Should I Get Hip to Cryptocurrency?
4 min read
*Disclaimer: this is not by any means a form of financial advice nor can we guarantee that you will always profit from cryptocurrency.*
Well, should we all jump on crypto?
Before we get into that, covering the basics will be necessary.
What is cryptocurrency?
When we think of crypto, the first thing that will pop up in our minds is BITCOIN. You've probably heard about people becoming millionaires from it, but you've also probably heard of people losing half their life's savings. So what's the deal?
Bitcoin is one of many cryptocurrencies available in the market, and all of these use blockchain technology, which is in one aspect a ledger that keeps record of all balances and transactions. You might ask, "So, how's that different from current banking systems?" I won't get into much detail since I'm no guru in this area, but the essence of having a decentralized system makes transactions a lot faster with almost zero chance of forgery. Authorization of transactions are designated to people that participate in the network, as opposed to leaving it to one central bank to take care of it, which can take several days especially for international transactions.
How do people make/lose money from this?
It works the same way as the stock market: buy low, sell high for profits. Vice versa for loss.
While the blockchain technology itself doesn't print money, it does award users that participates in the network (aka miners) with tokens (e.g. bitcoin, litecoin). The tokens have a specific valuation depending on the current supply and demand of the currency. When the demand of a token increases, the valuation will increase as well. If things are in your favor, selling at a higher price will result in profits. Simple, right?
"It's a bubble waiting to burst."
You've probably heard people describing it as a bubble, but I don't think a lot of people fully understand how an economic bubble is formed or what it is exactly to be able to make that call on crypto. Most people, including me, still don't understand how cryptocurrency/blockchain technology works. When people like Bill Gates and Sir Richard Branson are nodding their heads in approval of the potential that blockchain technology holds, I think we shouldn't be too quick to judge.
I would definitely agree that the volatility of this whole market is absurd, and anyone trading cryptocurrency has to be fully aware of the risks (e.g. possibility of losing 50%+). Even then, I think people should take some time to try to understand the potential that blockchain technology has aside from the profits. It could be something bigger than social media or the internet.
Where do I start?
Do your research and get a better idea of what it is because this post is just touching the very tip of the iceberg. You've worked hard for your money, so you shouldn't just dump it in just because someone said they made tons of money. Think about the amount of risk you can handle (e.g. "How much can I lose and still be ok?").
Check out the different exchanges where you can start buying crypto. Coinbase is the most popular, but if you're looking for opportunities with higher volatility, sites like Binance and Cryptopia may be worth looking into.
Learn about how you can protect your money. We've heard of cases where people have lost everything after the entire exchange got hacked. We recommend keeping funds in wallets (topic discussed more in depth in a later post).