People often ask me whether they should invest in cryptocurrencies, or whether it is too risky. I don’t think it’s risky. I do think it’s highly speculative, and it is not a magic bullet for wealth creation, but I don’t think it’s so risky that you shouldn’t consider it.
But here are five things you need to know before investing in cryptocurrency:
1. The risk of losing everything depends on your investment amount, how long you plan to hold it, the volatility of the market, and what your other investments are doing. The more money you put in (up to a point), the more risk you take for that amount of money. Thus, a small investment has less risk than a large one.
2. If you want to buy something for $1 and sell it for $3 three months later, cryptocurrencies aren’t for you. This is called “day trading,” and most people who do day trading lose everything–and more than they can afford to lose, because they have borrowed money to make each trade–in a short time, because they don’t understand the laws of probability.
3. Cryptocurrencies are not good investments if you can only afford to lose a small amount of money. They are very high-risk
Cryptocurrencies are an interesting new class of assets. But they’re not in the same league as stocks or bonds, and they offer a different kind of risk.
Many people have heard the phrase “buy low, sell high,” but cryptocurrencies are a bit different. The assets you buy with them tend to crash.
That’s why it’s important for you to understand 5 things before investing in any cryptocurrency:
1) It’s a lot like getting into the stock market if you’ve never done that before.
2) It’s like buying collectibles if you’ve never bought any collectibles before.
3) It’s like gambling if you don’t understand what that means.
4) It’s an unregulated market where there’s no oversight or consumer protection, so you can get ripped off at any time.
5) You could lose all your money anyway, even without taking that risk.
1. THIS PROJECT IS NOT PROVIDED, GUARANTEED OR ENDORSED BY ANY GOVERNMENT OR AUTHORITY.
2. YOU SHOULD DO YOUR OWN RESEARCH BEFORE INVESTING IN CRYPTOCURRENCIES.
3. THE INFORMATION IN THIS BLOG SECTION IS ONLY A PLEA TO HELP THOSE WHO ARE ABOUT TO INVEST IN CRYPTOCURRENCIES AND SELF-DETERMINATE THEIR OWN INVESTMENT DECISIONS.
4. WE DON’T MAKE ANY REPRESENTATIONS ABOUT THE SUITABILITY OF ANY OF THE INFORMATION/INFORMATION PROVIDED HEREIN FOR APPLICATION IN ANY PARTICULAR SITUATION.
5. ALL OF THE INFORMATION/INFORMATION PROVIDED HEREIN ARE FOR GENERAL INFORMATION PURPOSES ONLY AND ARE NOT INTENDED TO BE LEGAL ADVICE, LEGAL TREATISE OR TAX ADVICE OR TAX PLANNING ADVICE OR TAX CONSULTANCE ADVISE, WHICH IS THE RESPONSIBILITY OF THE INTERPRETER/APPLICATION USER AND HIS/HER COUNSEL.
Cryptocurrencies are a new type of financial instrument. They differ from stocks, bonds and other investment instruments in major ways:
First, cryptocurrencies don’t have any corporate owners. Cryptocurrencies are created by the internet’s distributed computing network, and are issued and managed by the network itself. No central authority issues them, no one controls them.
Second, unlike government-issued currency and other forms of money, cryptocurrencies aren’t issued at a fixed rate each year. They are released in proportion to the work performed on the system by miners – people who use powerful computers to solve complex mathematical puzzles (called “mining”) to validate transactions on the system. Every time someone successfully solves a puzzle, they receive some additional cryptocurrency as a reward.
Third, cryptocurrencies are decentralized: No single party controls them. Instead, anyone can create new ones or use an existing one. Each of these features makes cryptocurrencies different from traditional financial instruments such as stocks and bonds. And it also means that cryptocurrencies aren’t actually money or currencies – they’re instead part of a new class of financial instruments known as “cryptocurrencies.”
Cryptocurrencies are different. First, they are digital money. That means they exist only in computers or on servers that keep track of the transactions, and that’s probably not a long-term solution. The value of digital money will depend on what people think it is worth, which doesn’t make it an undifferentiated blob of value.
Second, cryptocurrencies use cryptography to create a private, secure ledger of all transactions. That ledger is publicly available and can be checked by anyone. But once it’s created, the history of how the currency has changed hands cannot be tampered with without breaking the cryptographic laws that protect it.
Third, most cryptocurrencies have no central issuing authority. That means there is no central point for hackers to attack or for governments to seize control of. Instead, the currency is usually controlled by a distributed network of users – Miners who provide their computing power to generate new units in exchange for a subsidy paid by other users.
Fourth, because there is no central issuing authority, these currencies are easy to counterfeit: all you have to do is print them out and pass them off as real ones.
Fifth and finally: because most cryptocurrencies have no central issuing authority, they may become more valuable as time goes on.”
1. Bitcoin is a cryptocurrency. A cryptocurrency is a digital currency that’s not issued by any bank, not backed by a government, and not controlled by any central authority.
2. Bitcoin is the original cryptocurrency. It’s the first decentralized, open-source cryptocurrency. It’s been described as “the first electronic cash system.” The first ever real-world transaction using it was between Satoshi Nakamoto and Hal Finney in 2009.
3. Bitcoins are mined through the work of solving complicated math problems, called “mining”. You can think of mining like trying to find gold in a mine—except that rather than finding gold you’re trying to solve math problems and earn bitcoins for your work.
4. Bitcoins are divisible up to 8 decimal places. Yes, that means you can buy things with one-hundredth of a bitcoin, if that makes you feel comfortable (or if you have enough coins).
5. Bitcoins are based on an open source protocol developed by the community that created them, and not owned by anyone or any company at all.
Cryptocurrencies are a kind of technology. They have similarities to credit cards, but they are not exactly like them. Cryptocurrencies are based on a new type of money called “crypto,” which will be worth something one day, and nothing the next.
Crypto is a kind of code. It’s not so different from computer programs, in the sense that it’s possible to write a program that will do any particular task (play chess, find prime numbers, print French words) and that same program can be run on any computer capable of running programs. But crypto is more like a system of laws than a piece of software. Compared to software, crypto is far more flexible and adaptable: you can write it yourself if you want to (e.g., create your own currency), or you can use someone else’s already-written version (e.g., Bitcoin). People who get rich writing their own crypto code aren’t necessarily doing anything new; they’re just writing code that other people will use.
This is all very complicated, so let’s boil it down into bullet points:
1) The entire concept of cryptocurrencies is based on cryptography; in particular, Bitcoin uses cryptography to keep track of who owns what and whether anyone tried to spend