Out of all the assets that investors put their money in, there is no long-term wealth creator than the really popular stock market. This is because the annualized return of stocks is 7%. However, when looking at cryptocurrencies, they quickly established themselves as a much higher wealth creator. Investors oftentimes got rich in just one year after making a rather small investment because of the fast value increase associated with virtual coins.
However, before you go to an exchange and want to invest, here are some very important facts you have to be aware of.
The Volatility Of Cryptocurrencies Is Exceptionally High
One of the very first things interested investors see when they look at cryptocurrencies is their volatility. This happens because virtual trading happens on various different websites that allow you to convert cryptocurrency. Transactions do not happen through central exchanges so it is normal for volatility to be very high.
As an example, in just a couple of months, a cryptocurrency can increase in value by 3,200%. At the same time, another cryptocurrency might lose 20% of its entire value. Making smart investments is mandatory.
There Is Nothing That Backs Cryptocurrencies
In the financial world, cryptocurrencies do not follow the same logic as regular currencies. This is because they are not backed by a government or a central bank. There are practically no tangible factors that lead to value increases. You can easily look at earnings histories for stocks to be able to estimate some sort of evolution. With digital currencies, they are not influenced by regular factors like GDP growth or stock increases. It is practically impossible to value cryptocurrencies in the same way that you do with currencies and stocks.
Also Read: Best Bitcoin Trading Strategies for 2020
Over 1,300 Cryptocurrencies Exist
Although Bitcoin is the most popular and well-known of all cryptocurrencies, in total there are over 1,300 digital coins that you can buy and trade. However, Bitcoin is what you most likely want to look at first. It was the very first cryptocurrency on the market and it actually makes up over 50% of the entire crypto market cap. In fact, around 24 crypto coins have a higher than $1 billion market cap.
The Real Value Of The Crypto Currency Is In Blockchain Technology
The emphasis of the industry is currently put on currency trading. However, what led to the creation of the coins in the first place is what is very valuable.
We can define blockchain technology as being the infrastructure used by cryptocurrencies. The technology is decentralized and digital and it records transfer transactions and payments in a highly efficient and safe manner. This led to it being used for numerous other purposes in countless industries.
Cryptocurrencies are here to stay. It is time to learn more about it because there is a very high possibility that you will eventually own some coins. However, blindly investing in cryptocurrencies can lead to huge losses if you do not know what you are doing. Due to this, always be informed and never make choices before you are confident.