The crypto market is a funny one. Over the past year, it has really taken the world by storm, yet people actually know very little about it. Despite this though, there are investors who have seen their money rapidly increase in some cases in such a short space of time, whilst others the opposite.
Before you start investing in any cryptocurrencies; here are eight things that you should know.
1) They are incredibly volatile
Investing in the crypto market has a high element of risk – you can be massively winning one day, and then, without warning, you could see your money plummet just like that. Anyone with any interest will notice how volatile the market is.
This can be put down to the fact that virtual currency trading occurs on many different cryptocurrency exchanges, as opposed to a central one, which will automatically increase the volatility of it.
2) There are over 1,300 cryptocurrencies
This is something that not many people know, but there are actually nearly one and a half thousand different cryptocurrencies that you can invest in, and over two dozen of these have a market capital in excess of $1billion.
Of course, the most popular though is Bitcoin. It was the first of its king, and currently makes up 54% of the $589billion market capital of all cryptocurrencies.
3) Decentralisation is the key
Cryptocurrencies run on a blockchain, and the fact that makes this different and exciting is that it is decentralised. This means that there is no central hub where all of the information is stored.
There are a number of servers across the world, that contain different pieces of information about a particular blockchain network, making it quite a secure technology, and part of the reason that it appeals to large businesses.
4) There are many advantages to blockchain technology
Miners work 24/7 to verify transactions, making it much quicker than traditional banking.
Not only this, but it offers users control and transparency. It doesn’t rely on a third-party to control the future of the blockchain. Instead, it is the members of the cryptocurrency community who call the shots when it comes to any future development.
5) In theory, anyone could create a cryptocurrency
If you have the time, money, and a team that understands how to code, you could write a blockchain, and create your own cryptocurrency that you could bring to the market.
Approximately 50 to 100 new virtual currencies, which are more than likely created by blockchain technology are being introduced every single month. The trouble is that every single one of those new currencies pose a threat to the existing currencies and their blockchains.
6) There are cynics out there
Not everyone is on board with this craze at all. Warren Buffett spoke in 2014 to CNBC about Bitcoin, and how it was a mirage that amounted to nothing more than a way of transmitting money, much like a cheque does.
Jamie Dimon, CEO of JP Morgan, has also expressed his concern over Bitcoin, saying it is a fraud that will not end well.
7) They are banned in a number of different countries
Because of their high risk and decentralised nature, the use and trading of virtual currencies in banned in some countries. Bolivia, Bangladesh, Nepal, Morocco and Ecuador are among those that have banned them, and this list could easily grow. Take Russia for example; who have spent a lot of time considering whether or not to ban payments that are made with cryptocurrencies.
8) Blockchain does have some flaws
Blockchain technology is not perfect, and does have its drawbacks. The technology is still relatively new and is still being developed, meaning that it will no doubt and has hit bumps along the way.
There are a lot of worries that surround blockchain, and how this technology can be integrated. Although many do see the benefits, there is no quick transition to the technology.
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