Appearing a few years ago, crypto-currencies have recently become the attraction of all players in the financial sector. In Nigeria, it is estimated that around 32% of the population uses one of the cryptocurrencies.
But in reality, what are the reasons that could lead you to invest in crypto-currencies? What are the disadvantages of this new type of currency? These are some questions we will answer.
What is Cryptocurrency?
A cryptocurrency is a digital currency issued peer-to-peer without the intervention of the central bank. This type of currency uses cryptographic technologies and operates a decentralized computer network. According to CoinMarketCap, there are a total of 15,617 cryptocurrencies with a total value of 2.031 billion euros.
Tips for winning in cryptocurrency
Despite the risks, investing in cryptocurrencies is an attractive investment. However, in order to make the most of this type of currency, some tips can be useful:
- Master the operation of the blockchain which is the technology used by cryptocurrencies to store and transfer data.
- Choose to invest in currencies that have a certain reputation such as: Bitcoin, Ethereum… These currencies offer you more guarantees than the new ones
- Diversify your investments to avoid losing all your money
- Avoid investing all your savings since in the field of cryptocurrencies events are not predictable
- Take the trouble to also check that the chosen broker is credible. In order to identify the most credible brokers, do not hesitate to consult this dedicated source.
Reasons to invest in a cryptocurrency
If you want to invest in crypto-currencies and are looking for valid arguments to get started, here are a few:
- A profitable and simple investment
Investing in cryptocurrencies is an operation deemed profitable according to the opinions of financial sector players. To realize this, you can observe the evolution of bitcoin, one of the most used cryptocurrencies in recent years.
Better yet, since there is a wide variety of cryptocurrencies on the market, you have a free hand to make your choice depending on whether you consider one cryptocurrency more promising than another. Investing in cryptocurrencies also involves a fairly simple method.
- Unlimited and inexpensive transfers
Crypto-currencies do not know the geographical limits taken into account by “classic” banking institutions. Thus, regardless of the geographical position of the sender and the receiver of the transfer, the transactions take place without the slightest blockage at a relatively low cost.
- A secure currency
Cryptocurrencies are based on cryptography; which makes transactions and accounts much safer compared to bank accounts.
- Confidentiality assured
Thanks to the blockchain system, governments, organizations and other external parties do not have access to any data concerning your transactions. No one will be able to know what you bought or how much you spent.
- Low inflation risk
Inflation is often due to the fact that currencies suffer the consequences of the crises that governments have to face. Since cryptocurrencies are not traditional currencies, they are not controlled by a government.
- Guaranteed discretion
Transferring funds from one account to another is a fairly simple operation that takes place out of sight.
- Have extra income
Since the value of cryptocurrencies varies over time, you have the opportunity to make additional income from your earnings.
The risks associated with cryptocurrency
Beyond the many advantages of cryptocurrencies, they also carry great risks.
- Unstable Value
The first risk is that of the volatility of the cryptocurrency. Indeed, since cryptocurrencies are not linked to tangible assets such as gold, their value is unstable. The value of a cryptocurrency varies according to supply and demand.
As an illustration, bitcoin in March 2020 was worth around $5,000. On November 24, 2020, it was worth $19,161 then will lose value in 3 days to be worth $17,156 on November 27. This great instability represents risks of loss for investors.
- You bear the danger, alone
Since the different crypto-currencies are not governed by the central bank, users are not compensated in the event of theft, hacking, etc. linked to a technical failure.
The other risk that is common to everything digital is that related to scams. Indeed, according to a survey 50% of scams take place on the internet. It is therefore common to find many fake brokers.
Finally, the world of cryptocurrency remains a domain in its own right. It is therefore important to document yourself and get trained if necessary in order to master both the operating principle and the transaction mechanisms.
In which cryptocurrencies to invest?
The choice of cryptocurrency is an important factor in your investment process. Among the most prominent currencies are:
Bitcoin: it is the first crypto-currency to have emerged. And, this crypto-currency does everything to deserve its place of elder. Already at its creation, it was expected that in the world there will be a total of 21 million bitcoins. Every 4 years, the number of new bitcoins put on the market is halved. This makes it possible to give value to bitcoin since the demand is permanent for a reduced production.
Ethereum: Created in 2015, this crypto-currency like the others is not governed by the central bank or by any government. In less than two years, this cryptocurrency has become in terms of market capitalization one of the most popular. One of the strengths of Ethereum is that its blockchain has built-in programmability. Clearly, the platform can be used by other developers to create decentralized applications.