This is the 2021 guide on cryptocurrency: discover what is it, how it works, what is it for, which are the most profitable and how cryptocurrencies were born.
What is a cryptocurrency and what is it for?
A cryptocurrency is a digital currency, also called just crypto.
It is a medium of exchange characterized by strong cryptography that allows transactions to be carried out safely.
Investing in cryptocurrencies is the first choice of traders who want to generate passive income.
Its operation, which does not depend on banking institutions, is regulated by a network called blockchain.
How were cryptocurrencies born?
The origin of cryptocurrencies is linked to the failure of Lehman Brothers, an American financial company.
In September 2008, the bankruptcy date, this investment group was the fourth most powerful in the United States.
This bankruptcy is considered the greatest in US history and marks the first step in the global financial crisis, which originated in 2008.
Therefore, a month later, Satoshi Nakamoto published a document on the possible creation of an electronic payment method, free of bank intermediaries: bitcoin.
In 2009, this coin started working and, like it, the rest of the cryptocurrencies that are currently dominating the market.
In the following image, you can see the alternation of some of the most popular cryptocurrencies:
What is the function of cryptocurrency?
The creation of the cryptocurrency has as its main objective to carry out online transactions outside the public-service corporation.
Users can exchange their cryptocurrencies stored in their digital wallets and, with them, make payments.
It’s a digital currency that differs from the traditional one in its appearance since it is not physical.
What are the advantages and disadvantages of cryptocurrencies?
The advantages of cryptocurrencies are the following:
- Immediate and irreversible transactions.
- Global currencies.
- Encryption provides security.
- No ties to banking entities.
On the other hand, there are still disadvantages:
- Distrust of users.
- It is a market in which competition has grown in recent years.
- No ties to banking entities.
What are the benefits of using cryptocurrencies?
The advantages of cryptocurrency are the following:
- The monetary policy of central banks, such as the European Central Bank, does not affect cryptocurrencies’ price.
- Decentralization allows operations to be carried out throughout the day, without specific planning.
- Users do not disclose their data in financial transactions.
- Users can perform Cryptocurrency operations in any country in the world.
- Exchanges are faster than in banks.
- Market volatility represents a difficulty for investment but, at the same time, it is a business opportunity.
To show you an example of volatility, Barone Enterprise Study Center observed bitcoin on days 1st and 15th of the month, from January to August 2020.
The figure, expressed in dollars, is the latest of that day.
From August 1st to October 15th, 2020, bitcoin’s value ranged between 10,000$ and 12,000$.
In November and December, its value increased to 13,000$, 15,000$ and 18,000$.
From 1st to 15th December, a significant drop in the price was observed: from 18,812$ to 7,136$.
What is the difference between a digital currency and a cryptocurrency?
Digital currency is money, used on the Internet, that exists only in digital form.
There is no physical equivalent in the real world, but it has all traditional money characteristics.
Both its use and the transfer of currencies have no geographical boundaries.
A cryptocurrency is a variety of digital currency, originating through the blockchain, based on cryptography.
How are cryptocurrencies obtained?
The first step in obtaining cryptocurrencies is to acquire a digital wallet or exchange.
There are several ways to acquire cryptocurrencies:
- Offer a service or product and accept cryptocurrency as a payment method.
- Watch ads and, in return, get paid with cryptocurrencies.
- Mining: In cryptocurrency networks, each participating computer can perform mining, which means validate and record transactions through complex mathematical operations.
- Automatic trading, which is based on the trading of cryptographic assets and involves a robot.
How many types of cryptocurrency wallets are there?
There are different types of wallets for cryptocurrencies.
Below I will explain the various classifications.
The main type differentiates cold from hot accumulation.
The cold wallet is offline.
This is the case of the hardware wallet, which offers different sizes.
The hot wallet is the most common, thanks to its online operation.
The online wallet is characterized by its accessibility, as users can buy it on investment platforms.
It is the best choice if cryptocurrency operations are active.
On the other hand, there are mobile and portable wallets, which work as an app.
Desktop wallets work the same way, relying on software which is downloaded to a computer as well.
A multi-signature wallet, instead, stores two private keys for two different users.
Lastly, the multi-currency wallet allows you to store different cryptocurrencies.
Are cryptocurrencies real money?
Cryptocurrency is, in short, real money in digital format.
There are no physical bills or coins.
There are bitcoin ATMs installed in different countries.
The United States, Canada and the United Kingdom are the countries with the largest number of ATMs, with a clear gap between the first one and the other two.
As shown in the infographic, the distribution by continent is as follows:
- North America: 73.31%.
- Europe: 20.36%.
- Asia: 4.11%.
- Oceania: 1.79%.
- Latin America: 0.32%.
- Africa: 0.11%.
How can you use cryptocurrencies?
The user who operates with cryptocurrencies must acquire a wallet.
You need to configure an address to carry out transactions, consisting of two cryptographic keys: one private and one public.
The public key is the one that is sent to initiate the operation and verify its validity.
With the private key, however, you sign to transfer the money.
Finally, the data is processed and stored on the blockchain network.
What are the characteristics of cryptocurrencies?
The characteristics of cryptocurrencies are as follows:
- Decentralized control, unlike traditional currency.
- Operations are irreversible.
- Cryptocurrencies can be exchanged for other currencies.
- The market is active 24 hours a day, seven days a week.
- Bitcoin and altcoin prices are volatile.
- Provides confidentiality to users.
- Cryptocurrencies work with an encryption system.
According to the Cambridge dictionary, cryptography is:
“The practice of creating and understanding codes that keep information secret”
In the specific case of cryptocurrencies, cryptography is the set of algorithms that encode messages to protect them from third parties.
What can you buy with cryptocurrencies?
With cryptocurrencies, you can buy all those products and services related to e-commerce, anytime the virtual store supports this payment method.
What are the existing cryptocurrencies?
While there are currently around 2,600 cryptocurrencies, the main ones are:
- Bitcoin (BTC).
- Ethereum (ETH).
- Ripple (XRP).
- Tether (USDT).
- Litecoin (LTC).
Which cryptocurrency has more chances for the future?
Which cryptocurrency has more chances for the future depends on user demand, market volatility and the application of technology.
In the following chart, you can see which are the cryptocurrencies with the highest capitalization.
The Barone Enterprise Study Center collected the graph data on January 4, 2021.
The figures and positions are moving, depending on the factors mentioned above.
However, bitcoin always remains in the first position.
What are the most profitable cryptocurrencies?
Within this capitalization, bitcoin is the leading cryptocurrency.
Profitability depends a lot on how various strategies are applied, such as cryptocurrency arbitrage.
Barone Enterprise has developed the CryptomaticTrader®, a 100% automatic tool with which the customer has absolute control of his capital.
How many cryptocurrencies exist?
According to data from January 2021, there are around 2,600 cryptocurrencies.
Bitcoin, created by Satoshi Nakamoto, is the most popular cryptocurrency on the market: it is the most reliable digital currency, compared to altcoins, thanks to its “stability”.
What is the best cryptocurrency?
Today, the best cryptocurrency is bitcoin: it is the most stable, secure and easy to acquire.
This is demonstrated by the data in this guide, produced by the Barone Enterprise Study Center.
Another strong cryptocurrency on the market is Ethereum.
The following image analyzes the evolution of these two cryptocurrencies from 2016 to mid-2019.
In which cryptocurrencies should you invest in 2021?
Currently, any cryptocurrency is a good investment.
Volatility, however, positively or negatively affects transactions.
With cryptocurrency arbitrage, the trader applies a strategy in which he inexpensively buys a cryptocurrency and resells it at a higher price.
That is: he seeks the opportunity in an unstable market.
Barone Enterprise Study Center has chosen January 4 to analyze the price changes of cryptocurrencies in 24 hours and a week.
Altcoins have increased their daily volume.
The one that grew the most was Ethereum.
Although the 4th of January, bitcoin’s price has fallen, its difference with the rest of the cryptocurrencies remains significant.
As for the weekly volume, XRP was the only one to decrease.
The altcoins increased their daily value. With ethereum at the top.
Is it profitable to invest in cryptocurrencies in 2021?
Cryptocurrencies are the currencies of the present and the future.
The International Monetary Fund (IMF) has surveyed which payment method people will prefer over the next five years.
The organization is well aware of the spread and growth that cryptocurrencies are having in citizens’ daily lives.
And the result of the survey confirms it.
Cryptocurrencies win 56.2% compared to cash, mobile applications and credit cards.
Should you consider investing in cryptocurrencies?
Investing in cryptocurrencies is an easy and accessible option for all types of investors.
That’s why cryptocurrencies gain more followers.
The current president of the European Central Bank (ECB), Christine Lagarde, said at a Bank of England conference that:
“It would be unwise to exclude virtual currencies”.
How much to invest in cryptocurrencies?
Cryptocurrencies allow investors to start auto-trading on any budget.
This type of financial investment is therefore accessible to any user of financial products.
What will happen to cryptocurrencies in 2021?
Libra, Facebook’s cryptocurrency, and Learning Coin, the ECB and IMF’s digital currency, are two of the new cryptocurrencies on the market.
The latter can be defined as a pseudo-cryptocurrency, a study project on these assets.
Even though new cryptocurrencies continue to appear, investing in bitcoin is the first option.
Additionally, Barone Enterprise is engaged in buying and selling cryptocurrencies through the Cryptomatic Trader.
With this bot, the user has absolute control of their capital: it is an opportunity to generate passive income.
A cryptocurrency is a digital currency characterized by strong cryptography, used to carry out transactions in absolute security.
From this guide, you can draw those conclusions:
- Investing in cryptocurrencies is the first choice of traders.
- Its operation is regulated by a network called blockchain.
- Bitcoin, created in 2009, is the first cryptocurrency in history.
- There are currently around 2,600 cryptocurrencies. Bitcoin, ethereum and tether are the main ones.
- It is a digital currency, independent of banking entities.
- Security, speed and accessibility are some of the characteristics of cryptocurrencies.
- Market volatility represents a financial investment difficulty and, at the same time, a business opportunity.
Barone Enterprise is a leading auto trading and bot design company.
The Cryptomatic Trader is a bot operating on the cryptocurrency scene: its software allows the cryptocurrency investor to make money without knowing anything about trading.