Definition;
Cryptocurrency is a type of digital currency that got its name because it uses cryptography to secure transactions. Unlike fiat currencies, which are issued by central banks and regulated by fiscal policy in some countries (such as the United States), cryptocurrencies do not have any single authority overseeing them; instead, they operate through a decentralized system where each user holds their part about how money should be exchanged among themselves.
To answer the question "What Is Crypto?" We can start here;
Cryptocurrency is like that weird cousin you only see at family reunions. You know he’s there, but you try not to think about him too much. Fact is, they’ve been around for a while now, and people are still trying to understand what they are.
Some say that cryptocurrencies use encryption so you can trust them because it provides safety from fraud or theft; others argue against this by saying any type of code leaves room for errors that could lead down either path – including losing money!
Bitcoin, Ethereum, Litecoin- these are all just words that mean nothing to the average person. But to the growing community of people who understand them, they’re worth a fortune.
Cryptocurrency is digital money that exists outside of government control. It’s based on a technology called blockchain, which is a distributed network of computers that allows cryptocurrencies to exist without a central authority.
Virtually all Macro Experts believe that blockchain and related technology will disrupt many industries, including finance and law. So if you’re not paying attention to cryptocurrency yet, you should be. Because it’s only going to become more popular in the years to come.
Types of Cryptocurrency
There are presently 20 thousand cryptocurrencies out there, but Bitcoin is still the king. In fact, Bitcoin is now considered in a league of its own, separate from all the others.
Bitcoin was made available to the public in 2009 and remains the most widely traded and covered cryptocurrency today.
As of August 2022, there were over 19 million bitcoins in circulation with a total market cap of around $400 billion.
There are only 21 million bitcoins that will ever exist.
After Bitcoin’s success, many other cryptocurrencies, known as “altcoins,” were launched. Some of these are clones (or forks) of Bitcoin, while others are new currencies that were built from scratch. They include Solana, Litecoin, Ethereum, Cardano, EOS, and 20 thousand others.
By November 2021, the aggregate value of all the cryptocurrencies in existence had reached over $3.1 trillion—Bitcoin represented approximately 41% of that total value.
So if you’re looking to invest in this new and exciting technology, it’s important to do your research and find the right coin for you.
How do they get their value?
Cryptocurrencies don’t have a physical form, unlike traditional currencies like the dollar or euro. So, how do people know their value?
Unlike traditional currencies, cryptocurrencies are not backed by any public or private entities. This means that no one entity can guarantee that a cryptocurrency will have a certain value.
Cryptocurrencies get their value from the trust that people have in them. People believe that cryptocurrencies will be worth something in the future, and this belief drives the value of cryptocurrencies.
Cryptocurrencies are also difficult to regulate, which has made them a popular investment choice for many people. Because of this, cryptocurrencies have been able to exist outside most existing financial infrastructure.
However, in June 2019, it was recommended that transfers of cryptocurrencies should be subject to the requirements of its Travel Rule, which requires compliance. This could mean that cryptocurrencies will start to become more regulated in the future.
Take Note
Cryptocurrencies get their value from people’s belief in them and use of them. Just like a dollar or a euro, cryptocurrencies are worth something because we all agree they are.
Like our fiat Money, most are not backed by gold or any other commodity. Many are backed by “Proof of Work” and “Proof of Stake”, while most others are backed by promises of “utility”.
But if people believe that they will be worth more in the future, and many agree then who knows? Maybe they will.
That’s why when you buy cryptocurrency, you’re investing in the future. You’re betting that other people will want it too and that it will be worth more in the future.
When you sell cryptocurrency for profit, you’re earning a capital gain. That means you made money off of your investment, and the government wants to take a slice of the profits.
Capital gains are taxed as regular income, so you’ll need to report any sale above $10,000 to the IRS.
But don’t worry, even if the value of your cryptocurrency goes down, you can still claim a capital loss on your taxes. So if you sell your Bitcoin for less than you paid for it, you can subtract that amount from your taxable income.
Examples
The number just passed 20 thousand. Although I feel this is a bubble that will burst, right now the number is still growing.
Benefits
The idea of a currency without banks is an intriguing one. For centuries, we’ve been using institutions that are controlled by individual people to enforce trust and police transactions between two parties: now there’s no need for this since cryptocurrency does away with centralized intermediaries altogether! This means you can’t have any single point failing – which would set off waves around the world like those triggered during 2008 when several major U-S financial institutions started going belly up due to their failures.
In a world where standard money transfers can take days or even weeks, cryptocurrency is fast-paced and efficient. Flash loans in decentralized finance provide an excellent example for this efficiency as they allow people to trade with each other without having any collateral on hand by merely relying upon blockchain technology alone!
Drawbacks
Cryptocurrencies were meant to be decentralized, with the wealth spread out between many different parties on the blockchain. In reality, only Bitcoin is truly decentralized, and ownership is highly concentrated. For example, an MIT study found that just 11,000 investors held roughly 45% of Bitcoin’s value. This means that the vast majority of people who own cryptocurrencies are very wealthy, which can create a lot of problems.
First of all, it can lead to huge price swings. When a small number of people hold a lot of cryptocurrencies, they can easily manipulate the market by selling off their holdings. This can cause the price to plummet or surge, depending on their agenda.
Secondly, it can lead to a lot of instability. If one or two big players decide to sell off their cryptocurrency, it can cause chaos in the market and lead to a lot of instability. This could hurt the economy as a whole.
Last, a major drawback of cryptocurrency is that it’s not always safe. If you don’t hold your crypto on a self-custody wallet, Just like regular money, crypto can be stolen by thieves. Unfortunately, because cryptocurrencies are digital and not physical, they’re a lot easier to steal. And because they’re not regulated by governments or banks, there’s not much you can do to get your money back if it’s stolen.
Final thoughts
When it comes to investing in cryptocurrency, it’s important to do so safely. One way to ensure your safety is by doing your research first. Find an exchange that you trust and make sure you understand how to store your digital currency. Use a self-custody wallet to store your coins, and diversify your portfolio. Diversifying your portfolio is also key, so don’t put all your eggs in one basket. Additionally, be prepared for volatility. The lower the market cap of a coin, the more it will rise and fall in price. So, if you’re looking to invest in altcoins, be prepared for some big swings!
