Cryptocurrencies 101: All That You Need to Know

Cryptocurrencies 101: All That You Need to Know


Anyone who follows the financial news is aware that the Bitcoin has made some major headlines. The value of this cryptocurrency briefly breached $15,000 dollars (£10,750 pounds) before retreating to below $10,000 dollars. However, you might not be aware of how cryptocurrencies function. These are both important concepts, for some analysts believe that these currencies may soon represent a large market sector. Let's take a look at the basic principles behind cryptocurrencies and crypto investing before moving on to look at their future.

What are Cryptocurrencies?

Cryptocurrencies are essentially a digital form of a transaction. There are several currencies currently available. While the most well-known is the Bitcoin, other “alt coins” such as Ethereum and Litecoin are also emerging. The main difference between cryptocurrencies and other types of transactions is that the value of these assets are not determined by a central bank. In other words, they are much less regulated. This can be beneficial for those who wish to trade cryptocurrencies, as this is a highly liquid marketplace. As their name may already suggest, there is a great deal of anonymity associated with this type of digital currency. This is ideal in terms of privacy protection..

Cryptocurrency movements are often tracked by what is known as a blockchain. This is a digitalised ledger (sometimes referred to as a wallet) of all recent transactions placed into chronological order. As opposed to private organisations, blockchains and the information contained within is considered to be public domain. Users are therefore able to keep track of cryptocurrency movements. Blockchains are also good indicators of the future price of a specific cryptocurrency such as the Bitcoin. A final important aspect of any blockchain is that its accuracy can be validated by an entire community as opposed to a centralised organisation.

What are the Benefits and Drawbacks Associated with Crypto Investing?

As we have seen above, this is a highly liquid marketplace and all transactions are rather anonymous. However, the main appeal of the cryptocurrency sector is that it represents a novel means for traditional investors to become involved within an entirely new sector. In fact, some believe that major cryptocurrency providers will soon be listed on a handful of stock exchanges (Bitcoin futures are also expected to be launched on the Chicago Mercantile Exchange). Should this come to pass, the demand for cryptocurrencies should rise substantially. This may allow wise investors to turn a handsome profit.

Still, there are a few drawbacks to keep in mind. The values of cryptocurrencies such as the Bitcoin have been known to fluctuate wildly. There are always chances that blockchains may be tampered with (although highly unlikely). Finally, this market is rather unpredictable when compared to traditional sectors.

What is the Future of the Bitcoin and Alt Coins in General?

The future looks bright for this sector. As a growing number of investors are looking towards the digital community, it is likely that that value of popular currencies such as the Bitcoin will increase. The number of ICOs (Initial Coin Offerings) is also on the rise as more investors seek to obtain new units of currency in exchange for existing alt coins such as the Bitcoin. It will be very interesting to see how this market continues to evolve throughout 2018 and beyond.