7 Basic Cryptocurrency Facts You Should Know
There has been a massive amount of financial investment going into cryptocurrency. It should be clear to you that crypto is undoubtedly here to stay, and the earlier you take advantage of it, the better. For any smart investor interested in diving into this gold mine, it would be wise to know some compelling facts.
Throughout history, there has never been an asset that created enormous long-term wealth like the stock market. With stocks, you can generate about 7% annualized return, including dividend reinvestment and adjustment for inflation. It implies that an investor gets to double his capital about once every decade, which is not so bad.
Do you know what is rather mind-blowing? Since the inception of cryptocurrency, the stock market has been left in the dust. This new technology of digital currencies that uses encryption to generate funds and verify transactions has been on an entirely new level to what the financial market has ever experienced. For instance, Blockchain investors have made a lifetime’s worth of returns within months compared to the stock market.
But it would be best if you learned some basic facts before you dive into the cryptocurrency craze, let’s get started:
- Cryptocurrencies are volatile digital currencies
What does it mean to be volatile? Crypto assets are highly susceptible to variation of trading price continually. For instance, if you bought a coin for $1000, it might be worth double that price or half the price in the next month. Understood, right?
Some of the reasons for the volatility are speculations, large purchases/sales per day, and several crypto exchanges without any central exchange. All these may look bad, but they are instead the dangerous grounds for extraordinary profits if you learn the trading skills.
2. No fundamental backing
Like I said about the exchange, crypto also has no central bank or authorities governing over it. It is not like all the foreign currencies you are used to, which is new and seemingly impossible. Impossible or difficult to manage because it has no fundamental factors to use for deriving an appropriate valuation. Unlike how you can rate the economic performance of a nation using a ratio of its GDP growth to value a currency like the US dollars, crypto has no direct fundamental ties as such.
3. There are more than 6,088 cryptocurrencies (but bitcoin rules)
As of August 5, 2020, there are about 6,088 crypto coins with a total market cap of about $337.28 billion (according to CoinMarketCap). Even though bitcoin tops with Ethereum following after, there are so many other coins that you can make lots of profit trading with, and you can still trade them back to bitcoin.
The exciting part is that it is continually expanding and growing, so there’s enough room to take everyone.
4. Blockchain is the main deal
Popular emphasis has always been on trading digital currencies, but the most valuable part is the technology upholding cryptocurrency itself — Blockchain technology.
Blockchain technology is the fundamental infrastructure that supports the use of cryptocurrencies like bitcoin. Blockchain is a transparent digital and decentralized ledger that stores payment and makes the transfer of transactions safely and efficiently possible. Blockchain technology was instrumental in creating a new type of internet that the big companies are very excited about and enjoying now.
6. Decentralization is key
What’s cool about this new technology? In this new blockchain technology, decentralization is a significant factor that makes it astonishing. It means that there are no central hubs for overall information storage, processing, and policies. You can be glad that there won’t be any local data center that might get attacked or hacked into by cybercriminals.
Blockchain works by using numerous servers and hard drives worldwide to store bits and pieces of information about a specific blockchain network. It means that any part of these pieces of data stolen is insufficient to cripple the network. That’s why big businesses want it because of the high security it guarantees.
9. Many people still have limited knowledge of what cryptocurrencies are, or if they’re real
As widespread as bitcoin seems to be, it is funny to note that lots of people still lack basic knowledge about this new technology. Some even think it is not real, or it’s a scam to get your money. Whereas there are those, who are not even sure what to think about it.
The good thing about that is you get to take advantage of it while growing because when more people know, demand will increase. Simple economics teaches that as demand increases, price increases as well, which means more significant profit. Furthermore, it is only suitable for you to learn about it more and be able to teach as well.
7. The barrier to blockchain entry is relatively low
It would be best if you understood that as much as blockchain technology could completely transform the financial industry, it has virtually no barrier to entry. What does that even mean? It merely means that if you have all the required resources, which is money, blockchain expertise, or a group of blockchain developers with enough time, you can also develop a blockchain and bring a crypto coin to the market.
Isn’t this a terrible thing for kingpins such as Bitcoin and Ethereum? Let’s see about that. Right now, bitcoin is worth about seven times than Ethereum, which is closest to it. The fact is that the new virtual currencies that are being introduced complement the blockchain technology, but people have a way of sticking with their first brand in away. It doesn’t change the fact that all these new coins remain a potential threat to the existing currencies and their blockchain.
Conclusion
You have learned only a few basic facts about cryptocurrency here, search out for more guides and reviews to help you further. Like I mentioned before, cryptocurrency is here to stay, and people are already taking advantage of it. Learn all that you can and make some cool profits from this new technology.