A cryptocurrency or Crypto is a form of digital currency used to purchase goods and services. However, these currencies are unregulated by the government and the banks. Most people are generally interested in trading these currencies online to profit, which causes the currency to fluctuate due to speculators.
What is CryptoCurrency?
Cryptocurrency is a kind of digital currency that can be used to purchase goods and services. Many companies have jumped into the pool and launched their currencies. These are similar to tokens or coins at a casino. However, you can use these currencies to purchase goods and services from those companies only. To buy Cryptocurrency, you have to buy it with real cash to make purchases with Cryptocurrency.
At the back end, the Crypto works by using a technology called the blockchain. These blockchains are responsible for managing and keeping records of all the transactions made. Blockchains are decentralized and are spread out on multiple computer systems. Due to the security this currency and blockchain system offers, most people find it compelling to purchase it.
Is it worth investing in Cryptocurrency?
You can make money by trading in Crypto as the chances of you making a profit are high. Similarly, the chances of you losing all your investment are high, too, due to the market’s volatility. Hence, like any new venture, cryptocurrencies offer many potential gains and some chances of losses.
Benefits of investing in Cryptocurrency:
The volatility of the Cryptocurrency:
Even though it is a relatively new market, it has still suffered a lot of volatility due to speculative investors. These speculative investors have the power to skyrocket any of the currencies at any given time by buying a lot of that particular currency, which raises the currency’s value. Short-term speculative interests cause a lot of volatility in the market. However, you do have the option to use it to your benefit. For instance, bit coin’s value fell as low as $5851 and then rose to $19,378 in 2017 and 2018. People who purchased it at a lower price gained a lot. However, those who invested in it at a higher cost lost a lot of money. Regardless of the fluctuation, bitcoin is still one of the most popular cryptocurrencies around the world.
Market hours of Cryptocurrency:
Since there is no governance of the market, it is unregulated by any rules or laws. It runs 24 hours a day and seven days a week. You can make a transaction whenever you want. All of the transactions are taking place between individuals from across the globe on different cryptocurrency exchanges. However, the market has a downtime known as forks when the market goes through infrastructural changes or updates.
Liquidity of funds is a crucial factor when purchasing Cryptocurrency since it measures how quickly your Cryptocurrency can be changed into cash without causing any impact on the market value. It is essential because it effectuates better pricing, improved accuracy for technical analysis, and quicker transaction times.
Since there is no governing body for this market and the rates are incredibly volatile and dispersed worldwide on multiple exchanges, it is not easy to liquidate your Cryptocurrency. This also means comparatively smaller trades can create a significant impact on the market values.
Ability to go long or short:
When purchasing Cryptocurrency, you can buy the asset upfront and sell it when the price goes higher or lower. However, you can also make use of a falling market value with Cryptocurrency, such as if you sell an asset that you do not have, but you know it will go down, you can sell it without having it and purchase it when the price goes down as per your assumption. This is called short selling. It means making a blank sale for a short period, only to purchase the asset when it goes down. With Cryptocurrency, you have the benefit of making use of both short selling and going long, which is the traditional way of purchasing an asset at a low rate and selling it when it goes above your purchase value.
Since it is a leveraged commodity, you can deposit a small amount – a fraction of the Cryptocurrency’s actual value. It allows you to open a margin position.
In other words, you can get maximum exposure by just investing a small amount of your capital. Trading on margin offers you the ability to make large profits by investing only a small amount. However, it also means that your losses will amplify as well. The Cryptocurrency’s gain or sale will be reflected on the currency’s actual sale or purchase against your marginal amount.
Furthermore, you might be interested in owning Cryptocurrency for the following reasons:
- You might want to own the Cryptocurrency for a longer period
- You are willing to pay the complete value of the asset upfront
- You may want to acquire direct exposure to one primary exchange per account
- You don’t find maximum deposits or introductory limits a problem
- You are okay with paying supplementary fees for deposits or withdrawal
The top three cryptocurrencies as per their values are as follows
Now you know the benefits and pitfalls of having or owning Cryptocurrency. The above mentioned are the top three; you can also scour the market and find smaller, lesser volatile, and expensive currencies. The benefit of using Cryptocurrency is that you can invest a fraction of your whole amount and buy the shortest amount of a money, and it can end up giving you a marginal profit.