What is cryptocurrency?
Before we discuss the growth of cryptocurrency, it is important to understand what cryptocurrency is: Cryptocurrency is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a bank or government, to maintain it. The first cryptocurrency was developed in mid-2008 and early 2009 which is the most popular cryptocurrency on the market, Bitcoin. Since then many cryptocurrencies have been developed and put on the market, some of which have been very successful, while others have not been. According to NBC News, cryptocurrency is becoming ever so popular in the 21st century – about 21 per cent of American adults have owned cryptocurrency as of 2022. The value of all existing cryptocurrencies is around $804 billion, which is an outstanding amount considering how extremely volatile cryptocurrencies can be.
Why was cryptocurrency invented and what can it be used for?
As mentioned Cryptocurrency first began as it was a form of currency which could be sent untraceable and in a manner that did not require centralized entities. Many people were fond of the idea as there is no ‘middle man’ between transactions. These transactions online, sending monies to friends or paying for a service, can be sent at any time, any day throughout the year anywhere across the globe. There are no limits on purchases and withdrawals which makes it great for people to complete transactions at any time, with the transaction costs being low to nothing at all - unlike, for example, the fee or transferring money from a digital wallet to a bank account. There are many different types of cryptocurrencies: the most popular being Bitcoin where currently, on 10th February 2023, one Bitcoin will cost £18,093. Other cryptocurrencies include Ethereum (ETH), Tether (USDT), XRP (XRP), Cardano (ADA) and the list goes on. Each cryptocurrency is different from the others, mainly the differences relate to how the coins are produced and spent – for example, Bitcoin, Dash and Monero are created in a process called “mining”.
How can I get involved with trading cryptocurrencies?
Step 1: an account must be created with any trading platform with cryptocurrency assets available to trade. For example, platforms which are popular include:
- Etoro
- Coinbase
- Binance
- Crypto.com
- Robinhood
Step 2: you need to fund your account by either connecting your bank account to the trading platform (linked bank account transfer) or depositing cash – although depositing cash can be expensive as there are fees involved.
Step 3: Decide which cryptocurrency(s) you would like to invest in. This step is very important and may take some time to arrive at what crypto you would like to buy, and when. It is essential research is done as without proper research, investors are more likely to sell their assets at a loss. Researchers need to be disciplined and fully aware of what they’re getting involved in to mitigate their chances of a loss. A beginner may want to consider taking a course.
Step 4: Once there is money in your account, place a cryptocurrency order. There are hundreds to choose from and you can purchase fractional shares of cryptocurrency to buy high-priced tokens, such as Bitcoin.
Step 5: Find a storage method. Cryptocurrencies are not protected or regulated which adds another layer of risk of theft or hacking. You could lose your investment or forget vital codes which are needed to access your cryptocurrency. Ensure all information is protected and secure to ensure you have access to your crypto wallet.
Are cryptocurrencies popular?
The popularity of cryptocurrency has grown in recent years as access to crypto has become much easier. The popularity comes from the advantages that they have, for example, can be that it is a cost-effective mode of transaction and currency exchanges can be done easily. Although, many people are still sceptical to purchase any crypto assets due to them still being incredibly volatile. There was a big down year in 2022 due to increasing interest rates to fight high inflation which caused many cryptocurrency assets to drop in value. There are many disadvantages to using cryptos such as there is no regulation by the Financial Conduct Authority (FCA) so there are no rules in place to protect your money or business. There are both advantages and disadvantages to using crypto, it all depends on how knowledgeable and safe users are which can have a huge effect on their trading experience.
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