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The Scope of Investment in Cryptos

investing in cryptos

June 4, 2021 | 

620 Views | 

JOHN K MWANIKI | 

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Cryptocurrencies are virtual mediums of exchange that occur as digital assets. They use cryptographic functions to carry out financial transactions. This currency takes advantage of blockchain technology to gain transparency, functionality, and immutability. The first crypto was released in 2009, and it was known as Bitcoin. To date, this currency is the most known, and it remains to be the leading digital currency. 

Since 2009, more than four thousand cryptos have been launched, and this number continues to rise. Different cryptos are placed in different caps. Cryptocurrencies that have market caps of between $ 1-10 billion are mid-cap cryptocurrencies. On the other hand, companies with a cap of under $1 billion are known as small-cap. Small-cap cryptos carry higher risk since their chances of failure are significantly higher than mid-cap companies. 

According to the current market trends, it is predicted that the blockchain technology market will grow. Some of the most prominent companies utilizing blockchain include Ripple, Coinbase, and Blockstream. Virtual currencies have become very popular among investors and traders. That has prompted banks and governments to want to influence the crypto market because they see it becoming an economic fizz. Some governments have chosen to ban cryptos because of an inability to regulate them. Some have enforced bans because the virtual currency market is very random. 

1.How has currency evolved? 

Years ago, humans used the barter trade system to trade goods as well as services. With time, this system was not as efficient anymore because of an increasing need to quicken and standardize transactions. So, currencies began being developed. The elites of Lydia, now Western Turkey, are thought to be the first to manufacture money to pay their armies. They used an industrial facility to mint both silver and gold back in 600 BC. Over the centuries, people have become reliant on banknotes, credit cards, and coins to buy goods and services. 

These currencies are collectively called fiat currencies. In the 21st century came cryptocurrency. This is also known as virtual currency. Bitcoin was the first crypto to be launched in 2009. Its inventor was Satoshi Nakamoto, and s/he wanted it to be a solution after the financial collapse in 2008. Currently, there are over four thousand cryptos in circulation. You can use them to build on blockchain technology, buy goods and services, and secure your assets. 

2.Power Dissolution 

Crypto transactions get recorded onto a blockchain. It is done in a decentralized manner, meaning that no person or group can control how data is stored. Instead, all the users retain control as a collective. This approach upholds the ledger’s integrity. Subsequently, it prevents corruption of the system by particular persons. Traditional currencies are controlled by the government and the central bank. Just because cryptos are decentralized, it does not mean that the systems can defy all forms of manipulation. It actually means there is a lack of one point of attack, which makes it very resistant to hacks. 

Governments worldwide fear blockchain because it is decentralized, hence not under the control of any authority. They cannot manipulate cryptos’ value like they do with the traditional form of currency. The absence of interference makes it impossible for them also to control inflation rates. Moreover, by using blockchain, investors, merchants, and customers are able to cut out interests from banks and other financial institutions. All these benefits are appealing. However, there are also some aspects of uncertainty and fear where the uses of cryptos are concerned. 

3.Regulating cryptocurrencies and blockchain

There is a great need to educate people on cryptos and blockchain to prepare them for the opportunities being brought about by emerging technologies. The number of people investing in cryptos since 2009 continues to increase significantly. Ironically, the rate of familiarity and knowledge in this area is relatively low. Another downside is that governments seem more interested in scrutinizing rather than educating the masses on virtual currency. A good example was January of 2020 when the FCA in the U.K. imposed a ban on trading in crypto derivatives. The nature of this ban was regulatory. 

4.The volatility of the cryptocurrency market 

When Bitcoin, the first crypto, was introduced into the market, it was worth below U.S. $1. Currently, its value clocks over $37,255. This surge in price is all thanks to supply and demand, seeing that only 21 million of these can be mined. The price surge applies to all of the other cryptos. Something else that contributes towards fluctuations is decisions undertaken by the FCA and SEC. Perhaps, because it unintentionally provokes an increase in the overall market prices. Consequently, this causes traders and investors to base their choices on emotions, leading to quick liquidity and higher market volatility. 

5.What is the future of cryptocurrencies 

As institutional money continually flows into the cryptocurrency market, economic analysts predict a significant shift in crypto. It is also possible that virtual currency might be floated onto the Nasdaq. If this did indeed happen, it would also make blockchain more credible in its role as an alternative currency. Some individuals have argued that cryptocurrencies only need ETF, a verified exchange-traded fund. This fund is supposed to make it easier for you to invest in cryptos like Bitcoin. 

However, it is necessary to dispute this by noting that it is still vital that there be a demand for crypto investment. The success of cryptos might not come automatically because of ETF. 

Conclusion 

As you have seen, the virtual currency was catapulted into the financial market by the financial crisis in 2008. Since then, there have been significant milestones in this area, making it more attractive to investors and traders. Rather than entirely depend on the traditional market, people are dipping their legs into the crypto market. It provides them with safety and security, among other things.

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Total Market Cap The Total Market Capitalization (Market Cap) is an indicator that measures the size of all the cryptocurrencies.It’s the total market value of all the cryptocurrencies' circulating supply: so it’s the total value of all the coins that have been mined.

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