Cryptocurrency For Skeptics: Internet Money, #1

By Krystian Kayde

Learning more about cryptocurrency, how it works, and what it will mean for the world, just might change your mind about getting involved. However, if you choose to remain a skeptic, you'll have plenty of information to consider and discuss. From the benefits of crypto to details of the market and some insightful techniques, let's explore a little into the world of cryptocurrency, and find out if risk is really worth the reward.

• Language: English
• Publisher: Krystian Kayde
• Release date: May 29, 2022
• ISBN: 9798201901264

Book preview

CHAPTER 1

WHAT BENEFITS DO YOU GET?

While many people were initially suspicious of digital assets competing with traditional investments, cryptocurrencies have grown popular. The movement began with a few well-known cryptocurrency names, but new currencies are being established every year. The unexpected development and popularity of new coins, on the other hand, has far-reaching implications, beginning with banks and ending with customers like you. If you want to keep your money safe in the coming years, you need to know where cryptocurrencies came from and how they interact with modern banking.

What are Cryptocurrencies?

You've probably heard the word cryptocurrency tossed about, but what exactly does it imply? Simply put, cryptocurrency is a sort of digital currency that is only available online. It does not exist in a physical form but rather in a blockchain on a server that keeps data about transactions in blocks without identifying personal information. They are not backed by a bank or other traditional lending organizations, and all transactions are heavily encrypted to protect personal information. Nonetheless, they cannot be utilized for every online purchase. Rather than being used to safeguard purchases from online stores, they are frequently purchased as an investment. 

Bitcoin, widely regarded as the first successful cryptocurrency, made its major debut in the world of cryptocurrency. It was advertised as a peer-to-peer electronic cash system that promised to decentralize and eliminate the need for any middleman. Other cryptocurrencies entered the market as Bitcoin grew in popularity, providing potential investors with new options each year.

How Did Cryptocurrencies Gain Notoriety?

While the safety and security of online transactions were a major selling factor, it was the investing opportunities that garnered the most attention. For those who were unable to use traditional banking products, quick access to internet cryptocurrency provided an alternative investment option. Investing in cryptocurrencies has various advantages, including: 

•  No costs 

•  Easy access to a wide range of investment options

•  Direct control over investments 

Bitcoin and other cryptocurrencies moved from skepticism in 2009 to being a sought-after resource less than a decade later due to these advantages.

What Is the Difference Between Cryptocurrency and Traditional Investing?

As cryptocurrency investing becomes more popular, more people will opt for the more convenient choice. As a result, many people who would normally invest in more traditional ways have switched to cryptocurrencies. This means fewer banks and investing business transactions, which has far-reaching implications. 

However, because cryptocurrencies' value isn't supported by anything, investing in them might be risky. One of the reasons digital currencies cannot replace a local bank is this. They can provide an investment opportunity, but they can't offer the steadiness you need for your money.

Furthermore, you won't be able to secure mortgages, loans, or other services with this cash. Even if bitcoin piques your attention, you should continue to deal with your local bank.

CHAPTER 2

BUILD LONG-TERM PERSONAL WEALTH

Despite its extreme volatility, cryptocurrency can help investors grow wealth, mainly if they invest in digital coins over time. 

It's a portfolio strategy that's gained favor in recent months and is catching up to stock trading as a source of wealth for Americans. According to a recent survey by NORC at the University of Chicago, 13% of Americans had purchased or exchanged cryptocurrencies in the past year. The study discovered that 24 percent of people traded equities within the same time period.

A component of a bigger portfolio and strategy

INVESTING IN CRYPTOCURRENCIES, according to Ross, should come second to having an excellent financial strategy that includes emergency savings and retirement planning. 

First, make a financial strategy and see where crypto fits in, Ross advised. What are you doing if you don't have a plan? 

However, once that's in place, investors may want to consider crypto as a crucial component of their long-term portfolio. 

Cryptocurrency is generally recommended for tech-savvy investors who are dedicated to learning about the asset and have a lot of time to ride the ups and downs due to its volatility nature. 

Then there are some of the same criteria that apply to stock market investment, such as not making emotional decisions or selling on a downswing. 

For bitcoin investors, this may be considerably more challenging and require more discipline.

Ross advises against monitoring the price frequently, and especially not every day. 

If you don't pay attention to that, you'll have a lot of stomach acid and gray soon, he explained.

Allocation

FINANCIAL EXPERTS GENERALLY advise just investing an amount of money in cryptocurrencies than you can afford to lose – in other words, not all of your savings. 

A safe rule of thumb is to invest 5% of your portfolio in a high-risk asset such as bitcoin — or other coins. However, for some individuals, investing even more in cryptocurrency may make sense. 

I'd guess 5 percent to 15 percent of digital assets in general, Alex Mashinsky, co-founder and CEO of Celsius, a cryptocurrency lender that pays high returns and provides loans using cryptocurrency as collateral, says. 

Higher allocations are typically reserved for younger investors who trust in cryptocurrency's technology, feel it will become more broadly embraced in the future and have the patience to wait. 

Obviously, if you're 69 and retiring next year, and you're going to need this money, that's not a good idea, Mashinsky said. However, if you're in your twenties and looking 20 or 30 years ahead, you should have a larger budget. 

Experts also advise investors to acquire cryptocurrency using tactics similar to those used to buy equities, such as dollar-cost averaging — essentially, investing tiny amounts of money over time rather than everything at once. This helps to mitigate some of the price fluctuations. 

It's not about saying, 'I'm going to make ten times my money,' Mashinsky explained. Investing in cryptocurrencies, on the other hand, can be seen as an additional road to financial freedom that can help people overcome inflation over time.

Acquire a younger, more diverse group of investors.

Another advantage of cryptocurrencies is that they appeal to a broader range of investors, including people of color, women, and those with lower incomes, who traditionally have difficulty amassing long-term wealth. 

According to the NORC survey, women account for more than 40% of cryptocurrency traders compared to 38% of stock dealers. 

People of color and those with lower incomes were also more likely to invest in bitcoin than stocks, according to the NORC survey. People of color account for 44% of crypto traders, compared to 35% of stockholders. Those earning less than $60,000 a year account for 35% of bitcoin traders, compared to only 27% of those investing in stocks.

CHAPTER 3

WORLDWIDE IMPACT

IMPACT OF CRYPTOCURRENCY:  The decentralized concepts they promote and the potential for big rewards are at the root of the popularity of cryptocurrencies. Still, their volatility remains significant, and these assets are more susceptible to losses than many other types of investments. For instance, the value of Bitcoin rose from $1,000 to over $19,000 in 2017, before plummeting to about $3,000. There will be a period in April 2021 when Bitcoin falls below $30,000 before rising again until the end of 2020.

Impact on Foreign Investment 

CRYPTOCURRENCIES PROVIDE several benefits in terms of frictionless transactions and inflation management. Despite their noncorrelation with gold and other precious metals, many investors are adding them as assets to their diverse portfolios. As a result, a number of cryptocurrency exchange-traded funds (ETFs) and exchange-traded notes (ETNs) have appeared. 

A cryptocurrency crash, according to some analysts, would have a severe impact on the entire market, similar to how mortgage-backed securities triggered the global financial crisis. It's worth mentioning that the total market value of all cryptocurrencies is now between one and two trillion dollars, which is still less than the market capitalization of some of the world's largest firms, such as Meta (formerly Facebook) or Amazon. 

Cryptocurrencies, on the other hand, are a new and highly volatile asset class that can fluctuate dramatically. Finally, while many investors regard cryptocurrencies as a form of speculation or a hedge against inflation, the market's size does not constitute a systemic risk as of 2022. 

Cryptocurrencies, such as Bitcoin, have a positive but disruptive tendency that has begun to undermine the old financial system gradually but effectively. 

The economy benefits from it. 

There is already a thriving industry centered on cryptocurrencies, with companies entrusted with monitoring all digital currency exchanges throughout the world. The extraordinary rate at which the bitcoin business is growing may be attested to by early adopters who became wealthy overnight and discovered opportunities to expand financially. The most well-known of these cryptocurrencies, Bitcoin, has already helped countless people and businesses to flourish and succeed. For many people and businesses, trading is a substantial source of revenue. To address these demands, cryptocurrencies have immense potential, and the economy is increasingly responding. 

Poorly developed countries have bright prospects. 

More than a third of the world's population lacks access to basic banking services such as loans,