A beginner’s guide to Cryptocurrencies

A cryptocurrency is a digital currency that allows you to use it as a type of investment or to buy goods and services. This article is a guide that helps introduce cryptocurrencies to newbies.

An exciting feature of cryptocurrencies is that they are generally not managed by a centralized authority.

Many investors consider cryptocurrencies to be immune to any government intervention attempts.

For coin issuing and security, cryptocurrencies use state-of-the-art technology called the blockchain.

Although there is a lot to talk about on this topic, blockchain is a technology that is practically impossible to break and/or falsify today.

Through this blockchain, the transactions are split into different small pieces, managed, and stored by many computers worldwide.

To break the code of a cryptocurrency, they should have access to all computers storing these small pieces.

A short history of cryptocurrencies

The known history of cryptocurrencies begins in 1983; back then, a cryptographer named David Chaum developed a concept of ​ a type of cryptographic system to manage economic transactions.

Wei Dai used the term cryptocurrencies for the first time in 1998; he considered using a cryptocurrency as a decentralized online payment method.

Bitcoin was the first-ever cryptocurrency launched, a digital currency that continues to be the most popular in the present.

In 2009 Bitcoin was introduced by an anonymous group or individual who goes by the pseudonym of Satoshi Nakamoto.

Millions of people were affected by the big economic crisis in 2008. This motivated Nakamoto to create a fantastic idea, to create a payment system not affected by political events and not connected to any government.

How many cryptocurrencies are on the market, and how much are they worth?

There are now more than 7000 publicly tradable cryptocurrencies. However, many of the general public only heard of three or four of them, and the number of cryptocurrencies continues to grow daily.

The value of the cryptocurrencies market is more than 1.5 trillion US dollars.

We think it’s no surprise that Bitcoin continues to be the most popular digital currency of all.

Bitcoin has a market capitalization twice larger than all other cryptocurrencies.

Are cryptocurrencies legal?

Although there are countries like China banning the trading of cryptocurrencies, in most countries, they are legal.

Not only will you be able to buy and sell them at will, but in some states, there are even stores that accept direct payment with crypto for their products.

In the US, some real estate companies have started to allow buying houses using cryptocurrencies.

Some states want to introduce virtual currencies issued nationally, such as:

Country Name crypto

China DCEP

Dubai Emcash

Estonia Estcoin

Japan J-Coin

UK RSCoin

Portugal CryptoEscudo

Russia CryptoRuble

Sweden E-Krona

Turkey Turkcoin

Why are cryptocurrencies so popular?

Cryptocurrencies have many supporters today, and there are many reasons why they choose to buy such tools:

Many investors want to buy cryptocurrencies now before the price goes up even more because people see these new payment methods as the future currency. 

Some people think that the primary advantage of cryptocurrencies is that they are not connected to any central bank, which only increases their value over time.

Technology enthusiasts advocate for the use of cryptocurrencies because they support the blockchain technology behind these virtual currencies.

Some investors have seen virtual currencies as a great way to make quick profits.

Is it reasonable to invest in cryptocurrencies?

If we mentioned a little above that some people choose to invest in crypto, let’s go a little deeper into this topic, answering, “Is it good to invest in cryptocurrencies?“.

As the price of virtual currency can rise, many see these cryptocurrencies as an excellent opportunity for increasing their profits.

However, just like in the case of Foreign Exchange Trading, when someone buys a cryptocurrency, it will not generate any cash flow.

So, for you to make money, there has to be someone in the future who agrees to pay more money for it than you gave.

For this reason, such investments can only be seen as speculation, not an investment in the true sense of the word.

Most experienced investors urge us to stay away from the crypto market if we want to sleep peacefully at night.

And you will see in the example below why.

Why it’s not safe to invest in crypto

Let’s take what happened in the past years: in December 2017, the value of Bitcoin was very close to $ 20,000. A year later, it hit a low of $ 3,200.

It is true that in Novembet last year, it had again reached the threshold of $ 60,000, and now it is at historic levels.

But if you had bought in 2017, you would have had to wait until now to make a profit.

Pretty long.

Why invest in cryptocurrencies

Many choose to invest in cryptocurrencies because of the volatility that most experienced investors blame.

And as I gave a negative example above, let’s give a positive one:

If you were to buy Bitcoin in early January last year, you would have spent about $ 29,000 on it. At the time of writing, the value is almost $ 41,000.

So it would have resulted in a profit of $ 12,000, or 41% pure profit in one year.

Pretty good.

How to buy cryptocurrencies

It was a real story until you got to own cryptocurrencies in the past.

But today, the process is much simplified, and anyone has access to such tools through applications such as Revolut or eToro.

With them, you don’t even have to worry about opening a wallet to keep virtual coins because they will be safe inside the applications.

The purchase is effortless by pressing a button, and the sale, if necessary, is the same.