Learn More About Investing in Cryptocurrencies
A Cryptocurrency, also known as a cryptocoin, is any digital asset designed to function as a secure medium of exchange where personal coin ownership data is recorded in a public ledger in the form of a distributed computer-readable ledger. Unlike other assets, such as stocks and bonds, a Cryptocurrency does not have a tangible physical commodity attached to it. This means that although an investor may be invested in Cryptocurrences, the investment is entirely virtual, as there is no way that the investor could “own” the issued Cryptocurrency.
One of the biggest issues with Cryptocurrences is that they are all rather anonymous. Unless the property issuing the Cryptocurrency is online or has some form of web presence, you will not know who is behind the issuing asset. For this reason, the value of Cryptocurrences as an investment vehicle is relatively low and is really only secure if the protocol used to create them is well-maintained. Also, while it is not possible to follow the progress of the Cryptocurrency in real-time like you can with gold and silver, you can still follow the progress of the Cryptocurrencies that are in circulation. This is done by people who buy into these particular currencies in order to track their performance.
The value of Cryptocurrences as an investment vehicle falls drastically when they begin to experience “hard” money transactions. As you may have guessed, hard money transactions refer to ones that require the investor to obtain the currency from an external source in order to settle the debt. While many Cryptocurrences offer the ability to carry out these types of transactions without having to use actual money, they generally take a very long time to settle. Thus, you will need to be patient when investing in Cryptocurrences such as this.
On the other hand, it is quite common for a typical Cryptocurrency to be prone to pump and dump situations. A “Pump” is a large volume of buying that occurs quickly followed by a drop in the market capitalization of the particular Cryptocurrency in question. For example, during the last several weeks there was a significant amount of trading activity in the ether currency involving nearly every single currency in the world. While there was a noticeable increase in the price of ether, it took about three months for the market cap to decline by nearly twenty percent, or about thirty percent compared to the last three months. This is generally considered to be a bullish signal for traders looking to make money by selling their tokens.
On the other hand, a “Dump” is essentially the opposite of a “Pump”. It is an abnormal loss of interest for a specific currency. The most common instance of this is when a popular Cryptocurrency such as monero or dogecoin becomes worth less than half of what it was previously worth shortly after it was introduced to the public. It has been pointed out by experts that this is generally bad news for anyone trading in this kind of tokens. Therefore, in order to avoid these types of scenarios it is advisable to stick to well-established trends and to limit your exposure to either extreme.
One of the benefits that come from trading in Cryptocurrencies is that you are not limited to any one pair. This is one of the biggest advantages that come with trading in any other form of alternative currency. However, this is certainly not to say that there are no possibilities of trading in other currencies. Any given day there are literally thousands of new currencies being launched. If you are interested in purchasing tokens, then perhaps the best option for you would be to visit an exchange that offers a wide range of Cryptocurrencies.