Since their appearance, cryptocurrencies have had a deep impact on the financial monetary market. They are considered to be the currencies of the future, but despite these predictions and their obvious potential, they are still controversial and most people are still confused by them. The main problem is that the digital assets market is changing and evolving at a high speed. However, if you are interested in invested in these market, can help clear some of that mist for you, with a simple yet comprehensive introduction to the crypto market.
How cryptocurrencies work
Cryptocurrencies and other similar digital assets all use blockchain technology. This tech allows digital data to be distributed without being copied. Bitcoin is currently the most popular and the most valuable cryptocurrency. It works as a chain of transactions from one user to another. The users are identified by a public key and for each transaction, the previous owner of the bitcoins must approve the transaction with their secret key, a hash of the previous transaction in which they got the coins and the public key of the next coin owner.
Pros and cons of cryptocurrencies
The main advantages of digital currencies are privacy, confidentiality and anonymity. Despite the fact that the blockchain system is completely transparent in terms of the transactions, the users remain fully anonymous. Another major advantage is the fact that there are no limits to the transactions. They are all processed in a matter of minutes, regardless of the amounts, the location of the users or the time of the transactions. Moreover, since the blockchain platform is not centralized, it cannot be influenced by any government or corporation, which makes it immune to inflation.
Cryptocurrencies also have some limitations in terms of the system of payments, and there is also the legal matter to be considered. Due to the fact that users are completely anonymous, digital currency can be used for money laundering and for financing illegal activities.
Cryptocurrency investing options
The first Bitcoin investors mined the coins by offering computational power to support the network. However, with the increasing popularity of the cryptocurrency and the growing complexity of the computational algorithms, mining became less cost-effective and quite difficult to perform. Thus, people started trading them for fiat currency. Nowadays, there are several options for investors who wish to invest in the blockchain market.
For people and institutions that are new to the financial world, the best options are crypto funds. From hedge funds to mutual funds and even venture funds, crypto funds work similarly to normal financial funds. However, due to the complexity and the volatility of the crypto market, it is advised to work with reputable service providers, who can help with forming and administering the funds. The best option is the Stonegate Cryptocurrency Fund Formation services. Stonegate is a leading name in the crypto trading market. With a solid crypto trading experience, and hundreds of clients spread across the world, they are the best option from startups, but also for established institutions that wish to invest in the crypto market.
The appeal and the risks of crypto investments
The main appeal of these investments is the high profit margin. With cryptocurrencies being expected to be the only currencies in the future, their values are likely to maintain on an ascending trend. However, like it goes with all investments, the higher the profits are, the higher the risks will be. Not only are digital currencies very volatile, but their future is also still uncertain. Many governments are looking for solutions to regulate them, and it could even be possible for these currencies to be outlawed in the future. Moreover, there are also other risks to be considered, such as hacking scenarios, or simply losing the cryptocurrency key.
How to build a safe crypto investment portfolio
Up until 2016, Bitcoin was the only available cryptocurrency, but in just a couple of years numerous other cryptocurrencies appeared, and Bitcoin’s share in the crypto market has dropped to 40%. While this was bad news for Bitcoin, it was good news for investors who wanted to build a safe and diverse digital assets portfolio. Bitcoin should still be the first option for any investor, but a good portfolio should also include other reputable digital assets such as Ethereum, Ripple, Litecoin, Dash or Monero.