cryptocurrency exchange will be an ideal choice. With the growing popularity of the cryptocurrency industry, new trading platforms began to actively appear in the market. Now there are a huge number of them. New, unknown sites attract users with favorable terms of cooperation (low commissions, bonuses, etc.). Popular exchanges attract with their stability and high level of security. But by and large, a 100% secure exchange simply does not exist. For this reason, many industry experts recommend not to keep most part of cryptocurrency portfolio on exchanges.
3. Where to store cryptocurrency?
We approached to a very important point of our today’s material: the issue of storing digital coins. It should be noted that there are several types of digital currency wallets. Each of them has its own characteristics, advantages and disadvantages. Let’s talk more about them.
- Online wallet. This type of wallets is considered to be the most convenient, since you can access them from any device that is connected to the Internet. There is no need to download any additional software for using online wallets – everything works from the browser. It is only necessary to pass a simple registration procedure for the service and that’s it. But it is important to remember that this type of wallets is the most unsafe, so storing all your coins in online services is not a good idea.
- Hot wallet. This storage option is somewhat average in terms of safety and ease of use. Hot cryptocurrency wallets are desktop or mobile applications that need to be installed on device.
- Cold wallet. This cryptocurrency storage variant is the safest, but far not the most convenient. You can make a cold wallet by yourself, you will need a flash drive, on which it is necessary to transfer private keys. There are also ready-made options for cold wallets, such as Leadger, Trezor, Keepkey, etc. They are suitable for long-term investments, as it is not convenient to use them on a daily basis.
4. How to invest in cryptocurrency?
The vast majority of people who are interested in this industry actually want to figure out how to earn cryptocurrency. So, there is a huge number of different coins and tokens in the cryptocurrency market. More specifically, as of the time of writing this article, their number is 2068 (data from the Coinmarketcap website). The biggest part of the entire market capitalization is of course taken by Bitcoin (55.1%).
Many coins have practically no value, but there are few projects that can show very good growth in the future. Interesting fact, for 2017, Bitcoin grew in price only 20 times (from $1,000 to $20,000), for example, the XRP token at the beginning of 2017 cost $0.006, and at its peak the price reached $3.84. If to calculate these numbers, it is easy to see that the XRP has grown 640 times just in one year. Therefore, Ripple was the best digital currency for investment in 2017. This example proves that the key to high profitability is to invest in new cryptocurrencies.
Of course, the risk of complete capital loss increases in several times, when investing in unknown coins. To feel confident and not risk the entire cryptocurrency portfolio, it’s better to balance it properly. It is not recommended to buy only one asset, it’s better to diversify your risks and buy several coins at once, for example, in the digital currency group TOP-10, TOP-20, etc.
5. What is the current cryptocurrency rate?
News that are actively discussed in the industry throughout the year 2018, have a bright negative trend. When the price of cryptocurrency grows, the media writes that Bitcoin will soon change the world and that it is digital gold. But when the market suffers correction or downtrend, the very same media call cryptocurrencies a bubble, which should burst by all means soon.
Now the market capitalization is either actively falling, or at best, standing in one place. This year turned to be one of the most difficult for the industry. Bitcoin rate fell almost in 6 times compared with its peak value, which was recorded on December 17, 2017. For the moment of writing this article, the price of the first cryptocurrency is at $3,400. Other coins have lost much more than Bitcoin, the average for altcoins is about 90% – 93% of the fall.
6. What is the future of cryptocurrency?
Given the current market situation, it is possible to make preliminary conclusions that cryptocurrency has no future and that everyone needs to escape from this “sinking ship” quickly. But in fact, the situation is not as straightforward as it may seem at first glance.
The fact is that along with the general fall in cryptocurrency prices, there is raise in institutional investors in the industry. This year, a huge amount of financial investments were made both in the digital coins themselves and in infrastructure development (mining farms, cryptocurrency platforms, services, etc.). We are talking about hundreds of millions dollar, invested by the largest Wall Street sharks, such as Goldman Sachs, Bakkt, etc. It can mean that the digital economy development is only at an initial stage and it will have a positive time ahead.
Many experts predict a huge increase in the cryptocurrency market capitalization in the near future. The weighted average optimistic BTC price forecast for 2019 is $30,000. Some analysts talk about numbers of $50,000, $100,000, and even $1,000,000, but this growth cannot be considered as adequate. In case Bitcoin rate rises to such values in such a short period of time, no less enchanting collapse will wait for it.
But surely no one in the world can 100% say how much Bitcoin or any other cryptocurrency will cost in the future. Therefore, let’s also talk about the pessimistic forecast for the BTC price. If the market situation does not change, then in early 2019 we can see the Bitcoin rate at $1,000. There is no need to talk about a full-scale collapse of cryptocurrencies, since there are simply no prerequisites for this. There have been great upheavals in the history of the industry, but Bitcoin and other coins have always recovered and continued to grow.
Cryptocurrencies are a very young asset class, so it is too early to talk about their widespread adoption. Their work is based on a revolutionary technology blockchain, which value is difficult to deny even for the most severe skeptics. The capitalization of digital coin market is now too small (about $108 billion), so it’s pretty easy to manipulate it. It is the reason for cryptocurrency rates volatility (price fluctuation).
Unfortunately, there is no certain answer to the question: “Is it worth investing in cryptocurrency now?”. Everyone has to decide it for himself. On the one hand, investments in Bitcoin and other digital coins carry a large number of risks. But on the other hand, they offer great opportunities, since no other asset in the history has given such a huge yield. Of course, no analyst is 100% able to make a top digital currencies list.
If you are ready to risk your money, then investing in cryptocurrency is definitely worth it. But it is absolutely not recommended to sell all your property in order to buy BTC. Since the market is very volatile, it has very significant drawdowns. Therefore, if you enter the industry with all your money, you simply cannot make adequate decisions in emergency situations. Invest the amount of money that you can afford to lose completely. With this approach, you will achieve much better results and save a lot of nerve cells.