Investing in cryptocurrencies
Cryptocurrencies – some use them on a daily basis, others have never met with the term, and yet others hear about them often, but do not know what it is. The most popular cryptocurrency is Bitcoin, which was created as the first one and many people who dared to invest in it brought considerable profits. What are cryptocurrencies really, and is it worth taking an interest in them?
The characteristics of a cryptocurrencies
The name itself is an abbreviation of the full phrase – cryptographic currency. To put it simply, cryptocurrencies are virtual currencies, i.e. all transactions in which they are used take place electronically. Their owners have them on their computers or smartphones in a special application. Unlike regular money, cryptographic currencies are not supervised by any institution. This means that their quotations are influenced by market mechanisms, which will be discussed in more detail below. Each unit of any cryptocurrency has its own unique code, thanks to which it is protected against copying or repeated use.
Cryptocurrencies have one more thing that distinguishes them from traditional currencies. The account where the cryptocurrencies are kept cannot be seized by a bailiff or even blocked. There are three ways to invest in cryptocurrencies. The first is simply buying the currency on the crypto exchange and trading on the increase and decrease of its price. The second option is to invest in cryptocurrency contracts, where the potential profit is the difference between the price of their conclusion and the exit price. There is another, the simplest but at the same time the least popular option to invest – with binary options. This is nothing more than betting on the direction of the price in a certain unit of time.
Factors influencing the cryptocurrency price
Both in the case of the crypto and traditional currencies, demand and supply have a huge impact on their price. The less a virtual currency is on the market and the more currencies are purchased, the higher its value will be. Conversely, the higher the supply and the lower the demand, the lower the crypto price will be. However, it is worth remembering that the supply of cryptocurrencies is limited and slows down over time.
The price of cryptocurrencies is also influenced by the costs of their extraction. Virtual currencies are “dug” by cryptocurrency miners, and this is done by special equipment (excavators). Over time, their extraction becomes more difficult and the miners incur higher costs, which translates into the price of the currencies themselves.
Of course, their usefulness is also of great importance when it comes to the cryptocurrency rate. Cryptocurrencies are only useful if you can use them in some way, for example by paying with them or making various investments.
As mentioned earlier, the more people want to buy a given virtual currency, the higher its price is. Therefore, if a cryptocurrency starts to be misconceived, its rate starts to fall. Sometimes false information is transmitted intentionally and can even contribute to the crash of a given cryptocurrency. The price of Bitcoin, the main cryptocurrency these days, also influences the other cryptocurrencies’ rates.
The most popular cryptocurrencies
The most popular and first cryptocurrency is Bitcoin. It was created in 2008 and it is basically unknown who created it. There are other virtual currencies. In 2011 Litecoin was created, called Bitcoin’s younger brother. One of the most popular cryptocurrency is Etherum, whose origins date back to 2015. Unlike Bitcoin, in addition to transmission, it enables the creation of so-called Smart Contracts. Ripple is also worth mentioning, as it is based on a different technology than blockchain and its resource has been established in advance.