Some years, there’s been an increasing amount of discussion about cryptocurrencies, which are virtual currencies that fluctuate and frequently have exponential value. It’s been a long time since bitcoin’s popularity began to take off, with those who support it asserting that it can revolutionize the economy as well as the money. (Full disclosure author invests in bitcoin and ether, dogecoin and bitcoin. )
In the light of Elon Musk’s recent remarks and the volatility of specific cryptos (such as dogecoin), I am left wondering what if cryptos represent an actual market opportunity or are it a bubble that’s about to explode?
How do Cryptocurrencies work in the market?
To determine if cryptocurrencies be a viable option or not, it’s crucial to know the nature of what they are. I offer advice to institutions that deal with blockchain technology and cryptocurrency. This is something I’ve studied thoroughly. A cryptocurrency is a digital currency developed through blockchain technology. It’s essentially a set of codes that allow protected and secure transactions, making them safer and more regulated.
Cryptocurrencies don’t work with traditional banking or financial systems and differ from regular currencies. Nevertheless, they are products that you can buy or sell and, in the case of most well-known virtual currencies, even make transactions similar to real cash.
The most well-known cryptocurrency is bitcoin. It was introduced in the year 2009. Bitcoin was invented through Satoshi Nakamoto, who is shrouded in mystery. Some believe that Nakamoto is part of a group of individuals who, to hide their identity, created fake names to disguise their identities.
One of the main reasons for the development of Bitcoin (and later cryptocurrency) could be offering an alternative method of payment. Alongside bitcoin, you can find a myriad of other cryptocurrencies, whose values range from less than a cent up to 10s in the thousands for one unit.
It has also triggered an array of investors and speculators enticed by the potential for profit that cryptocurrencies offer. People who bought just a couple of bitcoins for a couple of dollars, in the beginning, could have earned an unimaginably large sum.
The Risks Of Cryptocurrencies in the world.
As with every other investment, it is not absolutely “safe” about betting on this kind of asset. As investing in commodities, stocks or ventures can be risky, making investments in virtual currencies is also a risk. There is the risk of losing money.
Cryptocurrencies are highly unpredictable. A coin could fall by a percent in a matter of minutes, but it could also increase rapidly. It is challenging to be accurately predicted through analysis.
What is certain, however, is becoming an increasingly tangible reality. They’re no longer an epoch-making phenomenon. This is growing evidence that more businesses (including physical companies) are now giving bitcoin a try to conduct transactions using bitcoin directly.
The most significant risk facing the businesses involved is that bitcoin might see a decrease in value, and its value could never be the same as it was when it was being used to pay. The value of 1/10th of a bitcoin, for instance, might change within just a few months. Because of this, cash received to sell the product or service may be much lower than at the date that the purchase was made.
But, the same logic is valid to reverse. Take a look at the first bitcoin transaction of a person who employed 10,000 bitcoins to purchase pizza. With that 10,000 bitcoins today, he could’ve created the chain of pizza eateries.
Why are people investing In Cryptocurrencies?
I think that cryptocurrencies are an investment opportunity. As with every other investment, investors should first evaluate any potential cryptocurrency investment and assess its risks to lower the risk of their portfolio and boost profits.
As we’ve mentioned, there are many cryptocurrencies, so choosing which one you want to make a bet on is a choice that needs to be considered carefully. Before investing in cryptocurrency, you should be aware of all risks. In the end, dangers and criminals lurk around the crypto sphere and want to defraud investors of their cash. Also, consider that investing in cryptocurrency could lead to a total loss of capital in the worst case.
How to avoid loses?
Another significant risk associated with digital currencies is loss of access to information. If you lose your private keys, you will be unable to access their data through the blockchain. Because of this, backups should be made repeatedly. Even though an intermediary could manage investors, an online exchange may also be compromised. It’s not impossible that a platform can make assets disappear in the same way that investors had feared following the fall of Turkish exchange Thodex.
Furthermore, transactions made on the blockchain aren’t irrevocable. This means that transfers to another address are not reversed. Also, care is needed when checking the addresses.
The cryptocurrency market is full of opportunities for those willing to take on the risk. It is clear to me that cryptocurrencies are the currency of the future.
The information here is not intended to be investment, tax or advice on financial matters. We should seek advice from an accredited professional on your specific situation.
