A drop in an ocean of Cryptocurrencies
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A drop in an ocean of Cryptocurrencies

Introduction-What is Cryptocurrency?

‘A successful investment is about managing risk, not avoiding it.’

And in today’s world, one of  the riskiest moves is investing in cryptocurrency. One should invest in cryptos upto that amount which he/she can afford to lose because no one knows the future trends of cryptocurrencies. Let's learn some more about cryptocurrencies.

Cryptocurrencies are digital modes of investment where the injections will boost the current value and withdrawals will reduce the values. It is used as an exchange in some countries. The strongest cryptocurrency is Bitcoin. Its current value is $43,307.10 (US) and keeps on changing every moment. It is legal in some countries like the US, Canada, El Salvador, etc. Cryptocurrencies are decentralised which means no legal organisation or body controls them. Talking specifically about bitcoin, it is mined through an algorithm which means there are a fixed amount of bitcoins which is 21 Millions and the more we mine the algorithm will become more difficult. The last bitcoin to be mined is expected to be mined in 2140. Cryptocurrencies can be traded through digital wallets and keys. And all the transactions are recorded in a Distributed Ledger. It is public and anyone can access it and some details can be viewed but not all. Identity of buyer and seller is not revealed. It is safe because hacking this is next to impossible.

Research Work-Finding the Best Crypto to invest in

Investing your money in cryptocurrencies involves a greater risk than any normal investment. So proper research work is important before investing. Read blogs and watch videos about the future trends of any crypto in which you want to invest in. Your chances of losing the money is more if you don’t do the proper research.

Important Features

1.Blockchain-Blockchain is the technology that enables the existence of cryptocurrencies. Basically, it is a technology which is used to track all the transactions. Every cryptocurrency has its own blockchain. When a transaction is carried out, it gets added to the blockchain. Some cryptos can take upto hours to complete transactions and some take only a few seconds. But the most important thing is that transactions are irreversible, meaning if you want to get back the transacted crypto then a new block will be added to the blockchain. No one can delete the old block. So a record is maintained for all the transactions.

2.Cryptocurrency Exchange-A cryptocurrency exchange or a digital currency exchange (DCE), is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies. It includes several apps and websites which conduct the flow of investments and show the current values of various cryptos. 

3.Miners-Miners are normal people. Their work is to verify each transaction, to check its accuracy and to maintain security of the blockchain. Miners ensure that each transaction is being added to the blockchain. An important thing here is that if anyone wants to create a new cryptocurrency then you have to create a new blockchain, and to code a new blockchain, it involves a great time consumption, loads of money and advanced technical skills. So, an alternative to this is that you can create a cryptocurrency which will work on the blockchain of some other cryptocurrency. These cryptocurrencies are known as ‘tokens’. You have to be very careful in this regard. Companies and individuals created their new cryptocurrencies which were ‘tokens’ and launched with so much hype. People purchased them and the prices went high. Then these companies and individuals sell their firm and gain a lot of profit. This strategy is known as pump and dump strategy in crypto trading.

4.Wallet-As you need a wallet to store your rupees, just like that, you need a digital wallet to store your cryptocurrencies. This wallet can exist in the cloud, laptop or in an external storage device like a USB Drive or Hard Drive. You can deposit and withdraw cryptos when you purchase or sell respectively.

Volatility-A Rise and a Fall

A big issue that is associated with all the cryptocurrencies is that the value is very volatile. This means that their value can soar in the sky in one moment and can crash in another. This is why it is very difficult to carry out financial transactions. If you send the money (crypto) from one place to another and within a few moments, say the value rises or falls, then it can impact the receiver in a healthy or unhealthy way. So, to carry out financial transactions, stabilization is the key factor. Due to this reason a ‘new class’ of cryptocurrencies is created which offer price stabilization which are backed by a reserve asset, say US Dollars or gold. They are known as stable coins. They provide benefits of both security and stability.

Conclusion-Whether one should invest or not?

Cryptocurrencies have been in a trend for a while now, and many people are confused whether it is a safe option for investment or not. Well, you can invest in cryptocurrencies if you can take risks but it is not a very safe option. We don't know the future of these cryptos as they are not regulated by any organisation. And also no one knows the trends of these cryptos whether their values will go up or go down. Though these cryptos are not regulated by anyone still their values are influenced by powerful individuals like Elon Musk. His small activities on the internet hamper the current values of the cryptocurrencies significantly. One can invest in healthier schemes which are regulated by some organisation and the trends are already known to us, for example, Mutual Funds, Long-term government bonds, Annuity from insurance companies, Share Markets, etc. Especially in these covid times when the country is reeling under economic crisis, you should invest your money with proper knowledge.

More about Cerebro Kids

We, at Cerebro kids, have introduced a certificate programme in stocks trading basics for young minds. The course curriculum is interactive and structured, which will cover topics such as the basics of the stock market, how stock prices work. Also, students will get exposed to Candlestick patterns and how to use them to make buy/sell decisions. Finally, topics such as the Basics of Indicators like MACD and RSI, and how traders make use of these indicators to earn money.

 

With one course your child will get ready for future finance decision Making and that too at an affordable cost. 

 

For further information visit: www.cerebroteam.com

Blog Info

  • Author : Tushar Gera

    2021-08-09 13:45:00

    B.Com Hons. student and a part time blogger.