Virtual Currencies – Beginner Investor’s Guide

Virtual Currencies

Virtual Currencies are a type of digital currency that allows you to buy goods and services or use them as a form of investment. A specific feature of Virtual Currencies is that, in general, they are not issued by any central authority. As such, many investors consider them immune to attempts at manipulation or government interference.

Virtual Currencies use a modern technology called “Blockchain” to secure their transactions, which is almost impossible to crack and forge. Through this technology, cryptocurrency transactions are divided into many small pieces stored and managed by a group of computers. Thus, for someone to decode the encryption, they must access all the computers that store these little bits.

Virtual Currencies – a brief history

Not many people know this, but the history of cryptocurrency began in 1983 when a crypto expert named David Chum developed the idea of ​​using a cryptosystem to conduct economic transactions.

The term cryptocurrency was first used by Wei Dai in 1998, who thought of using such a tool as a decentralized payment method. The first cryptocurrency to be launched was Bitcoin, a virtual currency that is still the most popular.

Bitcoin was launched in 2009 by an unknown person or group of people under the pseudonym “Satoshi Nakamoto.” The impetus for the creation of Bitcoin was the economic crisis of 2008, in which millions of people were affected. Nakamoto came up with a brilliant idea of ​​creating a payment method that is not tied to any government and thus unaffected by political events.

How many Virtual Currencies are there?

Although many of us have only heard of ten or twenty of them, there are currently over 6,700 publicly traded Virtual Currencies, and their numbers continue to rise as if from today. According to statistics, the total value of the crypto market is estimated at $1.5 trillion as of February 2021.

Not surprisingly, Bitcoin is the most popular virtual currency of all time. The market capitalization of Bitcoin is twice the size of all other Virtual Currencies.

Are Virtual Currencies legal?

Although countries like India have banned the use and trading of Virtual Currencies, it is legal in most countries. Not only will you be able to buy and sell them however you like, but in some countries, some stores accept direct payments in cryptocurrency for the products they sell.

In the United States, even real estate companies have recently appeared that allow you to buy homes through these payment methods.

Why is it so popular?

Virtual Currencies have many supporters today, and the reasons why they choose to buy these tools are many:

  • Many see Virtual Currencies as the currency of the future and choose to buy them now before their price increases further.
  • Some believe that the main advantage of cryptocurrency is that it is not linked to any central bank, and this only increases its value over time.
  • Technology enthusiasts choose the crypto version because they understand, trust and love the idea of ​​blockchain.
  • Investors see it as a great way to make money and choose to buy, waiting to sell when the price increases.

Is it a good idea to invest in Virtual Currencies?

Since the price of virtual currencies can go up at any time, many see in these tools a real opportunity to make money. The problem is that, just like in forex transactions, it doesn’t generate any cash flow when you buy cryptocurrency. So, for you to make money, there has to be someone in the future who agrees to pay you more money than you gave them.

For this reason, such investments can only be viewed as speculation and not as investments in the true sense of the word. Most experienced investors urge us to stay away from the cryptocurrency market.

Let’s take what happened in the past years as an example: In December 2017, the value of Bitcoin was very close to $20,000. A year later, it reached a low of $3,200. In December of last year, it again reached the $20,000 threshold and is now at historic levels.

But if you bought the maximum in 2017, you will have to wait until now to make some profits.

Advantages and disadvantages of Virtual Currencies

Advantages

  • You earn money. There is a good chance that you will get great returns from investing in Virtual Currencies, which are much higher than, for example, in stocks.
  • Get rid of the money. You no longer have to carry a wallet of physical money with you; you need a mobile phone to access the encryption.
  • Increase safety. Since the blockchain in which you purchased the cryptocurrency cannot be reconstructed, you can be sure that no one can steal your currency from your account.

Disadvantages

The future is still uncertain. No one can say exactly how the cryptocurrency market will develop. Yes, it is trendy now, but we do not guarantee that the demand will be high next year and that the prices will remain high.

Not insured. The bad part about Virtual Currencies is that any commodity does not secure them. The shares are valued at least based on the company’s market capitalization, while the price of the coins is determined strictly by market demand.

Transactions cannot be tracked. One of the drawbacks of blockchain is that no transaction can be traced back, so many thieves are currently using Virtual Currencies.

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د. مرهف العطاسي

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