Cryptocurrency is a very risky thing to invest in. There are dozens of different coins in existence, each with its own advantages and disadvantages. It’s difficult to know which one has a good chance of succeeding, which is why it’s important to learn how these things work before investing.
There are many different kinds of cryptocurrency: Bitcoin is the most famous and popular, but there are also many other types that offer a variety of features. In 2017 the cryptocurrency market was worth more than $400 billion; by 2020 it’s expected to be worth $3 trillion. That’s a lot of money!
In 2018 we saw the spectacular rise and fall of several cryptocurrencies. It turns out that while they may have some potential as payment systems or even as currencies, they do not have any long-term value. In 2018 there were several bubbles (they’re called “ponzi schemes” in finance), including Bitcoin Cash and Ethereum Classic; both burst after taking dramatic rebounds from their peaks.
But if you want to make money with cryptocurrency, you don’t want just one that does well for a few months: you want one that will continue to be profitable over the long term. The best way to do this is through diversification: pick a number of different cryptocurrencies and
Cryptocurrencies in general and Bitcoin specifically will continue to be volatile. The market cap of all cryptocurrencies is still less than 0.5% of the world economy, so it’s not a huge market, but it’s one that has attracted a lot of attention. Bitcoin’s price changes a lot, in part because its price depends on the actions of large groups of people around the world who have been buying and selling Bitcoin for years.
The most important thing you can do, as an investor, is to understand how this volatility works. How much should you expect a cryptocurrency to change in price by the end of the year?
Two factors play into this question: first, there are a lot of different cryptocurrencies out there; bitcoin isn’t alone. Second, some cryptocurrencies are more like currencies than others. The most popular cryptocurrencies are ones that people are using for trading or as a medium of exchange: Bitcoin, Ethereum, and Ripple. And some cryptocurrencies are speculative bets on future technological developments: Litecoin or Ethereum Classic or Zcash—they’re all trying to become better versions of their current form, or simply better than Bitcoin itself.
As an investor you have to evaluate the relative appeal of each cryptocurrency if you want to decide which one is best for you. But keep
Cryptocurrencies are digital coins that can be traded online. They are also called cryptocurrencies, altcoins, digital currencies, and tokens. Cryptocurrencies use technology called blockchain to create a decentralized payment system that is secure, non-reversible and permanent.
The first cryptocurrency was bitcoin, which was created in 2009 by an unknown person (or group) by the name of Satoshi Nakamoto. Bitcoin is designed so that no single entity has control over it.
Cryptocurrencies have become increasingly popular with the advent of the Internet, and a recent surge has made them some of the fastest-growing assets in the world. Cryptocurrency values vary hugely. The value of bitcoin has seen enormous fluctuations over the past year, and as such it is important to know what you are investing in and why.
A lot of people are trying to make money from the blockchain. They are mostly speculators, and some of them are criminals. Either way, they look a lot like regular investors: investing in something that has no real value is the same as investing in nothing, which is what you’re doing if you don’t know what to do.
If you want to make money from the blockchain, here are some things you can do that are different from what everyone else is doing.
1. Don’t try to get rich quickly by guessing where it’s going. The market is too big and there’s too much money being invested daily in new cryptocurrencies for anyone to know where it’s all going. If you bet correctly, you will be lucky; if you bet wrong, you’ll get caught out.
2. Don’t try to make money quickly by guessing how much people will pay for your cryptocurrency. There is no way of knowing whether this cryptocurrency or that cryptocurrency will be worth more in 3 months’ time or even 1 year’s time. And even if they were all going up, odds are they won’t all go up at the same time and there will be no one who wants them all at once*. So don’t try to guess how much worth your cryptocurrency will
There are many different kinds of cryptocurrency. Some are used to buy drugs and launder money, others are share offerings, and others perform some other function. The best ones to invest in right now are probably those in the middle: They have a lot of potential for growth, but they have been around for a while and many people have tried them and found them wanting.
If you are interested in cryptocurrencies, I recommend reading some books about them. There is almost no information on the internet about them.
I suggest starting with “Digital Gold,” by Nathaniel Popper. It’s a lively and readable account of the history of money-making as seen through the eyes of Satoshi Nakamoto, the mysterious (and likely fictional) inventor of Bitcoin, which was released in 2009. It’s more technical than it needs to be; it doesn’t explain much that you need to know to understand what Bitcoin is or how it works. But it covers most of the ground with wit and good taste.
Cryptocurrencies, which are digital currencies based on mathematical algorithms instead of central banks, have been in the news a lot lately. Most people don’t understand them very well, so they tend to think that cryptocurrencies are like Bitcoin or other cryptocurrencies. But cryptocurrencies are not the same thing as Bitcoin.
Cryptocurrencies are often compared to gold, because both metals were once considered an unending store of value until they became too expensive and lost their value. But while gold made a bad bet on faith in the future, cryptocurrencies make a bad bet on faith in the present.
Bitcoin was the first cryptocurrency, created in 2009 by a person using the pseudonym Satoshi Nakamoto, who has never revealed his own identity (or if he did, it has not been discovered). Its value rose quickly to nearly $20,000 per coin before crashing back down again to around $5,000 last year. This is an absurdly high level of volatility for any kind of currency.
Cryptocurrencies are also unstable because their value is determined by speculation about what other people will pay for them. So each one depends on massive numbers of people believing that it will become more valuable than other currencies before long. In practice this means that their values can only go up or down as much as
Cryptocurrencies are the new Internet. They are a kind of money designed to work like a medium of exchange and a unit of account, but unlike regular money and unlike gold and silver, they aren’t controlled by governments or central banks and aren’t redeemable for anything. And compared to gold, they’re really cheap.
But there are still big uncertainties about whether cryptocurrencies will catch on. It’s not clear that they will be useful as money, since no one has ever tried them before, and it’s hard to see how they could be useful as a unit of account. And while the price movements have been wild, there are always plenty of people who were betting against Bitcoin even before it was $20,000; in fact it’s hard to think of any asset class that was more widely hated beforehand.
It looks as though cryptocurrencies are like the Internet: in the beginning there were only a handful of people who understood what it was and why it was important; then a lot more people got interested; then it became a huge industry; and now everyone has joined in and no one knows what’s going on anymore.