Cryptocurrencies are the best assets to trade today, thanks to the skyrocketing prices of Bitcoin. Together with Ethereum and Litecoin, these three cryptocurrencies are the largest cryptocurrencies in the market today.
More altcoins are increasing in value with over 900 cryptocurrencies available. With the cryptocurrencies popularity, many people are also interested in getting into the cryptocurrency market.
Should you start trading cryptocurrencies?
This is one of the most popular questions today, and the answer to this question depends on different factors. In this article, we’re going to go through several basics of what you need to know before you get started.
Behind cryptocurrency mining is the idea of block rewards. For most of these coins which are given to a person or a group, they need to find a valid solution to the cryptographic hashing algorithm. The solution uses the result of previous block solutions to find the answer.
Therefore, there is no definite way to find precalculated answers for a future block without knowing the answers for the previous block. The history of block solutions constitutes the blockchain, which is a public ledger.
To understand how you can make the blockchain technology work for you, read this exclusive guide.
Overview of cryptocurrency
Cryptocurrencies are not governed by any authoritative figures and is not subject to anyone’s control. It works similarly to the regular currencies where you can exchange local currency for cryptocurrencies and vice versa.
One of the main differences between cryptocurrency and regular currency is cryptocurrency do not have a physical form.
The Bitcoin, which is the more successful cryptocurrency does not exist in the way that the regular currency does. You cannot pull it out of the ATM or put it in a bank. Instead, this currency is only in the digital realm.
While this can be convenient for some, this also means that digital currencies as a means of payment can be an issue. Despite Bitcoin’s popularity, it is only accepted as an exclusive currency on several websites. In reality, the usage of Bitcoin requires it to be changed to the local currency.
Why should you invest in cryptocurrency?
As cryptocurrencies are digital currencies, many investors see these coins as a potential speculative opportunity in the future. The value of digital coins can fluctuate over time, the same way that the local currency does.
These fluctuations gives investors the opportunity to profit from trading them. There are a few ways that you can trade digital currencies.
Firstly, you can buy cryptocurrencies using physical currencies. When you profit off the trade, you can easily convert the cryptocurrency back into your local currency.
What are the risks associated with cryptocurrency?
As you are getting into the cryptocurrency trading business, keep in mind that this is a highly risky investment. Hackers like to target cryptocurrency exchanges that trade large volumes daily.
With high vulnerability, comes high volatility. Hacking always leads to a violent market correction.
For any investor, it is often a daunting task to predict when a hacking will occur. Therefore, it is best that you keep your cryptocurrencies in a secure crypto wallet.
This mining cryptocurrency worth your time?
To illustrate this, we are going to use a Bitcoin as an example. Bitcoin is the golden standard for the cryptocurrency market. Thus, we are going to analyze several advantages and disadvantages of mining Bitcoins.
Using Bitcoin, you enjoy freedom in payment as it is possible for you to send and receive money anywhere in the world. You are fully in control of your money using Bitcoin, and there is no authorative figure when it comes to money management.
By being in control of your transactions, you ensure that your cryptocurrency profits are safe. Merchants cannot charge you extra fees on anything without prior notice.
It is also complete anonymously using Bitcoin because your transactions cannot be traced. The only trace left behind is on a public ledger which utilizes the blockchain technology, which is available for everyone to see but personal information is kept hidden.
Different from regular banks, Bitcoin has very low fees or no fees at all. However, to process transactions faster, users might still pay fees.
There are still a lot of people that do not know the existence of Bitcoins. For the use of Bitcoin to be widespread, more people need to be educated about how Bitcoins can be applied in their daily lives.
There are also different businesses which are already accepting Bitcoin as a means of currency, but the list of advantages remains little compared to physical currencies. When speaking about cryptocurrency, we also need to discuss the risk and volatility that comes with it.
There is a limited amount of coins and the demand for them increases every day.
Cryptocurrencies are also still very new to the market, and many of the features are still in development. For a digital currency to be more secure, there needs to be an advanced development of features, tools, and services.
For cryptocurrencies to fully grow, there are still many things to do before it can reach its final potential. Many of these currencies will encounter problems in its development, especially in regards to cybersecurity.
Our guide can help you to mitigate the risks associated with Bitcoin and profit off the market.
Wrapping it up
As we have discussed both sides of the coin, you can see the cryptocurrencies are not perfect. There are many advantages physical currency has that the cryptocurrencies do not have.
In the next few years, it is expected cryptocurrencies will become the predominant method of global payment.
Similar to how the pros and cons to everything in life, mining cryptocurrencies has its own set of advantages and disadvantages. To make a good decision in crypto exchange, it is essential for you to weigh the good and bad before you finalize your choice.
This is why this guide can help you to fully understand the extent of the risks associated with the cryptocurrency market and how to mitigate them well.