I’d say the boom for cryptocurrency trading has exploded approximately last October, when we started being bombarded by all types of media with daily news about how profitable it was to trade in cryptocurrency. I felt it was my duty, therefore, to offer my input too, especially as this website wants to offer ideas for home working and for home based earning solutions.
My aim with this article is to present cryptocurrency explained in layman’s terms, as well as to advise on best cryptocurrency trading platforms and give you my take on the future of cryptocurrency.
Cryptocurrency – What Is All About
If you like to play with the root of words like me, you will guess quite easily that cryptocurrency has an aura of secrecy about itself – the root ‘crypto’ comes for the Latin and means ‘secret, coveted’. And that’s exactly the intention behind its release back in 2009 by pseudo-Japanese inventor of bitcoin Satoshi Nakamoto (yes, apparently the evasive individual revealed himself to BBC in May 2016 as Australian Craig Wright).
And that’s exactly how cryptocurrency was created, with the coinage of the first currency Bitcoin. So, really trying to define cryptocurrency is the same as defining Bictoin.
The coveted aura around bitcoins is given by the fact that you do not deal with physical commodity, or with metal coins or paper banknotes, but with a virtual currency. As such you deal with bitcoins primarily online.
Nevertheless, bitcoins, and the subsequent other currencies that were created to replicate the success of bitcoins, are seen as alternative currency.
Currently, when trying to trade in cryptocurrency, I believe you can come across the following currencies:
- Bitcoin Cash
But the above list is not exclusive. In fact, new currencies have been created and more are bound to be created as the main currencies are getting near to the maximum amount of bitcoins that can be created and in circulation.
Bitcoins at present remains the most valued currency, especially as it’s seen its peak in 2017, when a single bitcoin reached values equivalent to nearly £14K. Powerful stuff, uhhh?!?!
But, like with all more traditional forms of currency, the metal coins and banknotes that we are all used to trade for the last couple of centuries at least, the value of cryptocurrency is determined by the Economics basic principle of supply and demand. I’ll come back to this further down.
The downside of cryptocurrency? The fact, of course, that as it’s not currency governed and issued by any specific government, it is not recognized as legal tender anywhere in the world. As such, its uses are still relatively limited.
How Do You Get Cryptocurrency
In the last few months you will have come across terminology such as ‘wallets‘ and ‘mining‘, when reading about cryptocurrency.
When purchasing cryptocurrency, truly all that you purchase is a unique 27-to-34-digit code which stores your virtual address as well as the value of your unit of cryptocurrency at the point you purchased it. Naturally, that value is subject to changes, based on the growth or loss of the trading market.
Your code will act as a virtual address to which all your trading movement for that specific cryptocurrency will be sent. However, this address will not store your real address nor identity – that is another coveted aspect of cryptocurrency.
Your cryptocurrency will be stored in wallets, which are safely kept by trading companies to use your wallet with the aim, hopefully, to increase its value.
Trading companies, however, have started asking proof of identification by their members, in order to guarantee that the actual individual is traceable, should the cryptocurrency they stored be used for illegal purposes.
Some of the best cryptocurrency trading platforms are:
But trading platforms are not to be mistaken with miners. Mining, that I understood, refers to the computer softwares who issue cryptocurrencies and keep the database of transactions which see the actual currencies been moved from one ownership and another. Mining companies therefore grow in competition to use the more powerful computer systems in order to beat each other in securing and putting in circulation the highest amount of cryptocurrency – their reward for doing so is the fact that they can keep a portion of the cryptocurrency produced. I imagine miners like the current mint of legal tenders: a currency factory.
The whole process in reality is much easier than it sounds. A miner puts a certain amount of bitcoins in circulation, of which retains the database, or ‘blockchain‘ of transaction movements. Once the currency is in circulation. You subscribe to one of the trading platforms that most appeals to you, or whose terms you find most accommodating to you, and the platform will help you purchase and trade in that currency.
The whole process, if you think of it, is not at all dissimilar from trading in legal currencies and in commodities on the stock market, or from trading in binary options.
How Can You Use Cryptocurrency
Until recently, I don’t think it was much possible physically using cryptocurrency. Only recently a few ATM machines have been introduced on the high streets of some of the biggest financial centres, which would give you legal tender in exchange of cryptocurrencies.
I suspect the reason of the limited employment of cryptocurrencies is given by the very nature of the currency. Why would retail manufacturers and shops accept a tender that is not legally recognized by any government?
For many years, the only way of making money through cryptocurrencies as by trading in any specific currency. You bought a fraction of a bitcoin (or even a whole bitcoin, when it was firstly introduced on the trading market and was worth next to nothing!) using legal tender. You then sold the same bitcoin and were paid in legal tender.
However, most recently, and particularly in the course of 2017, has seen an unexpected growth in value of cryptocurrencies. As a result more and more established business allow their customer to purchase goods and services in cryptocurrencies, particularly bitcoins.
Among them, the most renowned are Microsoft and Expedia. But in UK smaller businesses are opening their doors to cryptocurrencies – to mention but a few, a sushi restaurant in Cambridge, or an art gallery in London.
The Dark Side of Cryptocurrency
There are two main concerns about the stability of cryptocurrency. The first is to do with the rules around which cryptocurrency has been created and refers to the limit in amount of individual currencies that can be put in circulation.
For instance, it appears that no more than 21 million bitcoins can be in circulation. At the moment miners have put in circulation approximately 16 million. So you can see how closer and closer the market is getting to reaching saturation.
Expert miners have got around this problem by creating additional and secondary currencies, such as Litecoin, which may have a reduced value, but are already on the market, ready to boost in value when bitcoins are no longer to be produced.
- The other concern, however, revolves around the legality of cryptocurrencies and of its employments.
The fact that cryptocurrency has found no legal recognition by any government (in fact some states such as China and South Korea are trying to put a slow down to trading exchanges involving virtual currencies), the fact that at the moment it is still highly unregulated, the fact that its ownership is still protected and undisclosed – all of these factors have contributed to attracting individual with not the most honest of intentions in using cryptocurrencies to make illegal online purchases.
The Future of Cryptocurrency
As mentioned, 2017 saw a boost in value of cryptocurrencies, particularly bitcoin.
On the strength of the incessant growth of cryptocurrencies, my son wanted to invest a small amount of money in litecoins. He gave me his £100 to invest on Coinbase platform at the beginning of December (being only 17, he is not allowed to trade yet till he is 18). A few weeks later, his investment had gone down in value by one third.
What had happened?!?!?!
It was all due to the fact that one of the co-founder of giant bitcoin website Bitcoin.com sold all his bitcoins the week before Christmas (funnily enough, when bitcoins had reached their highest value) and predicted others may follow in his steps, realizing how vulnerable the market was.
This prompted the markets to plunge the value of bitcoin in the space of hours. And the devaluation had a ripple effect on other currencies, amongst which my son’s litecoins.
Why I am telling you all this?
Because I want to outline how feeble cryptocurrency trading can be. Like when trading on the stock market. It is a form of gambling after all – hence the age restrictions.
But, do I believe it’s all a scam?
Most categorically NO!!!
My simplistic view is that cryptocurrency is now much in fashion, but like all fashionable things (from clothes, to cars, to trendy holiday destinations), its demand can have the odd tumbles. All it took was the negative opinion of one of its prominent figures to make bitcoin plummet by 45% in value that day. This may have caused the price to drop dramatically.
But now that the price is down is the time to buy! And, as demands increases due to its low value, cryptocurrency values will creep up again, slow but sure.
Is cryptocurrency a ‘get-rich-quick’ investment? Not at all. Is it something I recommend as a long term return investment, where you can purchase cryptocurrency at low figures? Absolutely YES.
If you too would like to invest in cryptocurrency but have your due concerns – or if you have had experience of cryptocurrency trading – by all means drop me a line below in the Comment section. Let us start the debate!