(Newswire.net — March 30, 2021) — Several people in the cryptocurrency market get confused when they have to decide whether digital currencies like bitcoin and ethereum are a wise asset group to invest the money in. Here we are to help you get out of this confusion.
Bitcoin is a crypto that was welcomed open heartedly by its fans as a sign of market-disrupting liberation and predicted by critics as a dangerous, volatile creation. We have been that bitcoin and other cryptocurrencies are never out of the headlines for long. It was on December 16, 2020, when the price of bitcoin hit $20,000 for the first time. Again on January 3, 2021, its value soared above $34,000, meaning the cryptocurrency had gained almost $5,000 in the first few days of 2021. But after this immense rally, It has drifted lower, to about $31,500.
It is generally believed by the critics that the recent hype in the price has been due to a wave of money from both institutional and private investors, fueled by the coronavirus pandemic.
Cryptocurrency is defined as a mysterious currency. Satoshi Nakamoto is an anonymous figure who developed bitcoin, created and deployed bitcoin’s original implementation software and conceived the first blockchain database.
What is bitcoin and how does it work?
When we start learning about the digital currency, we see that the Bitcoin trader sending bitcoin to people is not that complicated in itself — after all, transferring money from one online bank account to another is doing exactly that. Blockchain technology is the main core of all cryptocurrencies. This is a way of sending data in cyberspace. It is different from normal currencies like dollars and pounds as these cryptocurrencies are “decentralized”. These are not regulated by a financial authority, like a government or central banks. So it could be a big plus point if cryptocurrency.
The system of cryptocurrency is global. So these cryptocurrencies have the same value in every country. This is the quality that makes them much easier to transfer from person to person across the globe. There is no confusion of exchange rates.
But one major disadvantage of digital assets such as bitcoin is that they are volatile. We have also heard about some technical issues in Bitcoin as the people have had to wait a long to cash out their coins.
Which are the three biggest cryptocurrencies?
Bitcoin, being the first major cryptocurrency, launched in 2009 and since then it has been enjoying the position of a market leader. Its market capitalization is worth $590bn, as of January 4. The coins like Ethereum and ripple stand in second and third position, with respective market caps of $115bn and $23bn, as of January 4. In the same year 2009, a wide range of challenger cryptocurrencies, dubbed altcoins, were introduced.
How has the bitcoin price performed?
Bitcoin has seen its price hike steadily since September 2020. And it is all time empowered by demand from investors. The decision from PayPal of allowing US customers to buy and sell the cryptocurrency within its app also fueled it. The value of one bitcoin was $31,685, as of January 4.
We have also witnessed the cryptocurrency market having steady gains before, such as at the end of 2017 – before collapsing in 2018.
The cryptocurrency market could be defined very well when we name it to be a place having extreme volatility. As we have seen, the investors who had invested at the start of 2020, were successful to get a 300% profit by the end of the year. However, if any of the investors invested at the start of 2018 and sold at the end of the year on New Year’s Eve, he would have lost 73% of his money as the bitcoin price collapsed.
You are not alone who could be shocked to see such an abrupt rise and fall in the price. The fact is that the value of these currencies like anything else is linked to supply and demand plus the number of competitors. So most of the time it is hard to determine what exact factors influence this erratic performance. This makes digital currency all the riskier to invest in!
Is bitcoin a good investment?
So we can see that Bitcoin is all the time at the “high-risk” end of the investment spectrum. All the cryptocurrencies are volatile. You can expect a sudden price fall any time, and occasionally one of these coins may increase in value and produce a return for investors. As it is advisable with any investment, you should do your complete research due and don’t focus all your hopes on one company or one cryptocurrency.