The first thing you need to know about cryptocurrency is that it isn’t going away anytime soon, and its legitimacy has been growing dramatically in recent years. Many people still question whether cryptocurrency is a viable investment option, but even more, people are recognizing it as an innovative way to conduct financial transactions of all kinds, including purchases of goods and services, bank transfers, and more. Whether you invest in cryptocurrencies or not, it’s important to understand what makes them legitimate and what doesn’t. The following article will give you everything you need to know about cryptocurrency’s legitimacy today.
Cryptocurrencies Are Here To Stay
If you’re one of those people who believe that cryptocurrencies are here today and gone tomorrow, we encourage you to do your research before coming to such a conclusion. There is no way someone could have figured out how to market, sell, and finance Bitcoin in 2009 without doing extensive work and research on what was possible. Furthermore, there is no way it could have become as big as it has been so quickly if there wasn’t a future in it. Sure, some people may be taking advantage of current hype and trying to make a quick buck or two off cryptocurrencies—but there are far more people involved than that now.
What Is a Cryptocurrency?
It’s a digital currency that is traded between individuals rather than banks or governments. The currency is created from computer algorithms and protected by a decentralized network. Two prominent examples are Bitcoin and Ethereum. To be used, cryptocurrencies must be stored in a wallet, which can be anything from an app on your phone to a hardware device like a USB stick. Many wallets also allow you to buy more cryptocurrency once you have some – or even trade your cryptocurrency for dollars or other currencies. Some wallets can even connect directly with exchanges, letting you make trades right within their interface.
How Are Crypto Tokens Valued?
Bitcoin is valued because people think it has value. But most crypto tokens have nothing behind them but their idea, which is why many crypto tokens are essentially just overhyped startup ideas that are being marketed through an ICO (initial coin offering). For example, let’s say someone has a profitable business that sells shoes. He or she could create a company called ShoeCoin and sell shares in it to investors as if it were a separate entity from his or her real business. However, when investors buy ShoeCoin shares, they don’t get any ownership in his shoe company—they just get a piece of paper saying they own some number of ShoeCoins.
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Why is Bitcoin So Stable?
The people that have faith in Bitcoin have a lot riding on it and are doing everything they can to keep its value stable. There is a large Bitcoin economy, with all kinds of vendors accepting it as payment. If one single country would ban Bitcoin (or other cryptocurrencies), then there would be serious economic repercussions for that country, which is why many consider cryptocurrency an emerging global market. Because it is so widely distributed across so many countries and individuals, banning or censoring cryptocurrencies like bitcoin will be nearly impossible globally.
The Challenges Ahead
The cryptocurrency marketplace is still in its infancy and is being shaped largely by retail investors who are new to trading. In short, things can be volatile and often unpredictable. So if you’re thinking about diving into cryptocurrency as a trade—meaning you aren’t simply investing for long-term growth—you should tread carefully, lest you get burned. That said, there are several ways for investors looking to get involved with crypto assets on exchanges like Coinbase and GDAX (which function like trading platforms) or marketplaces like Binance and Huobi (which function more like penny stocks exchanges) can protect themselves against major risk.
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