What is Cryptocurrency? - Details, Types & How to Invest | Espresso

Everything You Need To Know about Cryptocurrency

The cryptocurrency industry has been in the news for a while now. Also, it’s growing in leaps and bounds. With Bitcoin, Ethereum, and Dogecoin making headlines in the past few months, knowing this currency before investing is important.

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Investors, both novice and expert, are drawn to this industry as they think it could be a fast way to earn profits. However, unlike share markets, the cryptocurrency market doesn’t have any set regulations.

In a crypto exchange, the currency values go up and down all the time. These digital currencies are volatile because of the frequent market ups and downs, there are several things that you need to have an idea about before investing in the same.

 What is Cryptocurrency?

Crypto or cryptocurrency payment is a type of payment that doesn’t require any central financial authority like banks or other government institutions to circulate. Instead, these are created with cryptographic techniques that enable a person to purchase, sell, or trade-in the same safely.

Cryptocurrencies do not exist physically, which means that you cannot just hold a Dogecoin or a Bitcoin in hand. However, you can trade in cryptocurrencies on the internet.

Also, each one of the cryptocurrency coins has a unique code or a line of the program. This means that nobody can copy the coins you have invested in, and this way, it will be easier to track and identify your currencies while trading.

How Do Cryptocurrencies Work?

Cryptocurrencies run across the internet. These are not backed by the government or any other central authorities. These are exchanged between partners on the web without any intermediary or middleman. The transactions in cryptocurrency are secured by cryptography. So, it only allows the senders and the intended recipients to view the contents.

What are the Different Types of Cryptocurrencies?

Bitcoin, Litecoin, Chainlink, Dogecoin, Mooncoin, and Shiba Inu are some of the most common cryptocurrencies available. However, Bitcoin is the most traded and the most popular amongst them. Currently, there are 6,000 plus cryptocurrencies available for investment.

If you are interested in investing, Bitcoin is a stable option. When it first came into existence, it was traded below one dollar. However, its value picked up momentum over the past few years, and now cryptocurrencies by market capitalization have gone up to $1 trillion. However, you should still explore your options and choose the best one to serve your needs.
Also Read: Complete Guide on USD INR Trading

How to Invest in Cryptocurrencies?

  • Like stock market investments, the cryptocurrency market also has brokers or a crypto exchange through which you can invest. They are the facilitators who would charge some commission or certain fees for your transactions. You may also get rewarded for hitting a milestone. However, such policies usually differ according to the different exchanges.
  • In India, there are many crypto exchanges. If you invest through any of these, you need to sign up through the app, put your KYC details, and buy the currencies of your choice. These exchanges will also help you to keep a tab on the value of the cryptocurrency that you would like to buy or sell.
  • The various crypto exchanges depend upon the investors for the ownership of the currencies. This happens when you will deposit the cryptocurrency to sell, and a new user will come to buy it. This is what will facilitate the trading.
  • You can invest in cryptocurrencies fractionally. For example, if you are thinking about buying a Bitcoin, you will not have to buy a whole Bitcoin or BTC. You can just invest in a certain fraction of a BTC. This is the same with all kinds of cryptocurrencies that you would like to invest in.

How Stable is a Cryptocurrency Investment?

Early this year, the Bitcoin value skyrocketed to around ₹29.70 lakh. As it continues to be bullish in nature, towards the end of April 2021, its value reached an all-time high of nearly ₹48.27 lakh. However, later in May, its value fell a little, and throughout June, it maintained the range of around ₹22.28 lakh. Now, recently, Bitcoin’s value has skyrocketed once again, and it’s now ₹51 lakh approx.

This shows that the price conditions in the crypto exchange are volatile in nature. Also, the crypto market thrives on assumptions. Here, the investors usually place speculative bets causing a sudden inflow of money, or even a sudden downfall, leading to market volatility.

However, the crypto market is still seen as an easy way of earning profits. Part-time investors often try to invest in cryptocurrencies for quick gains. However, they often withdraw from the same due to a lack of patience. So this is one of the major reasons behind the volatility of such digital currencies.

Conclusion

Cryptocurrencies are volatile in nature. Hence, if you are just a beginner in crypto investments, you need to be extra careful while investing. Also, you can invest just a little in the beginning to avoid huge losses.
Also Read: Risk Management in Forex Trading Explained

 

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Frequently Asked Questions

Yes! If you are interested, you can get a cryptocurrency for free. However, you need to solve certain cryptographic equations on the internet to gain a cryptocurrency. In addition, there are some other ways of getting free crypto like taking surveys, trying new apps, etc.

 

Presently, there are no regulations or any kind of ban on the buying and selling of cryptocurrencies in India. Moreover, the Reserve Bank of India's (RBI) order banning banks and financial institutions from sponsoring crypto transactions was annulled by the Supreme Court India’s order in March 2020.

Cryptocurrency is an extremely risky and volatile purchase, whereas stock or share trading of established businesses is generally less risky for investors. Hence, for a novice investor, it’s better to invest in the share market rather than going for cryptocurrencies like Bitcoin.