You probably are thinking of becoming
a crypto investor if you are here. Crypto investing can be a lot of fun and bring
you lots of money, but it can also be risky. So in order to answer the question is crypto
a good investment, we’ve created this crypto investment for beginners video in which we
touch on the history of cryptocurrencies, how and why they appeared, if you can trust them,
and what the future holds in store for them.
Are cryptocurrencies a good investment?
There’s only one way to find out! How Do Cryptocurrencies Work? Bitcoin, the first cryptocurrency, was
created in 2009 by an anonymous person or group of people known as Satoshi Nakamoto. Satoshi explained that Bitcoin was
created as a way of removing third party intermediaries, such as banks,
from the equation of a money transfer. But we already have a video detailing
the history of Bitcoin and how it works. In short, it comes with advantages such
as good speed transactions and anonymity. We will not elaborate on the technology
behind this, but instead I invite you to stay with me as we explore why both people
and institutions chose to invest in Crypto.
Cryptocurrencies as Financial Instruments Crypto isn’t all just about person X
sending money to person Y. In fact, crypto can be very rewarding, if you
know how to play your cards right. For example, a Defi lending platform offers
crypto loans in a trustless manner, aka, without needing credentials and allows users enlist their
crypto coins on the platform for lending purposes. Thus, you can also take a crypto
loan in a peer to peer system, from another user, pledging your assets
as collateral to secure financing. In the case that you fail to repay the loan, the lender will liquidate or
cash out the cryptocurrency. You also have plenty of other options
to generate passive income, such as Crypto Staking and Yield Farming, subjects that
we’ve already discussed here, at Cryptomatics.
In short, if we compare this to Banks, if you
take out a loan from a bank you can even have a negative interest rate while with crypto
the interest rate can go up to 500% per year. Now that’s an offer that is hard to refuse. What Determines the Cost of Crypto? The price of cryptocurrencies is
notoriously volatile – the price of any coin can go up or down by even 10%
in one day. But what determines this? Among the factors are the supply of
Bitcoin and the market’s demand for it.
Bitcoin has a maximum supply of 21 million
with about 19 million being already mined. As the supply comes to an end, more people
want to buy it due to the fear of missing out. There are also factors such as the cost of
producing Bitcoin through the mining process, the rewards received by miners, the number of
competing cryptocurrencies, regulations and news. If the price of Bitcoin goes up, people
become confident and invest in it. When it goes down, people get
scared and sell it. This is why cryptocurrencies register
such high volatility levels. The price of Bitcoin stood at barely above zero
in 2009 and it took it two years to surpass $1. In 2013, when the Electronic Frontier
Foundation began accepting Bitcoin, the price grew over several months, going past
$1,000 for the first time by the end of the year.
This is just one example, but is quintessential, since Bitcoin’s price is usually very important as
it determines the price of other cryptocurrencies. When the total market cap of the crypto market
reached a level of over $3 trillion in late 2021, it was due to Bitcoin’s price rising which
also helped other cryptocurrencies rise. Crypto As a Short-Term and Long-Term Investment Regarding short term investment in crypto,
people who do it aren’t really interested in the utility of the cryptocurrency as they
are more interested in the price history. Since the market is highly volatile, many traders
are attracted to it and decide to buy Bitcoin when the prices are low only to sell it when
the prices go up again thus making a profit. But others consider Bitcoin to be a
great store of value which would mean it represents a long-term investment.
Younger generations, in fact, tend to prefer Bitcoin or Ethereum over
gold as a store of value or hedge fund. There are already dozens of companies
around the world that have Bitcoin holdings. Among them, we can mention MicroStrategy, Tesla,
Galaxy Digital Holdings, Square Inc., and Meitu. Is Crypto the Future? The legal status of cryptocurrencies varies
substantially from one jurisdiction to another, and is still undefined or changing in many cases. Some countries have banned cryptocurrency
completely – like, China, Nepal, and Bolivia. On the other hand, El Salvador is the first
country in the world to make Bitcoin legal tender with more Salvadorans having Bitcoin
wallets than traditional bank accounts. The reason why countries aren’t in a hurry to
make such steps is because crypto will allow its citizens to spend money without the government
knowing and they don’t wish to lose that control.
Conclusions If you ask somebody if you should invest in
crypto and they are completely sure in saying “yes” or “no,” you have to wonder what they
know that you or the general market don’t. What you need to do is to look at facts if you had invested $1 in
one Bitcoin ten years ago, that $1 investment would have turned
now into one worth thousands of dollars. The crypto market started
small, with just one coin, and now there are over 8,000
cryptocurrencies that you can choose from. We are not going to offer a
“yes” or “no” answer either. We only invite you to take a look at this
graph and data, keep in mind what we said, do your own research on top of this,
and to conclude with a Satoshi quote: “If you don’t believe it or don’t get it, I don’t
have the time to try to convince you, sorry.” If you liked today’s video and if you have
any other questions about cryptocurrencies, don’t be shy, go ahead and ask
them in the comment section.
See you soon, take care!.
