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Cryptocurrencies gained massive popularity over the years due to their incredible levels of return, high autonomy, and clear transparency. Not to mention the accessibility and safe transaction it offers in the time of a pandemic.
Here are a few other things we thought you should know about Cryptocurrencies:
- As of July 2021, the Cryptocurrency market caps at an estimate of $1.28 trillion, equal to the 8th largest economy in the world.
- Bitcoin (BTC), the most popular Cryptocurrency with 46%market dominance, has a current market capitalisation of $588 billion.
- In the last decade, BTC gained over 250,000% in value.
- Ethereum (ETH), another Cryptocurrency with 17%market dominance, witnessed a 1000% jump in its prices in the last year alone.
Cryptocurrencies saw a rise in prices during the pandemic and were among the assets not deeply affected by the global shutdown.
Trading Cryptocurrencies has now become one of the best ways to see significant long-term returns in traders’ investment portfolios, especially with so many countries now accepting it as a legal form of money. Several platforms give access to trade thousands of Cryptocurrencies, allowing you to benefit from low transaction costs and increased identity theft protection.
But before you start trading Cryptocurrencies, it’s important to know the basics of this digital asset.
What is Cryptocurrency?
Cryptocurrency is a form of digital currency kept secured through Cryptography. This makes it almost impossible for people to double-spend or counterfeit it. Most Cryptocurrencies around the world are decentralised networks run on blockchain technology with a distributed ledger shared, supported, and enforced by a network of different computers.
Cryptocurrency is different from government-authorised currencies because it is completely digital with no paper trail of any kind. It is currently not issued by any central authority – making Cryptocurrency immune to any kind of government manipulation or interference.
Cryptocurrencies are entirely digital and have no physical existence in terms of coins, notes, or bills. It is held in digital wallets, while buying and selling takes place by transferring Crypto coins from one wallet to another.
Introduced in 2009, BTC is one of the most popular types of Cryptocurrencies. Other Cryptocurrencies include BTC Cash, ETH, Litecoin, Ripple, and more. Each was created with a specific purpose: some were made in place of cash, while some were designed for direct and industry-based transactions.
How does Cryptocurrency trading work?
Cryptocurrency trading is almost similar to Shares trading. Traders buy Cryptocurrency at a particular price and hold it in their digital wallet until its price increases enough to sell it for a profit.
For example, let’s say you buy ETH at $1,000, and the price moves up to $1,500 in the next two days. You can then sell your ETH at $1,500 and gain a profit of $500. Alternatively, if the prices fall to $300, you can either hold onto the position and wait for the price to increase or exit the position bearing a loss of $700.
5 things you should know about Cryptocurrencies
Having no middleman means easier transactions
In most types of trading, you deal with several middlemen who interfere in your transactions. Hence, transaction fees are high, with a lot of paperwork, commission, and brokerage charges involved. With Cryptocurrencies, you do not have to deal with intermediaries. There is no government or bank involvement that regulates Crypto trading, making your transactions transparent.
Your transactions only take place on a single secure blockchain network. There is no confusion related to who will pay whom and how many times you pay intermediaries for a single transaction. There is only a one-time transaction fee involved while making a trade.
Legality
While Cryptocurrencies started as a way to bypass government regulations – which made governments wary of it – numerous countries have now recognised Cryptocurrencies as legal entities, including the US, the EU, Australia, India, and Nigeria.
Some countries like Russia, and most recently, China, still have their functioning banned. Each country has its discretion regarding the legalisation of Cryptocurrency trading because, as of now, there are no intermediaries to regulate it.
Even though this may sound disappointing, the important thing to note is that Cryptocurrency is hardly a decade old. Yet, it is recognised by the biggest countries in the world – and the number is only growing every day.
Cryptocurrencies’ cap is limited
You cannot buy an infinite number of Cryptocurrencies since its supply is limited. It is a finite resource that drastically increases in value whenever the supply goes down and the demand rises. This helps in keeping the number of Cryptocurrencies floating in the economy in check. Nobody can just go on and about to create an unlimited supply of Cryptocurrencies to manipulate their prices.
Cryptocurrencies are taxable
Taxation policies differ according to where you reside. However, ever since Cryptocurrencies started entering mainstream markets and expanded their functioning as a medium of exchange, they are now taxed in most regions.
For a long-term capital gain, you need to pay about 20% long term capital gains tax. Of course, rules, regulations, and tax slabs depend on your country of residency and your level of profit.
There are nearly 6,000 Cryptocurrencies in existence
As of July 2021, you can choose from almost 6,000 Cryptocurrencies to invest in. However, not all of them give as much profit as others. Only a few of these, like BTC, ETH, and Dogecoin are safe bets, for the most part. Also, anybody can bring any Cryptocurrency into existence as there are currently no regulatory bodies for the market.
Start trading Cryptocurrencies today
After all that we’ve discussed, it is clear that Cryptocurrencies have grown over the years – and will continue to do so. As risky as they seem to be, they are still one of the highest profit-making investments in today’s world with no third-party intervention.
Blueberry Markets makes Cryptocurrency CFD trading as easy as it can be. Learn more about our platform and get access to all financial instruments here.
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