Cryptocurrencies: What are they?

✔️ Information reviewed and updated in June 2024 by Eduardo López

One of the most popular trends that we can find in terms of investment is cryptocurrencies. And it is that, from a few years, or even months, to here, the issue of virtual currencies has gained great relevance in the financial environment.
If you are thinking of investing in cryptocurrencies, we recommend that before doing so you find out everything about this world and what you should know about it. Here we will tell you what are the 9 points you should pay attention to when investing in cryptocurrencies. So you can take care of your investment!

✨Cryptocurrencies: What are they?

Cryptocurrencies are defined as a payment method, not so much as a form of money. Many experts use casino chips as an example, since, to obtain them, as with cryptocurrencies, you must exchange conventional money for them.
These cryptocurrencies are used as a form of investment, since their value is changing, or as a way to pay for services and products online. Its operation is based on the Blockchain, a decentralized technology that uses a computer network to validate transactions. This makes it a very safe virtual currency to use.

✨The cryptocurrency market

According to experts in this segment, there are more than 6,700 cryptocurrencies currently in circulation, some more famous than others. As usual, most receive their value from initial coin trading offerings also called ICOs, a kind of pre-sale of cryptocurrencies.
The estimates, regarding the market value, are really promising if you want to invest there, as the value of cryptocurrencies is believed to be $ 6.45 trillion. Of those, 4.21 million belong to the most famous cryptocurrency of all time, Bitcoin.

✨ How do cryptocurrencies get value?

One of the biggest buts that cryptocurrencies have is that they are very changeable, or at least volatile. That is to say, its value can be through the skies one day and the next, have a very sharp fall which makes it a somewhat risky investment instrument.
This is because cryptocurrencies do not have any support in another asset, in addition to the fact that its value is based on the same chain of blocks or Blockchain. External events such as some conflict between the members of the chain can also affect its value.

✨ What you should take into account before investing in cryptocurrencies

  • The solidity: In addition to being volatile, another very common drawback is the fact that cryptocurrencies do not generate cash flow. Your investment is based entirely on selling your coin more expensive which can reduce returns.
  • The type of currency: As you could see, there are a large number of cryptocurrencies on the market, some are worth pennies and others thousands of dollars. It is important to consider the type of cryptocurrency to invest as this will directly influence the performance of your investment and its future value.
  • The saturation of the market: A very saturated market, such as Bitcoin, limits investment options and increases the cost of virtual currencies. If you want to invest in a saturated market, you must be prepared as that will be more complicated than doing it in a less competitive one.
  • The behavior of the cryptocurrency: For many, this is one of the most useful tips, as analyzing the behavior of the currency is revealing. You can see if it has held its value, has been up and down like a roller coaster or has had some spikes, but with good stability. In this way, you can choose the best option.

✨ How is the process of buying cryptocurrencies?

The process of buying cryptocurrencies is really simple. All you have to do is create an account with a broker, an intermediary in the purchase, which allows you to use a Wallet or electronic wallet.
There, you only have to transfer conventional money to buy the cryptocurrencies you want. You can also exchange cryptocurrencies for other cryptocurrencies or sell the ones you already have. Today there are a large number of brokers and Wallets so choosing one is not so complicated. You only have to look at points such as their reputation, functions and commissions.

✨ Invest in new cryptocurrencies?

Although the ICO stage turns out to be very attractive, we must always have our reserves with the new cryptocurrencies. This for two reasons, one is the issue of security and the second is the instability that these currencies can have.
That is why, if you plan to invest in new cryptocurrencies or in the ICO stage, you should pay close attention to the offer. It is important to read the fine print and the terms and conditions to be aware of what the offer is about. It is also advisable to do more research on how the coin works, who created it, etc.

✨4 tips to invest in cryptocurrencies

  • Define your budget: It is always advisable to have a budget when investing, as this prevents us from getting out of control when buying cryptocurrencies. Define how much you can invest in order to determine how to do it.
  • Don't have all your eggs in the same basket: A serious mistake is to invest all your money in the same, for example, Bitcoin. This is because, before a fall, your money will not be protected with other investments. We recommend that you diversify not only in cryptocurrencies, but also in other financial instruments.
  • Choose the broker well: It is very important to learn how to choose the broker with which you will make the purchase of cryptocurrencies, since this can influence the final result. Thoroughly analyzing each broker will help you know if that is the right one for your needs.
  • Learn everything about cryptocurrencies: Finally, we recommend that you learn or study everything you can about this segment. Know how it works, what parameters to take into account, what statistics you should follow, etc. Remember that An informed decision can be much more accurate than a decision with no grounds or arguments behind it.

Eduardo Lopez

Editor and Copywriter

I am Eduardo López Martínez, I was born in Madrid, Spain and I am 48 years old. I am a journalist and I am part of the team. Do you want to know a little more about me? I invite you to read my biography.

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