Towards the end of 2017, cryptocurrency instantly became one of the hottest topics over the internet, even becoming a popular subject in casual neighborhood and workplace conversations. Perhaps the most common reason that a lot of people became interested in cryptocurrencies is the opportunity to profit big in just a short amount of time. As a matter of fact, the value of Bitcoin, the most popular and most dominant cryptocurrency in the world, has risen from $900 per coin in January 2017 to almost $20,000 towards the middle of December in the same year. That’s a massive growth of more than 2,000% in less than a year!
While cryptocurrencies have been very profitable for early investors and well-disciplined swing traders, there are a lot of things that every person should remember before putting any amount of money into digital coins and tokens. Read more on the five important things that you should know about cryptocurrencies.
Cryptocurrencies are exceptionally volatile.
In contrast with stocks, commodities, foreign currencies, indices, bonds, and other types of assets, cryptocurrencies are highly volatile. For example, buying a dollar worth of Bitcoin in 2010 when it first appeared on exchanges and holding it would have made you a multimillionaire today. Similarly, buying at the all-time high price last December will leave you with only a third of your original investment in fiat currency. Cryptocurrency prices are very unpredictable and thus require proper risk management whether you trade or hold for a long term.
The value of cryptocurrencies lies in the blockchain technology.
Unlike fiat currencies, cryptocurrencies are not backed by central banks, governments, and other fundamental factors, making the speculation of its real value almost impossible. Its actual worth, however, lies on the blockchain technology – a common technology among the hundreds of cryptocurrencies in the market today. Blockchain acts as a decentralized public ledger wherein all transactions, past and present, are recorded and verified by computers distributed all over the world. This particularly makes cryptocurrencies highly secure from cyber threats.
There are already more than 1300 cryptocurrencies at the present.
As of today, there are already more than 1300 cryptocurrencies that are available for holding, trading, mining, and staking. However, not all of them have proven to stand the test of time. Many of them failed, while a few stable coins such as Bitcoin and Ethereum continue to dominate the market.
There are many merchants that accept cryptocurrencies.
Even with the promising technology behind cryptocurrencies, it wasn’t easy before businesses were finally convinced of the future from this innovation in finance. Today, there are already several merchants that accept Bitcoin and other cryptocurrencies as payment all over the globe. Leading the way are Microsoft, Reddit, Overstock, Newegg, Subway, and Expedia.
ICOs are becoming the blueprint of future economic models.
The emergence of cryptocurrencies and blockchain technology has also paved the way for ICOs or initial coin offerings to become the new model for projects and startups. An ICO is an innovative system for crowdfunding wherein investors take part in the development phase of a project by purchasing tokens which are expected to increase in value in the future.
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