Heard terms like Bitcoin and Ethereum in conversations and not sure what they mean? You are not the only one. Cryptocurrency is one of the trending words in the technology industry, and while it all sounds promising, learn more about what Cryptocurrency is and whether to invest it in it. You should know how cryptocurrency scams work to save your investments.
What Is Cryptocurrency?
Cryptocurrency is a type of digital currency that exists electronically only. In exchange for the money you spend, you don’t get any physical coin, no token, and no bills or bonds. To get a physical token or a bill, you’ll have to use an app that allows users to cash in cryptocurrency for a physical token. The cryptocurrency exchange happens completely online using a smartphone, and there is no intermediary involved like in bank transactions.
Bitcoin and Ethereum are the two most common and most valuable cryptocurrencies in the market right now. Dogecoin is a recent cryptocurrency that gained popularity overnight, because of a tweet from globally known entrepreneur “Elon Musk”. Dogecoin was launched as a parody currency to mock other cryptocurrencies, but now it is the top currencies on the market.
Why Are Cryptocurrency so Popular?
There are several reasons why cryptocurrency appeals to a wide group of audience. Here are some of the major reasons:
- Supporters see cryptocurrency as the future of finance and they are racing to buy them to be part of the future. Customers try to invest in currencies that may become too expensive in the future.
- Some people prefer cryptocurrency is because it removes banks and other organizations from the middle. As banks reduce the value of money over time, cryptocurrency sounds like a better option for investing money.
- Those who love technology love the technology behind cryptocurrency, which is the Blockchain. Blockchain is an advanced ledger system that records data and can be more secure than other payment systems.
- Another reason for liking cryptocurrencies is that they are a great investment option and they can convert into money quickly.
Should You Invest in Cryptocurrencies?
Cryptocurrencies can go up in value, but major investors see them as speculations and not real investments. The reason is just like real currency, crypto generates no cash flow, and so for investors to generate enough profit, someone will have to pay more money for the currency than you did.
Cryptocurrencies such as Bitcoin may not be that safe, and a lot of investors in the crypto community advice new investors to be careful during their investors. Those who see cryptocurrency as the future of finance should keep in mind that for a currency to grow, it needs stability. Bitcoin and other top cryptocurrencies have a history of not being stable. For example, Bitcoin had a market value of $20,000 in December 2017, by the end of 2018, the value dropped to $3,200. Currently, the value of Bitcoin is $56,620 which is a record-breaking growth.
This instability creates a tough situation for investors, there are chances that the value of Bitcoin increases exponentially in the future then lesser and lesser people will circulate it. Why sell or spend a Bitcoin when the value can double or triple by the next year.
How Can You Buy Cryptocurrency?
While we can purchase some of the top Cryptocurrency using US dollars, others require you to pay for another cryptocurrency. To buy cryptocurrency with crypto, you’ll need a wallet which an online app to its core that can hold your currency. The most common procedure is that you create an account on an exchange, then you can use actual money to buy cryptocurrency.
Coinbase is one of the most common cryptocurrency trading exchanges where you can create a wallet and buy and sell cryptocurrency. Tons of online brokers also offer cryptocurrency services like TradeStation, Sofi Active investing, and others. Robinhood offers free cryptocurrency exchange but it is not available in all the U.S states.
How Can You Save Yourself From Cryptocurrency Scams?
The simple way to protect yourself from Cryptocurrency scams is to read the documents carefully during and before the purchase:
- Who owns the company you’re doing business with? If it’s owned by an identifiable and well-known owner is always a good sign.
- Are there any major investors who are investing in a particular cryptocurrency? It’s probably a safe currency if well-known investors are a part of it.
- Will you be owning stakes in the company or will you just get the currency/tokens? If you own stakes in the company then you’ll get a share in the earnings, if you have the tokens then you’ll be able to use them like chips.
- Is the company taking its baby steps or is it already well developed? The better settled a company is, the fewer risks it will have.
It can take a lot of time to read through all the company information, the more detail that a company has offered, the less risky it will be for the customers. Although, just because a currency is legit, it doesn’t ensure the currency will succeed in the industry. The market is extremely volatile, which means the currency can go both up and down.
Apart from those issues, having a cryptocurrency opens you to the risks of theft, as hackers will try to gain access to your computer and steal your assets. One extremely successful exchange declared bankruptcy in 2014 because hackers stole hundreds of millions of dollars in Bitcoins.