Cryptocurrency is an encrypted digital currency that isn’t tied to a bank or government. It lets people and companies transact directly, peer-to-peer, without the need for mediators like banks. Popular Cryptocurrencies include:
- Bitcoin (BTC)
- Ethereum (ETH)
- Litecoin (LTC)
Cryptocurrency was invented in 2009, and it has become popular over time as its value has grown significantly. More than 1,000 cryptocurrencies now exist on the market. This new form of money attracts many people because they think it’s easy to earn money through investments in cryptocurrency.
Investing in Cryptocurrencies
There are risks associated with cryptocurrency investments. For example, if someone steals your wallet and gets access to its private keys, they could transfer all of your funds out of it without needing any additional information from you. In addition, there have been cases where hackers have hacked into users’ wallets and stolen their money before their owners could even notice that anything had happened!
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You must choose the right type of wallet before investing in cryptocurrencies because there are different types available: hot wallets vs. cold wallets vs. paper wallets etc.
However, investing in popular and older cryptos like BTC and ETH might have lesser risks when compared to buying newer cryptocurrencies like RNDR, SOL and WIF. While the price of RNDR or other meme coin can be volatile, with proper research you can reduce these risks.
The Constant Fluctuation of the Price of Cryptocurrencies
Cryptocurrencies are volatile investments. It means that the price can rise or fall dramatically over short periods, which you should be aware of before investing. For example, let’s say you buy 1 Bitcoin for $1,000 on January 1st, 2019. By February 7th, 2019, the price has risen to $1,300 per coin:
That’s an increase of 30% (known as a “gain”). But if you tried selling your bitcoins immediately after purchasing them and ended up repurchasing them because they fell in price during your sale period. Well, then, suddenly, those gains have turned into losses! It is challenging to predict what will happen with cryptocurrency prices over time. This unpredictability makes it hard to plan when making decisions about where and when to invest in cryptocurrencies themselves.
Digital Currencies Are Not Insured by Any Government
Even though cryptocurrencies have been around for several years, they are still not insured by any government or private organization. A bank or insurer cannot cover your cryptocurrency investments if you lose them.
In addition to being uninsured, cryptocurrencies do not have any tangible asset that backs them up. Cryptocurrencies are only backed by the faith of investors who use them as units of exchange and stores of value within their economy.
Bitcoin is an example of digital currency: it is used as a medium for exchange. Still, it does not possess any backing from any government or institution like gold does (or used to).
