Cryptocurrency came in like a wrecking ball in 2017 and had investors and the commerce industry sitting up and taking notice. Also known as virtual or digital currency and crypto in short, it works much like real currencies in that owners can buy and sell goods and services.
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The real interest in cryptocurrencies is driven by trading them for profit with the hope of making huge profits which are driven by speculators. The number of speculators goes up every day. The 2017 ICO (Initial Coin Offering) raised a staggering $3.5 billion (Source: Business Insider) and interest in crypto has escalated since then.
Trybe details a few things you should know about cryptocurrencies if your interest in them is piqued:
1. Understand Cryptocurrency
In a nutshell, cryptocurrency is a form of payment used to buy and sell goods and services online. A large number of companies have their own currencies known as tokens which are in the purchase of the goods the particular company provides. In order to gain access to cryptocurrency, you must exchange real currency.
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Cryptocurrencies use a technology known as blockchain which is a decentralized technology that runs across many computers. Blockchain is used to manage and record transactions. This technology is popular for its security.
2. How Many Cryptocurrencies are in Existence?
The long and short of it is approximately 1,400 of them as of January 2018. That is a lot and they are still piling up. Also, they continue to raise money via ICOs. The best known of these cryptocurrencies are Bitcoin, Ripple and Ethereum and these have already gone public. By the 5th of January, 2018, Bitcoin was valued at $283 billion firmly confirming its position as the most popular virtual currency.
Second place goes to Ripple which was valued at $119 billion. All cryptocurrencies are valued at a dizzying $708 billion (Source: Coin Market Cap).
3. Why the Popularity?
The numbers are evidence that cryptocurrencies are quite popular to be raising that much money. Why is this so? Here are a few reasons why:
· They have been marketed as the currency of the future; therefore, the race is on to buy them now before their prices hit the roof.
· They are said to be set to dethrone central banks from the position of money supply managers. This goes down well with supporters because banks tend to reduce the value of money by way of inflation.
· Blockchain is a secure decentralized system that provides better security than traditional payment systems.
· Blockchain provides anonymity which appeals to most users because they are able to escape government surveillance.
· Their value keeps increasing.
4. As an Investment
The question is, are they worthwhile to invest in? It is important to note that while cryptocurrency value keeps going up, many of them consider this speculation, not real investment. This is because they generate no cash flow just like real currencies. Therefore, for you to make profits, you have to dig deeper into your pockets to pay for the currency. This is how ‘the greater fool’ theory works in investment.
Also, a currency needs stability. Cryptocurrencies do not have the stability needed to be considered the currency of the future. There is still a bit of debate out there with regard to cryptos such as Bitcoin and their credibility as investment options.
5. Buying Cryptocurrency
To buy digital currency such as Bitcoin, you will need a Bitcoin wallet. This is an online app that you deposit your Bitcoins in. You will be required to register with your identity and bank details. Once this is done, you must transfer real money to buy your cryptocurrency of choice or Bitcoin in this instance.
Note that you do not have to buy them directly. You can buy via an investment company via an existing broker.
To protect yourself while trading in cryptocurrency, ensure that you know who owns the company and identify major investors trading through the same company.
