There are many cryptocurrencies and they are becoming more and more popular. While they don’t have the backing of governments, they aren’t regulated by central banks either. No wonder people are wondering if cryptocurrency is a good or bad Loan investment.
The global cryptocurrency market is worth nearly $ 300 billion, but it is difficult to say which currencies will survive or whether prices will rise or fall in the future.
Cryptocurrencies can be bought and traded online, but many governments have taken steps to regulate the currency or have banned its use in financial transactions altogether.
To help you decide if this is a good investment for you, here’s what you need to know about cryptocurrencies.
The Topic Of This Post
- What is cryptocurrency?
- How many cryptocurrencies are available? What is their total value?
- Popular cryptocurrencies in 2022
- Bitcoin (BTC)
- Ethereum (ETH)
- Left (LEFT)
- Binance Coin (BNB)
- Polygon (MATIC)
- Avalanche Token (AVAX)
- Why are cryptocurrencies so popular?
- Are cryptocurrencies a good investment?
- Are cryptocurrencies a decent long-term investment?
- How can I buy cryptocurrencies?
- Are cryptocurrencies legal?
- How do I protect myself?
- Timing is of the essence
- Frequently asked questions about investing in cryptocurrencies
What is cryptocurrency?
Cryptocurrencies are a form of online payment that can be exchanged for goods or services. Many companies issue these cryptocurrencies, called tokens, and these can be used to access the specific good or service provided by the company.
Think of them as arcade tokens you trade for a game or slot machine tokens you give to enter a casino.
You will need to exchange real currency with this form of payment to access the good or service.
How many cryptocurrencies are available? What is their total value?
By December 2021, more than 15,000 different cryptocurrencies will be publicly traded, according to CoinMarketCap.com, a market research website.
Cryptocurrencies continue to proliferate. The total value of all cryptocurrencies on December 10, 2021, was around $ 2.3 trillion – at the beginning of the year, the total value of all bitcoins, the most popular digital currency, was set at around $ 932 billion.
Popular cryptocurrencies in 202 2
Bitcoin is a digital currency that is gaining popularity because its supply is fixed.
Unlike fiat currencies (currencies such as the US dollar or Japanese yen which are backed by a central bank), Bitcoin is not subject to the whims of the press by politicians and cannot be easily devalued by inflation.
Many investors believe that Bitcoin will increase in value over the long term as fiat currencies become less and less valuable.
Ethereum is the native currency of the Ethereum platform and can be purchased by investors looking to gain portfolio exposure to Ethereum.
While Bitcoin can be seen as digital gold, Ethereum is building a global computing platform that supports many other cryptocurrencies and a huge ecosystem of decentralized applications – “apps” – built on the Ethereum platform.
The large number of cryptocurrencies built on the Ethereum platform, combined with the open-source nature of apps, creates opportunities for Ethereum to also benefit from the network effect and create long-term value for early investors.
The Ethereum platform allows for the use of “smart contracts”, which are automatically executed based on terms written directly into their code. The Ethereum network collects Ether from users in exchange for executing smart contracts.
Solana, a high-speed network introduced to the market in early 2018, has rapidly grown in popularity and value. The cryptocurrency that was trading at around $ 0.01 in January is now worth around $ 2.50, according to CoinMarketCap.
The Defi sector is expected to grow in importance in the years to come. Solana, a developer-friendly network with lower transaction fees than Ethereum, is a great cryptocurrency for investors and traders to consider buying at current prices.
Binance Coin (BNB)
Binance Coin is the native token of the Binance Smart Chain blockchain, which is the largest cryptocurrency exchange in the world in terms of the total trading volume.
Binance Coin accounted for 0.7% of the cryptocurrency market in early December 2018 and its market share climbed to 4.1% at the end of December.
As with many of the highest market cap cryptocurrencies, BNB provides a return on investment through mining rewards, staking rewards, and appreciation value.
Supply will be limited to BNB 100 million, with quarterly burns that will reduce supply in line with bullish demand.
MATIC, a cryptocurrency platform partially funded by Binance and Coinbase, was built on Ethereum.
The platform’s goal is to create a multi-chain system for Ethereum, which will allow for more widespread use of cryptocurrencies. MATIC is now in the top 15 cryptocurrencies by market cap, rising from under 2 cents in January to around $ 2 in early December.
It rebounded from an early December sell-off, rising 21% between November 28 and December 5. MATIC is also one of the best tokens to invest in in December and beyond due to its resilience during tough times.
Avalanche Token (AVAX)
Avalanche, a blockchain company backed by venture capital firm Andreessen Horowitz was founded by computer science researchers at Cornell University.
The AVAX coin started the year trading for just $ 3.17 but has quickly gained market share as cryptocurrency users increasingly flock to Avalanche’s smart contract blockchain network.
Currently, trading for more than $ 80, AVAX is one of the best performing coins around. What Avalanche lacks in short-term resilience – AVAX underperformed during the recent market downturn – it makes up for in growing popularity.
Increasingly compatible with other major Ethereum projects such as SushiSwap, Avalanche is also gaining relevance through “bridges”, which allow users to move cryptocurrencies from one blockchain to another.
Why are cryptocurrencies so popular?
Proponents of cryptocurrencies like bitcoin see them as a way to get around central banks’ handling of the money supply, which tends to devalue the currency over time.
They also like that blockchain technology is decentralized and can be more secure than traditional payment systems. And they see the value of currencies rise in the short term.
Are cryptocurrencies a good investment?
Cryptocurrencies such as bitcoin are not seen by many investors as real investments, despite their potential as speculative vehicles.
The reason is that cryptocurrency profits can only be realized if someone else pays a higher price for these digital currencies than you. This is known as the dumbest theory of investment.
A more favorable scenario would be to invest in assets that increase in value over time by increasing the profitability and cash flow of the deal, an approach that Warren Buffett advised investors to follow.
If cryptocurrencies will be viable for trading, they must have stable values, allowing traders and consumers to determine what a fair price for the goods is.
Bitcoin and other cryptocurrencies have been far from stable for much of their history, which creates a conundrum. While bitcoins could be worth a lot more in the future, people are less likely to spend them and circulate them today, which makes them less profitable as a currency.
Why spend a bitcoin when it could be worth three times the value next year?
Are cryptocurrencies a decent long-term investment?
Cryptocurrency is a place to park money. It cannot be considered an investment because it does not generate cash flows, nor can it change in value on its own.
When you buy gold or fiat currency for the same reason, their fluctuating prices only give the illusion that they are good or bad investments. They produce nothing.
Although many people believe that cryptocurrencies such as bitcoin will become stable and may have the characteristics of a good currency, what is overlooked is that central banks will not be able to control the supply of these currencies in the market.
Since central banks will not be able to control inflation and deflation with any alternative currency whose supply is not under their control, they are likely to ban cryptocurrencies in the future.
How can I buy cryptocurrencies?
Some cryptocurrencies can be purchased directly with US dollars, but others can only be purchased by buying Bitcoin or another cryptocurrency and then exchanging them for the one you want.
Are cryptocurrencies legal?
Cryptocurrencies are legal in the United States, although China has banned their use. Ultimately, however, their legality depends on each country.
Also, be sure to consider how to protect yourself from scammers who see cryptocurrencies as an opportunity to deceive investors. As always, pay attention to the buyer.
How do I protect myself?
If you are looking to buy cryptocurrency in an ICO (Initial Coin Offering), read
the fine print in the company’s prospectus for this information. If you are looking to invest in a cryptocurrency, look for companies with available information about their businesses and founders.
Also, if a company has its prospectus available, it’s even better: each company will have different information, but any amount is greater than zero.