https://nasacademy.com/blog/article/why-should-you-invest-in-cryptocurrency
If you have a phone with an internet connection on it (obviously you do if you’re reading this…), you are already aware of how the word crypto has taken over the world – with some people even becoming Crypto millionaires.
The cryptocurrency market has over 18,000 cryptocurrencies, the market reached its All-Time High market capitalization at $3 Trillion last year. There has been a remarkable growth in cryptocurrencies like Bitcoin, Ethereum, Solana, Doge, and Shiba Inu.
There is also a dark side to this, the Crypto market is extremely Volatile. People have lost their life savings to it. Our advice to you would be to DYOR (Do your own research) before investing.
But why should you invest in Cryptocurrency given the high volatility in the Crypto Market? Before we answer that let’s understand the meaning, characteristics, and risks associated with investing in Cryptocurrencies.
Making a transfer through PayPal, Venmo, or Google Pay is just a One-Tap process, but imagine the Venmo Server is down and you’re unable to make an urgent transfer, you’re now stuck in a pickle. Even though transfers through these apps are easy and fast there is a third party involved but in the case of Cryptocurrencies, these transfers can take place directly from the sender’s digital wallet to the receiver’s digital wallet; no need for any third party.
Cryptocurrency, also known as Digital Gold, is a digital or virtual currency, transactions done in them are secure and verified through cryptography making it impossible to counterfeit.
It is decentralized money i.e, no Central Authority has control over them thus promoting Peer-to-Peer transactions and making it an alternate Financial System. There is no limitation on transactions or volume. Since there are no regulations it has zero interference from any regulatory body.
It is based on Blockchain technology. You can refer to our previous articles to understand what is Blockchain and use cases of Blockchain (insert links here)
There are several cryptocurrencies available in the market today, following are the major currencies :
Bitcoin is the first and most popular Cryptocurrency invented by an anonymous person or group of people called Satoshi Nakamoto, it was introduced in 2008 to the World through its White Paper. Built on Blockchain technology, it enables secure and verified peer-to-peer transactions. Since its inception it has grown tremendously, Bitcoin went to an All-Time high of $68,000.
Every digital currency besides Bitcoin is known as Altcoin. Different altcoins have different utilities. Besides Bitcoin, the most popular Cryptocurrency is Ethereum – the most used cryptocurrency with an All-time high of $4800. There are other altcoins like Solana, Cardano, VeChain, etc.
Tokens are digital crypto assets that run on top of another cryptocurrency’s Blockchain and rely on smart contracts. Tokens seem similar to Altcoins, however, there are differences between the two. You cannot mine Tokens, they are not considered as a medium of exchange instead they are assets but they can be held for value and traded. Examples of Tokens are Tether, Uniswap, Chainlink, etc.
Decentralized – No intermediary party
There is no Central or Supervisory Authority involved resulting in the elimination of fees charged and ensuring fast transfer and there is no single point of failure.
Distributed Ledger – All parties have complete records
Every member on the Blockchain has a copy of the transaction thus records cannot be tampered with or altered ensuring complete transparency
Immutable – Records cannot be changed
Without the private key, no records or transaction details can be changed or hacked into. Hacking or changing the records will make the entire blockchain invalid thus making the records immutable.
Anonymity – Member’s identity is unknown
Members transacting do not need to disclose their identities as there is no third party involved. Only public and private keys are required to authenticate the transactions.
Scarcity – Supply of Cryptocurrencies are Limited
Unlike Fiat Currencies the supply of Cryptocurrencies are Predetermined and Limited.
Fiat currencies are inflationary in nature as their supply can be manipulated on the other hand Cryptocurrencies are deflationary in nature due to their limited supply.
Before making investments we always need to consider the risks associated with any such investment, let’s go through the Risks and how can we mitigate the risk.
Unregulated – Cryptocurrencies have no regulatory body striving for the interest and safety of investors.
Volatile – The Crypto market is extremely volatile as there are extreme price fluctuations without any accurate reasoning.
Irreversible Transactions – The identities of parties involved are unknown; so in case of a wrong transfer, it is highly unlikely for the receiver to transfer it back to the sender.
Hacking and Scams – There are a lot of scam coins out in the Crypto market and even though crypto is secured by cryptography it is still susceptible to hacking.
But along with the risks, there are also ways to mitigate the risks associated with Cryptocurrencies.
DYOR (Do Your Own Research) – Before investing in any coin always DYOR and always read the Whitepaper of every project. Don’t fall for advice received through Social Media or because of FOMO.
Financial Capacity – Never ever take a loan for investing in Crypto, if you’re a beginner only use your Buffer money. Make sure you invest only that much that you are willing to risk.
Maintain Vigilance – There are huge possibilities of being scammed on the internet as there are no regulations. The exchanges are not a hundred percent secure, so there is no way to reverse transactions. Therefore investors should take caution and read about previous or ongoing scams related to cryptocurrencies.
Market Evaluation – It’s never a sure shot that you will make money in the crypto market in fact due to its high volatility there is a huge chance of losing a lot of money. So it is important to understand the Mood of the Market. You can also refer to websites or apps showing the Market Greed and Fear Index.
Diversification of Portfolio – Diversifying your portfolio will help in overcoming market volatility. If one Coin is making losses the other Coin will be profitable thus reducing the risk and losses.
Now that we’ve covered the meaning, characteristics, risks, and ways to mitigate risks we have a better understanding of Cryptocurrency. Let’s elaborate on why should we invest in Cryptocurrency?
Besides the hype created over people becoming billionaires, there are many other reasons to invest in Cryptocurrencies.
The technology underlying Cryptocurrencies is Blockchain. Blockchain has many use cases owing to its characteristics of decentralization and immutability, its use cases range from money transfer to healthcare to entertainment to travel. Blockchain is the technology of the Future.
Capped by a mathematical algorithm, Bitcoin has limited supply unlike Fiat currencies; the long-term value of Bitcoin will never decrease due to oversupply. Investors are racing to buy Bitcoin now before they become more valuable and its price rises drastically.
Fiat Currency loses value i.e., purchasing power is reduced due to the economic policies of Governments and the oversupply of currencies, but since cryptocurrencies are deflationary in nature they can be used to hedge inflation.
As the cryptocurrencies are decentralized, there is no third party involved, no additional charges are required thus giving you complete control over the ownership and storing of your assets while being cost-effective. It provides you with complete freedom to make transfers within or outside borders.
Transactions done through cryptocurrencies are secure and transparent due to their decentralized and distributed ledger system. Transactions are also encrypted and records are immutable thus disallowing any alterations or changes to be made.
Even though the Crypto Market is in its initial stages and not many people have adopted or rather understood Cryptocurrencies the market has grown dramatically and all signs direct towards cryptocurrencies being extremely beneficial in the long run.
There is no opening and closing time in Crypto Market, it is open 24×7 which provides flexibility in trading at any time of the day, people from different parts of the world can trade simultaneously with each other.
Through DeFi Lending and Crypto Staking interest can be earned on the long-term holding of cryptocurrencies. Interests up to 10% can be earned on highly liquid cryptocurrencies like Tether.
Cryptocurrencies have been increasingly recognized as a source of payment by Giant Corporations like Microsoft, eBay, PayPal, AMC Theaters, etc. The growing usage of Cryptocurrencies will be widespread in no time.
During the ongoing invasion of Ukraine, the true power of Cryptocurrencies has become apparent. When the services of other Fiat Currency Banks are down and Bank Accounts of Citizens are Blocked, people are using Crypto payments for basic requirements as Crypto is free from any Central Authority interference and regulation.
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By Admin Nas Academy
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