Globalization, the unstoppable growth of money markets, general computerization, and the development of IT technologies have caused the emergence of a huge number of additional institutions, financial instruments, and new forms of interaction between people. Electronic money is one of such institutions in the modern world. Cryptocurrencies are a new type of electronic money that is rapidly gaining popularity.
What Is Cryptocurrency and What Are Its Benefits?
The definition of “cryptocurrency” means a type of digital currency. It is based on complex calculations of some functions that can be easily verified by reverse mathematical operations. The main issue scheme is the principle of Proof-of-work and/or Proof-of-stake. The principle of Proof-of-work implies that the only way to produce currency is to spend enormous computer power on performing a large number of computational tasks. The functioning of the system is decentralized in a distributed computer network. Proof-of-stake is a technology for protecting cryptocurrency networks, in which a participant forming a block in a chain is determined based on his share of coins in their total number.
For the first time, the term “cryptocurrency” began to be used after the appearance of the Bitcoin peer-to-peer payment system. It was developed in 2009 by Satoshi Nakamoto and is currently the most popular. Therefore, it is not surprising that many people want to find a link to BTC on the Internet.
The main advantages of using crypto include:
- Currency value. The value of coins is protected against inflation;
- Ability to manage a non-custodial wallet. No one can freeze or block your wallet;
- Transparency. If financial fraud is carried out, all users will have access to the transaction data;
- Limits. There are no limits on where and how much crypto you can transfer;
- Volatility. The significant volatility of cryptocurrencies provides ample opportunities for investors to make money.
Can Investing in Cryptocurrency Bring Profit?
If you want to find out whether it is worth exchanging BTC to ETN, BTC to TRX, ETH to BTC, etc., and whether it is profitable to invest in cryptocurrency at all, pay attention that the cryptocurrency market is currently at the beginning of its development. Many potential investors have not even started investing in it yet. But others managed to get considerable profits.
Many countries are developing relevant laws that will allow cryptocurrencies to enter the legal field. This means that in the coming years, significant funds will be invested in digital tokens, and a massive influx of institutional investors will begin to enter this market. As a result, long-term and stable demand for cryptocurrency is expected. And where there is demand, further growth of the rate can be expected.
Recommendations for Effective Crypto Investing
Since there is no centralized oversight of crypto assets, it is important to follow two important investing rules. Firstly, it is necessary to start investing with small amounts of money. Secondly, it is recommended to store coins securely. With proper storage, no one will be able to take your currency or freeze your deposits.
There are many digital coins in the world today, but not all of them make sense to invest in. It is necessary to select stable and promising coins that will not depreciate in value the next day. Investing your money in one or two cryptocurrencies is also not the best option. An important rule in building a balanced portfolio is diversification. It should be diverse. Investments in cryptocurrencies should be distributed as follows:
- 80% – in safe and reliable coins that are in the first places by capitalization;
- 15% – in promising currencies that are in demand;
- 5% – in low-cost projects that demonstrate potential.
Thus, investing in cryptocurrencies is a promising direction. The recognition of digital coins at the state level, the development of bills that will regulate their status, etc., will only increase public interest in digital tokens in the future.