Cryptocurrencies! WHAT ARE THEY???- Complete Guide

4년 전

What to Look for in a Cryptocurrency

But first What is a cryptocurrency?

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Lets just say "Cryptocurrencies are new forms of online currency, in effect digital money. They are designed to be secure and anonymous". This by far is the simplest definition, and if you are familar with cryptocurrencies you must have come across words like -blockchain, mining, ICO's etc.

But for clarity purpose i will go ahead and give a little definition for these terms so you can better understand them;

BLOCKCHAIN:

Blockchain is the name for the technology upon which all cryptocurrencies operate. It is a ledger that keeps a record of where all the relevant cryptocurrency is stored, and all of the transactions that have taken place.

MINING:

Mining is the name given to the process by which units of cryptocurrencies are created. It involves using computer power to solve complicated maths problems, as well as using processing power to support the upkeep of the blockchain.

ICO:

An ICO stands for Initial Coin Offering. It is where newer cryptocurrencies, hoping to raise funds to support the future upkeep costs of their business, for example by paying for hardware needed, various upkeep costs, or even human staff, put up their cryptocurrency for an initial sale to raise these funds.

Now Back to My Original discussion.

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What to look for in a cryptocurrency?

Although The new technology is being hailed as the next big online investment opportunity (although some investors are urging caution, comparing the boom to the dot-com bubble, and expecting it to burst), as evidenced by the explosion in value of the most popular and well-known cryptocurrencies, Bitcoin and Ethereum.

In case you are wondering what a dot-com bubble is
well guess who is at your rescue again, MEEEE!!!! :D

well the dot-com bubble was a historic economic bubble and period of excessive speculation that occurred roughly from 1997 to 2001, a period of extreme growth in the usage and adaptation of the Internet by businesses and consumers.

At the beginning of 2017, one Bitcoin was valued at just under $1000, while one Ethereum was valued at $8. Bitcoin went on to peak at over $6000, while Ethereum peaked at $416. While these currencies are volatile, with their values fluctuating both quickly and wildly and their values having dipped recently, they still possess huge investment potential.

So with these currencies having soared in value already, you may feel like you might have missed the boat slightly on cryptocurrencies and be wary of investing. However, there is no need to worry about this really, as new cryptocurrencies are being launched all the time – any one of which could have the potential to see the same sort of rapid growth as Bitcoin and Ethereum.

Cryptocurrencies are essentially pieces of software, just lines of code.

The trick for finding the next potentially big cryptocurrency is to look for a cryptocurrency that promises to do something different to other existing cryptocurrencies with its code, to upgrade, improve upon, or revolutionise the processes upon which other cryptocurrencies operate upon.

Weighing up the Risks

In recent weeks JPMorgan boss Jamie Dimon has lambasted cryptocurrencies such as bitcoin as being just a “novelty” and he claimed that they are “worth nothing”. However, in response to his comments, Fadi Ghandour who is the CEO of Wamda Capital, a major Middle East-based tech investment firm, said that Dimon needs to better educate himself about the burgeoning cryptocurrency market, and the technologies behind it, before making such sweeping generalisations. While Gandhour is a strong proponent for cryptocurrencies, being the founder of the Middle East’s biggest cryptocurrency, BitOasis, he has urged some caution when embracing the new technology.

While this technology is currently a huge growth area, representing huge potential to quickly grow investments, he explained: “people could get hurt but also people are mature and can make their own decisions. If you want to be part of a bubble, you are part of a bubble. You understand the risk”. He went on to draw the comparison to the tech crash of the late 1990s, following the earlier bubble, which has apparent similarities to the current state of cryptocurrencies. He also pointed out that the Dot-Com crash did not stop all of the tech companies becoming integral future platforms, as many believe that cryptocurrencies may one day soon become as well.

Can you trust an asset, which demonstrated this incredible vertical take-off? Must it not be a bubble?

Sure: it would have been better to invest one year ago, two years ago or six years ago. But if you understand the potential of also be found and if your belief in their vision of money, today might be the best day possible to start investing in it. That’s why we wrote a guide explaining how to invest in cryptocurrencies. We will tell you how you create a cryptocurrency-portfolio, where you buy cryptocurrencies, how you store them and how you tax your gains.

This said we need to note that cryptocurrencies are not a normal investment. The volatility grossly exceeds that of any other investment class. It is to some parts unregulated. There is the risk that cryptocurrencies get outlawed, that exchanges get hacked or that you lose your cryptocurrency key. Cryptocurrencies are a high-risk investment.

Why Invest in Cryptocurrencies And Why Not?

Besides what was already said, there are three major good reasons to invest in cryptocurrencies. First, because you want to hedge your net-worth against the fall of the Dollar imperium, which is assumed by many people to inevitably happen at some time. Second, because you support the social vision behind cryptocurrencies – that of a free and hard money for the whole world. Third, because you understand and like the technology.

However, there are also very bad reasons to invest in cryptocurrencies. Many people fall victim to the hype surrounding every cryptocurrency-bubble. There is always somebody captured by FOMO (fear of missing out), buying massively in at the peak of a bubble, just in hope to make quick money, while not understanding cryptocurrencies at all. That’s a bad reason. Don’t do this. Learn before you invest.

What Cryptocurrencies Should I buy? Building your Portfolio.

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The former only crypto has been Bitcoin. Up until late 2016 Bitcoin was the cryptocurrency, and there was not much besides it. If you wanted to invest in the success of cryptocurrencies, you bought Bitcoin. Period. Other cryptocurrencies – called “Altcoins” – have just been penny stocks on shady online-markets, mostly used to keep miner’s GPUs working, pump the price and dump the coins.

However, this has changed. While Bitcoin is still the dominant cryptocurrency, in 2017 it’s share of the whole crypto-market has rapidly fallen from 90 to around 40 percent. Many people saw this coming as a result of the growing popularity of Ethereum and the ongoing self-tearing of the Bitcoin community over the blocksize issue. This again shows that it is important to keep your eyes open and listen to what the communities say.

If you want to invest in cryptocurrencies, Bitcoin is still a standard item of every portfolio – but it is no longer the onliest asset. In every well-balanced crypto-portfolio today you find other coins, like:

A good starting point to put together your portfolio should be the website coinmarketcap.com

Market cap means the value of all token available. It is not a perfect metric, but likely the best we have to recognize the value of a cryptocurrency.

If you want to have a balanced portfolio at one point in time, it might be a good strategy to simply reflect the ten most valuable currencies in your portfolio. More interesting however is it to take some time, read about those coins, decide, if their vision gets you and make this to the base of your asset selection.
For example, you’ll find some coins focused on privacy, like:
• Dash
• Monero
• Zcash
Some on smart contracting, like Ethereum and Ethereum Classic, and some on scaling payments, like Litecoin and, again, Dash. Some coins, like Ripple or Nem or Bitshares, seem to be less open and decentralized as Bitcoin and other coins.

The cryptocurrency markets are a blazing, often confusing ecosystem, in which you find thousands of chances to win a lot of money – and to lose it. Every day gives birth to new coins and death to some old coins. Every day sees some coins heavily falling, and some vertically raising.

If you buy altcoins, there are some rules to discriminate the good from the bad. Good coins have a transparent technical vision, an active development team, and a vivid, enthusiastic community. Bad coins are in transparent, promote fuzzy technical advantages without explaining how to reach them, and have a community which is mostly focused on getting rich. Maybe the worst shatter of cryptocurrencies are the MLM coins, for example, OneCoin, which target the technical uninformed with a multi level marketing system, promising to be the next Bitcoin. Beware of them!

How to buy Cryptocurrencies?


While some years ago it was a real Odyssey to buy cryptocurrencies, today you have a full scope of options.
Exchange traded notes and more

Let’s begin with buying Bitcoin. That’s the easiest part. Some people want to invest in Bitcoin without having the trouble of storing them.

They can use investment vehicles like the XBT tracker (available on Swedish and German exchanges), the Bitcoin investment trust on Second Markets (USA), the Bitcoin ETI (Gibraltar and Germany) and some more. As Bitcoin rises, more and more brokers and exchanges try to setup a Bitcoin based financial product.

All these investment products have in common that they enable investors to bet on Bitcoin’s price without actually buying Bitcoin. While most cryptocurrency-fans think that this takes away the whole fun and sense of it, for many people it is the easiest way to invest in Bitcoin’s success. You can use the investment channels you already are used to, and if something goes wrong, you have your certificate and someone to take to the court.
Currently, no such investment product exists which covers more cryptocurrencies. But there are some in progress, both in the USA and in Europe.
Buying Real Bitcoin on Exchanges
If you want to experience possessing real Bitcoins – or if you want to avoid paying the partly high fees for investment products – you should start buying Bitcoin directly. For doing so, you have a lot of options all over the world.

For example, in Europe, you can use:
• Bitcoin.de
• Kraken
USA
• Coinbase
• BitFinex
• BitStamp
• Gemini,
Asia
• OKCoin
• BTCChina
• BitFlyer

I must state that I am in no way affliated with these guys, I’m just a good boy trying to help :D

But mostly buying Bitcoin is not a big problem. You open up an account at the exchange, verify your identity – this is required due to Anti-Money-Laundering rules in most jurisdictions – and fund your account with Dollar or Euro or whatever paper money you use. On some exchanges, like Bitcoin.de, you don’t need to fund your account, but trade directly with other users.

The question, what exchange to use depends mostly where you live. It’s alway better to use an exchange physically close to you. If it is located in the same jurisdiction like you, you have the best chances to get money legally back if some bad things happen. If no exchange is located in your jurisdiction, it is better to use exchanges based in stable countries with a good legal system.

Another factor to decide which exchange you use is some coins you want to buy and your patience. If you want to acquire large sums of Bitcoins fastly, you need to use one of the major exchanges which provide enough liquidity. If you only want to buy small amounts of coins and if you are not in a hurry, you can try to buy them on small exchanges. If your order gets filled, you most likely will get better prices than on big exchanges.

Buying other Cryptocurrencies

Other than Bitcoins, Altcoins (The word “altcoin” is an abbreviation of “Bitcoin alternative,” and thus describes every single cryptocurrency except for Bitcoin. Altcoins are referred to as Bitcoin alternatives because, at least to some extent, most altcoins hope to either replace or improve upon at least one Bitcoin component.) are somehow harder to acquire. Some major exchanges like Kraken, BitFinex, and BitStamp, have started to list some popular Altcoins, like Litecoin, Ethereum, Monero, and Ripple. If they are part of your portfolio, don’t hesitate to buy all at one stop shop.
But there are hundreds of cryptocurrencies out there. If you want to go to a crypto supermarket, where you can buy and sell most of them, you need to register at what is usually called an altcoin exchange.
Examples are:
• Bittrex
• Yunbi
• Bithumb
• Poloniex.
Again, the site coinmarketcap is useful, as it lists all crypto exchanges, sorted by trade volume.

The Altcoin exchanges have less strict KYC (know your customer) rules, as here you usually don’t trade with fiat money. You can fund your account with Bitcoin, which serves as a unit of account for the altcoin markets, similar to the Dollar’s function on the Forex markets.

Like with Bitcoin exchanges you should be careful to choose an exchange with a high trust level. However, most altcoin exchanges are not regulated, and many are located in Asia. So you never should place too much trust in them, as you have nearly no chance to get anything back if they are hacked or file bankruptcy. But exchanges like Poloniex and Bittrex are based in the US and have a long history of providing a secure and safe trading environment.

Is there a good time to buy?

There is no general rule when to buy cryptocurrencies. Usually it is not a good idea to buy in at the peak of a bubble, and usually, it is also not a good idea to buy it when it is crashing. Never catch a falling knife, as the trader’s wisdom says. Best time might be when the price is stable at a relatively low level.

The art of trading is to decide when a crypto is in bubble mode and when it reached the bottom after falling. What is easy to say in retrospective is a hard question in the present, which can never be answered with absolute certainty. Sometimes a coin starts to raise, and after it passes a mark, where everybody thinks this must be the peak of a bubble, the real rally just begins.
For example, many people did not buy Bitcoins at $1,000 or Ethereum at $100, because it seemed to be crazily expensive. But some month later these prices appear to have been a good moment to start.
There is only two advice about timing I can give. First, don’t compare crypto bubbles with traditional financial bubbles. 10 percent up is not a bubble but can be daily volatility. 100 percent up can be a bubble, but often it is just the start of it. 1,000 percent might be a bubble usually, but there is no guarantee that it pops.

Second, take some time to watch. Don’t buy in, because there was a dip. There might be another. And don’t buy in, because you fear that it will explode tomorrow. Watch it, get yourself informed, buy it, when you think the timing is good. And, maybe most important: don’t be a weak hand. Don’t sell too early. Hold. The monetary revolution has just started.

How To Store Cryptocurrencies?
After you acquired cryptocurrencies, the most important question is how to store them. You have several options which enable you to find your balance of risks.

Keep them off an Exchange


If you invested not only in Bitcoin but in several Altcoins, there is usually no way around keeping coins on an exchange. You don’t want to get in the trouble of installing, compiling, malware checking, using, syncing and updating the software for every coin you invested in.
More as in the process of buying, the trust in an exchange becomes very important, when you store your coins there. There is a long history of hacks and bankruptcies in cryptocurrency markets, most famous the hack of Mt. Gox, which sucked up hundreds of millions of customer’s Dollars. So if you use an exchange to store your coins, you should gather some information:
• Where are they located?
• Are the owners known?
• Since when do they operate?
• Do they provide some audits to ensure you that all the coins are available?
• How do they react to customer’s requests?

For example, for people in the EU, Bitcoin.de enjoys a strong trust level. The exchange operates without loss of customer’s funds since 2011, the owners are well known in the German and European community, and an annual audit by external company checks if all coins are available. This level of trust, however, can rarely be achieved when you hold a lot of altcoins. That’s the risk you need to take.

-So my friends there you have it, my two cents on cryptocurrency, i hope you got something from it, especially newbies.

If you have any questions please leave a comment and follow me @jaycidiq (i'll follow back)

More posts coming up on Altcoins and ICO's

Don't forget to follow and comment!, much love from @jaycidiq

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