What is Cryptocurrency – Should one invest in it?

To better comprehend this new wave and understand how each of us can benefit from it, it’s important to make sure that we are clear on the basics of crypto

Did you know that a 13-year-old boy from Goa is a manager of Millions of Dollars of cryptocurrency! Or that a 14- and 9-year-old brother-sister duo is making more money than most CEOs today simply by mining Bitcoins! Must sound like fiction, but the fact is that cryptocurrency trading is the new formula to earn strong returns and make some of these unbelievable stories a reality for yourself! 

In recent years, we have seen a boom of technological breakthroughs and one such revolution is cryptocurrency backed by blockchain. Cryptocurrency has revolutionized how businesses and investors are trading around the World. But it is a technology that is still very nascent and not fully understood by a lot of people.

To better comprehend this new wave and understand how each of us can benefit from it, it’s important to make sure that we are clear on the basics of crypto.

So, what exactly is Cryptocurrency?
Very simply put, cryptocurrency is a digital currency/ token. It is a type of digital asset that is based on a network that spans a huge number of computers and allows transactions to be highly encrypted, making exchanges secure. Cryptocurrencies are created through a process wherein powerful computers solve complex problems also known as mining. A simple exchange of cryptocurrency results in more cryptocurrency being introduced to the world.

A unique feature of cryptocurrency is that it is not issued by any central authority and regulatory policies around crypto trading are still being worked out. As a result, there is a lot of ambiguity and apprehensions around crypto trading and policies relating to it. But the fact that they do have benefits cannot be ignored. Benefits of digital currencies, to name of few include confidentiality, immutability, fast transaction times, and the lack of a middleman, has given many cryptocurrency investors and traders the confidence to invest in digital currencies for a long time.

What is Blockchain and how does it support the creation of Cryptocurrency?
In a business network, blockchain is a shared, unchangeable ledger that makes it easier to record transactions and track assets.  A blockchain network can track and sell virtually anything of value, lowering risk and lowering costs for all parties involved. A case in point is its application in the Land Registry where the Government is using Blockchain to securely record and manage all land/ property transactions across India. Being a digital ledger of transactions that are recorded in a way that makes it difficult or impossible to change, hack, or cheat the system, Blockchain has emerged as a highly secure technology for transactions with application across multiple Industries. And that’s what makes it the bedrock for safe and secure Crypto creation and trading across all types of crypto currencies!

What is the current market scenario for cryptocurrency?
The global cryptocurrency market is projected to grow from $910.3 million in 2021 to $1,902.5 million in 2028 at a CAGR of 11.1% in forecast period, 2021-2028. There are over 6,000 cryptocurrencies listed, and the number is only expected to grow further. Bitcoin, with a market capitalization of almost $650 billion, holds the largest share of this, followed by Ethereum and Binance Coin.

Bitcoin is the first cryptocurrency, and all others are generally referred to as “altcoins” (alternative coin). While it’s difficult to say which cryptos are the best. Listed are few of the most popular bitcoins: Bitcoin, Ether, Binance Coin, XRP (Ripple), Tether, Dogecoin etc.

What momentum is it seeing in the Indian market and government regulatory on it?
The recent heightened interest of Bollywood actors and cricketers in this new digital currency has reignited the craze for cryptocurrency among Indian audiences. Despite not having prohibited cryptocurrency, they are currently unregulated in India. The Indian government has organized a new committee to consider the tax consequences of the country’s rapidly rising cryptocurrency trading. It can be seen with no doubt that cryptocurrencies and blockchain must create the next phase of job creation for India’s highly skilled labor force. Thus, creating a great avenue for job creation and economic growth.

Cryptocurrency frauds and how to protect oneself from it:
Any scam that involves digital currencies such as Bitcoin, Ethereum, or Dogecoin is referred to as cryptocurrency fraud. These schemes function by persuading the typical individual, who has limited knowledge of the subject, that they, too, can profit. As a result, the common investor tends to get scammed.

One can protect oneself from this type of fraud the same way as any other investment scam in the traditional investing world: with the help of research. To begin with, it’s important to get familiarized with the team behind the new coin. Who are they? Also, it advised to go through the social media profiles and check to see its authenticity. Every new cryptocurrency has a white paper that outlines its business model and strategy. Therefore, if no such documents are available or shown, investing there is not advisable.

A Beginners guide to cryptocurrency trading:
First, it is important to first select a platform that helps to practise and brush skills in crypto trading. These platforms give a hands-on experience with proper guidance and knowledge through a trusted source. The next step would be to go ahead and select the correct trading platform or crypto exchange. To begin crypto trading, a first-time investor can choose from any of the available platforms. Once a trading platform is selected, an investor must complete the KYC (know your customer) process by uploading all relevant documents to the exchange’s website.

An investor can start trading cryptocurrencies after the KYC process is completed and all relevant documents have been validated by the crypto exchange. Crypto exchanges operate 24 hours a day, seven days a week, with no opening or closing hours like traditional stock exchanges. A crypto currency can be stored in a digital wallet or withdrawn in the form of currency by an investor.

To begin, only one cryptocurrency should be picked at a time, as the market is highly volatile, and it’s important to be cautious before expanding one’s portfolio. Experts advice should be followed, and one should always start with minimal investments and after thoroughly researching the market.

How Cryptocurrency is gaining momentum in trading as an asset
Despite its volatility, Bitcoin has gained in popularity and has become a favorite among investors. As it’s a digital currency, it is protected from counterfeiting and double spending through cryptography. The decentralized, transparent transactions of this virtual currency, which are not controlled by any central authority, are enabled by blockchain technology making them popular among investors and traders.

Consumers prefer to own bitcoins because they don’t work in tandem with other investment options, and that even if the pandemic causes a global market meltdown, cryptocurrencies like bitcoin can be a safe bet.

Authored by Harsh Himmatsingka, Chief Executive Officer and Co-founder, First Stock Contest Private Limited

crypto currencycrypto tradingFirst Stock ContestHarsh Himmatsingka
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