February 11, 2021 | AtoZ Markets – Recently, cryptocurrency has taken the world by storm. As we approach a world where most transactions and activities are done online, money can now be stored online, earned, and traded without a central authority.
Because of its compelling description and merits, more and more people are trying their hand at the cryptocurrency industry. Before jumping into this new asset class, it’s paramount to know what it is, what makes it so prevalent in today’s fintech, and what’s in store for interested cryptocurrency investors and traders.
What Is Cryptocurrency And How Does It Work?
Cryptocurrency is a portmanteau of the words ‘cryptography’ and ‘currency.’ In layman’s terms, cryptocurrency is a form of digital currency systemized by cryptography technology. While this money only exists virtually, it can serve as a medium of exchange. However, cryptocurrency doesn’t have a regulated centralized system the same way as Fiat currencies do.
How do you start your cryptocurrency journey? First, you need to set up your account in your chosen trading platform, which commonly depends on your location. After your account registration and verification, you can now purchase your first cryptocurrency. If you’re situated in Australia, check out this informative guide created by Crypto Head.
Cryptocurrencies In Today’s Market
Like Fiat money, there are different cryptocurrencies that people can invest in. When diving into the crypto industry, it’s essential to look into the popular cryptocurrencies as they pose better investment options.
Currently, the most traded cryptocurrencies in the market today are:
- Bitcoin (BTC)
- Ripple (XRP)
- Ethereum (ETH)
- Tronix (TRX)
- Bitcoin Cash (BCH)
While Bitcoin is the top cryptocurrency today, its journey wasn’t consistently steady. Before reaching its highest value of USD$20,000 per BTC last December 2020, Bitcoin has witnessed many downs. For instance, BTC’s value in early 2018 dropped to USD$13,500 after achieving USD$19,000 in December 2017. Other digital currencies were also not up to par during those times.
The cryptocurrency market is highly volatile. Since cryptocurrency works in a decentralized system with no dependence on physical currency and commodity, their values heavily depend on faith.
What Makes Cryptocurrency So Popular?
Despite the crypto market’s volatility, cryptocurrency remains one of the most sought out asset classes in the investment landscape. By looking at the bigger picture, there are numerous reasons why cryptocurrency is popular among traders, investors, and entrepreneurs alike, which are mainly the following:
- Has Many Uses
There’s no surprise how crypto investing can immensely grow your money, but cryptocurrency isn’t all about investing and trading. Among many other uses and applications of cryptocurrency, using it as a money transfer method is a smart move. E-commerce businesses can allow clients to pay through cryptocurrency platforms thanks to its low transaction fees.
Additionally, crypto owners looking for a long-term interest gain who doesn’t have the skill, time, and patience in crypto trading can look into ‘crypto yield farming,’ which is similar to depositing your money in the bank.
Once you have your cryptocurrencies ready for yield farming, they’ll be lent to borrowers who use cryptocurrency to speculate its prices. Through yield farming, you’ll gain interest from your crypto without experimenting with them.
- Plenty Of Potential In Growing Money
The highlight of cryptocurrency’s popularity is and will always be its huge asset growth potential, and, typically, many people enter the crypto world because of this reason. When you buy a specific cryptocurrency at a lower price, you can sell them in the future once the value of that crypto rises. This investing approach is known as the ‘buy and hold’ method.
Moreover, it’s easier to join the international trade in cryptocurrency than other investment assets. Typically, cryptocurrencies aren’t subjected to cross-border transaction charges, interest rates, and exchange rates, allowing your cryptos to grow more powerfully in the global trade.
- It’s Safer, More Transparent, and More Trustworthy
Is it safe that banks and other authorities don’t regulate cryptocurrency?
Yes, cryptocurrencies are even safer than government-issued money. In fact, the security and liability of transacting with cryptocurrencies are some of the reasons why cryptocurrency is popular.
The cryptographic mechanism of cryptocurrencies is regulated by blockchain technology, where a digital ledger called the ‘blockchain’ keeps transactional records by storing them in a public database of computers.
Whenever a transaction occurs in cryptocurrency, information regarding this transaction will be sent to all computers in the network. Every computer in the network should have this unique transaction, else the transaction would be considered tampered and invalid. Although the public can see these transactions, no one can infiltrate them.
Since financial transactions are viewable by the public via the blockchain, crypto is trustworthy because of its transparency. As soon as your transaction has entered the system, you’ll immediately know that your transaction has been acknowledged.
- Cheap, Easy, and Quick To Navigate
At first glance, cryptocurrency may look like a different world to you, especially if it’s your first time investing. Seeing those line charts and percentages can look confusing at first, but you’ll eventually get your way into crypto due to its ease and convenience of use. Transferring and receiving cryptocurrencies only occur within a few minutes, giving you peace of mind that your money is safe.
Compared to banks and central authority, intermediaries don’t exist in the crypto world. If intermediaries exist within transactions, they usually charge transaction fees, but some don’t reflect transactions in real-time and might take a few days. However, most crypto platforms today offer quick transactions with zero transfer fees.
- The Market Volatility Thrills Many Investors
As mentioned earlier, losing and gaining money from your crypto investment is almost instant, but the crypto market’s volatility keeps investors and traders thrilled. As the users themselves control the potential value of a cryptocurrency for the next 24 hours, cryptocurrency’s volatility isn’t always bad.
Here are two exciting ways on how you can use the market’s volatility to your advantage:
- People with the hold on for dear life (HODL) investing strategy don’t have to worry about the market’s volatility.
- Use the dollar-cost-averaging approach for utmost safety against the market’s volatility. This method is also suitable for investors who tend to get swayed by emotions.
Bottom Line: Cryptocurrency, A New Way To View Money
Because of the rise of Bitcoin and other cryptocurrencies, it’s a substantial lesson to the world that money isn’t the physical paper bill and coin that we transact every day. If cryptocurrency can work seamlessly without a central authority, why are Fiat currencies the preferred picture of money? Will crypto be the new future of money?
By exploring the various wonders of cryptocurrency, people can be more educated on how money and investments work, particularly with the integration of technology. If you’re planning to dive into the crypto world, make sure to conduct thorough research and practice different trading platforms before putting your money on the line.