If 10 years ago, you told somebody about your cryptocurrency investment – a virtual currency that is backed through computer-generated means or certain crypto graphics –they would have laughed. That is not the case nowadays. Today if you have not traded a single bitcoin or haven’t invested in cryptocurrency, you might be considered back on the times.
Cryptocurrency has taken over the world and is trending more day by day. Not only nerds and traders are dealing with it but a lot of the businesses are also integrating cryptocurrency into their businesses in one form or another. In this article, we are going to help you understand cryptocurrency and should you invest it or not? Let’s get started!
Cryptocurrency: What is it?
Let’s start from the basics! Cryptocurrency is the payment that you exchange through an online system for any sort of products and/or services a company provides. Various companies use their currencies, often referred to as tokens, and use these to trade products or services that they provide. You can think of this as casino chips or arcade tokens that are exchanged with the real currency to get access to a certain item or service.
Now you must be wondering how this whole system works? This whole system works mostly by use of a special technology known as the blockchain. This decentralized technology works online to manage, monitor, and record all sorts of transactions.
The Total Amount of Cryptocurrencies and Their Overall Worth
According to CoinMarketCap.com, more than 10,000 cryptocurrencies are being traded publicly. The number continues to proliferate thus raising the overall money through ICOs. By Aug 4th, the total value was $1.6 trillion-plus, which came down from April’s $2.2 trillion, tells CoinMarketCap.com. The value of the most popular currency, bitcoin, came to about $740 billion, thus regaining some amount after some downfall, although the overall amount came down from April’s $1.2 trillion.
The Largest Cryptocurrencies by Market Capitalization
The 10 best trading cryptocurrencies, according to CoinMarketCap, are given below.
Cryptocurrency - Market Capitalization ($)
Bitcoin - 740 billion
Ethereum - 315.4 billion
Tether - 62 billion
Binance Coin - 56.2 billion
Cardano - 44.4 billion
XRP - 33.9 billion
USD Coin - 27.5 billion
Dogecoin - 26.2 billion
Polkadot - 19.1 billion
Uniswap - 13.7 billion
Why Cryptocurrency has become so popular?
Cryptocurrency has become very popular recently. This is due to several reasons:
· Supporters believe that cryptocurrency is the ultimate future currency. This is why they are racing for it before it becomes even more valuable.
· The central banks no longer have to manage the money supply and thus the chances of inflation are reduced, thus cryptocurrency is more supported by the people.
· Supporters also like the blockchain technology that manages the whole process as it is decentralized and much more secure than the normal processes.
· Some supporters also like cryptocurrency because it is going up day by day and has a long-term acceptance.
Advantages of Cryptocurrency
Let us now discuss in detail some of the major advantages of cryptocurrency:
· Easy Transaction
In normal business dealings, there are a lot of complications are added due to the presence of agents, legal experts, and brokers. There are a lot of extra charges, commissions, and lots of paperwork. Cryptocurrency makes the whole process much easy as it is just a one-to-one affair. The transactions are much clearer and there is no middle man involved. You can also have better accountability of the whole process and a lot of confusion can be avoided.
· More reliable system
In the case of the traditional cash/credit system, your transaction details are often used as the reference, for example, to check that you have sufficient funds available in your balance. Thus, your financial status does not remain confidential and has to be used for the purpose.
The cryptocurrency transactions, on the other hand, involve a unique process where all the information is exchanged through a push button and you can transmit only what to wish to and nothing else.
This guards your privacy and your financial details remain much more protected than in the case of the traditional processes.
· Full governance over asset transfer
Just as described by a financial analyst, the cryptocurrency blockchain serves to be a large property database. It, not only, facilitates the execution and enforcement of the two-party contract and also helps in specialist transfer modes. For example, you can add third-party approvals in your contracts as well or make any sort of references you like. You have complete control over your contract without the involvement of any other person. This saves both your time and expense, and you can have an easy asset transfer whenever you desire.
· Cross-border and International trade is much easier
There are no complications and currency exchange fluctuations, thus you can easily transfer funds internationally via the peer-to-peer mechanism. This makes the whole process very easy and trouble-free.
· Transaction fees do not normally apply
We all know that normal transactions involve cutting certain fees, whether it be for check writing or the transfer of funds. The sum amount gets huge, especially if you perform a large number of transactions.
This can be avoided through cryptocurrency transactions. As the data miners that do the whole process get compensation from the networking system, they do not cut a separate fee for it and thus, you can save a good amount of money.
Now one thing to remember here is that if you opt for some extra services like third-party management, then some external fees might be cut. However, this is much less than the charges cut by the traditional systems.
After your transfer is authorized, it cannot be reversed. This is a great benefit of the cryptocurrency ecosystem and serves as a hedge in avoiding any chances of fraud. Also, the strong encryption techniques make sure that there is no account tampering, thus guaranteeing consumer’s complete privacy.
· Good access anywhere, anytime
As the whole process is operated via the internet, it is be accessed anytime wherever a data connection is available. Also, any person who desires to invest in cryptocurrency and has some knowledge about it can get easy access through the relevant website whenever he likes.
The traditional banking system, on the other hand, is not very vast, and although everyone has access to the internet, they may not have any access to the traditional banking system. Thus the cryptocurrency ecosystem has the potential to make the whole process of transaction and asset transfer very easy.
· Sole ownership
Unlike the traditional banking system, the cryptocurrency ecosystem provides the sole ownership of all the public and private encryption keys and no one can get access to your network unless authorized.
The Rise of Cryptocurrency
In the year 2020, PayPal introduced a new service that allowed their user to buy and sell cryptocurrency as well as use it to buy items from a variety of different merchants.
The CEO of PayPal, Dan Schulman believes that this shift of currency has to happen as it has clear advantages. It has more accessibility and is more efficient, quick, and reliable. According to the platform, although the cryptocurrency ecosystem currently has limited utility, it can be used as a more beneficial means of payment transfer due to these several advantages.
Right now, you can have any cryptocurrency saving account but it is being said that very soon, you will also get access to the Bitcoin rewards credit cards that BlockFi may offer. This will work like the normal credit cards except that you will get a 1.5% amount upon a single purchase in Bitcoin. This is under process right now.
So what does this mean? It means that very soon, all the businesses will shift to this ecosystem as it is inevitable to become the mainstream. So now the question arises: Should you invest in crypto? Let’s answer this now!
Why Invest in Cryptocurrency?
The Associate Director of Product Management at Gemini states that the rise of Bitcoin and the legacy financial institutions adopting this form of digital currency depicts that cryptocurrency has now become gained a lot of fame in the finance industry and FinTech.
He believes that the advantages of cryptocurrency are numerous in terms of efficiency, independence, greater choices, and more opportunities. The system is decentralized and has an open-source, thus the weak points of the traditional banking system are eliminated and users can have direct accessibility to the system. This has made it very easy for them to buy, sell and trade without any hassle or problem.
Not just this! The CEO of Rubix.io believes that right now, cryptocurrency is in its beginning stage. This means that it is the best time for the investment. If you invest now, you will be on stronger grounds in the future (even if the prices seem to be high).
A lot of experts have even suggested that Bitcoin’s worth would be immensely increased and may reach up to $100,000 in a very short period. Citibank’s leaked report has also revealed that one of the industries strongly believes that cryptocurrency may reach $300,000 per coin by the end of this year.
Attorney Len Garza also believes that there are good chances that investing in crypto especially Bitcoin can lead to massive gains (and of course, can also lead to massive losses). He says that it is the most liquid investment with the platforms established all around the globe.
The Cons of Investing in Cryptocurrency
Just like every other thing, cryptocurrency also has several cons and you need to know a lot of things before investing in it. It is said about this ecosystem that although it is good for investment, however, an average investor has to think a lot before investing in it.
Len Garza says that despite several advantages, cryptocurrency has incredible volatility. Thus, investment in this ecosystem is not very easy.
An example of this can be Litecoin. The worth of one Litecoin was $306.8 in December 2017 and right now, it is $140.96. Also, we all know about Bitcoin that it fell below $4000 in January 2019 (and later got a high rise at $41,940 in January 2021). All of this states, that you never know about the rise and fall and it is indeed a wild ride, especially for the average investor.
Garza also states that it is not just about volatility. The cryptocurrency ecosystem has no regulations to govern the market so you have to be very careful while investing.
Also to remember, hacking is a big threat in this ecosystem. You trade all your cryptos through mobile apps, thus hackers can steal your data easily. And once they get their hands on your data, there is nothing you can do about it.
According to Shuchman, partner of Cornerstone Financial Services in Southfield, there are a lot of companies like Gemini and Coinbase that even lack the track record of privacy, stability, and security that other companies like Vanguard have earned.
Thus, for all these reasons, many experts have even begun to believe that no one should invest in cryptocurrency. The Professor of Finance at Heider College of Business says that this whole system works through a fool theory, meaning a greater fool pays you more than what you paid.
The Final Words
So this was all about it! We have tried to cover it all for you, starting from the very basics to giving you in-depth detail of how the whole system works. Now it is up to you to invest in cryptocurrency or not. Just make sure that you have a good knowledge of whatever you are doing. Indeed the rise of cryptocurrency is inevitable but you must invest only if you are also prepared for the loss. Apart from this, the cryptocurrency ecosystem is more efficient, quick, and decentralized. So choose wisely and choose the best plan for yourself! Good luck!