Did you know that back in 2013, a single Bitcoin was worth about $100? Since then, the value of a single Bitcoin has hit.
In other words, if you had invested $1 in Bitcoin back in 2013, your holding would be worth about $600 in 2020.
Some of the biggest gains in Bitcoin and cryptocurrency, in general, happened in 2020. The huge cryptocurrency gains have persuaded many people that it is the right time to get in the fame.
At the same time, investing can be difficult and complicated. On top of that, cryptocurrency is a new game, so the rules are not as well established. How can you know when to buy cryptocurrencies?
Read on to learn all about some of the most important things to keep in mind when you invest in cryptocurrency!
1. Focus on Functionality
A lot of people think cryptocurrency is all about speculation. They think that the value of cryptocurrency is not based on anything but how much other people think it is worth. However, this is far from true.
The fact is that cryptocurrencies bring a lot of pragmatic benefits to the table that other currencies do not. Most traditional currencies are fiat currencies. That means that they derive their value from the support that a national government gives them.
Fiat currencies are mostly stable. There are exceptions. If a government starts printing huge amounts of its currency, inflation will rise.
In contrast, cryptocurrencies derive their value from what people think they are worth. And what a cryptocurrency is worth depends partly on the functionality that it provides.
There are lots of functions that Bitcoin provides that national fiat currencies do not. First of all, they can be used by anyone. If someone in France wants to buy something from someone in Zimbabwe, they can both use a common currency like Bitcoin.
Another common feature of cryptocurrencies is that they are potentially anonymous. There may someday come a time when governments have learned how to perfectly track the use of cryptocurrency.
However, for the time being, cryptocurrency is too new of a game. Traditional institutions have not yet learned how to regulate and control it. It is possible that they never will.
Keep an eye on the pragmatic functionality of cryptocurrency. If Bitcoin ever loses its ability to be anonymous, be prepared to sell it. The same goes if a cryptocurrency losses access to people all around the world.
On top of the basic functions we’ve discussed, certain cryptocurrencies bring extra functionality to the table.
2. Smart Contracts
Most people have heard of Bitcoin. It is the oldest cryptocurrency. It also provides some of the least functionality.
Since the explosion of Bitcoin, thousands of other cryptocurrencies have been invented. So far, they have all been fighting for second place. And Ethereum has won the battle to take second place behind Bitcoin.
How did Ethereum win this battle? Ethereum provided functionality that Bitcoin and other cryptocurrencies did not. One of the biggest things that Ethereum provides is access to smart contracts.
Smart contracts are powerful financial tools. They eliminate the need for trust between buyers and sellers. This can revolutionize financial tools in some parts of the world.
Traditionally, you could only buy insurance from institutions that you trusted. Insurance companies needed to prove that they were trustworthy. But that led to certain downsides.
In some parts of the world, no such institutions exist. They simply haven’t been around long enough to prove that they are reliable. This is where smart contracts can solve the problem.
Smart contracts execute themselves. Unlike traditional contracts, they do not rely on any person or institution to choose to honor the contract.
That means farmers who used to have to do without crop insurance can use smart contracts to buy it. That can revolutionize agriculture in parts of the world that desperately needs it.
Ethereum gained so much value by providing value in the form of smart contracts. When a new crypto-currency is providing functionality that no other coin does, that is a strong sign that it is worth investing in!
3. Keep Track of Coins That Are Connected to Each Other
Ethereum provides smart contracts, but at a high cost. Cardano is a different coin that is about to start offering smart contracts at a much lower price.
That might make Cardano a good investment. You should always keep an eye on new functionality.
At the same time, there is another lesson to learn from Cardano. Cardano is connected to another coin called Ergo. The more that Cardano goes up, the more that Ergo goes up.
That is because Cardano relies on Ergo to provide certain extra functions. If you think that a coin will go up, you should check out if any other coins are connected to it. If they are, then you can invest in them too for a profit.
Based on all of these cryptocurrency strategies, you might be considering getting into cryptocurrency trading. Looking at Bitcoin strategies can be a great way to start.
To learn more about how to buy Bitcoins at ATMs near you, find out where you can use one nearby.
Learn How to Invest in Cryptocurrency
You now know the most important things to keep in mind when you are learning how to invest in cryptocurrency. Cryptocurrency may be a new currency, but it has exploded faster than almost any other new financial tool. There is a good chance that it will be one of the main players in the future of finance.
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