Market Conditions causes cryptocurrencies to spike or sharply fall in price.
What causes cryptocurrencies to spike or sharply fall in price? It’s simple — market conditions.
Bitcoin, the most popular cryptocurrency, fell as low as $6,300.27 per coin before climbing back above the $7,000 mark again. Bitcoin has spent much of its time since that high near $11,000 stuck in the $6,500 to $7,000 range.
While bitcoin is the most famous of all cryptocurrencies, it’s far from the only one and is by no means the only valuable type of coin. A group of coins, known as altcoins, are also in the cryptocurrency space. Here’s the best way to invest in the most popular coins out there.
Cryptocurrency investment strategy
Without a doubt, Bitcoin is the most well-known, but as the world’s most valuable cryptocurrency, it’s a bit narrow.
Bitcoin and other cryptocurrencies have been in the public eye for several years now, and most people have heard of it.
First, let’s establish what cryptocurrencies are. Let’s say you get paid $50 every month, but you’re just keeping the coins in a virtual wallet on your computer. You use this virtual wallet to pay your bills and transfer money online.
Let’s say in the summer of 2016, a bunch of people start using these virtual wallets to make online purchases at “bitcoins.” These online purchases cost less in real money than what the payment processor, like PayPal or VISA, would charge.
What happens next? What would it take to make more money off your “bitcoins”? How about when those payments are automated, and the payment processor can reduce the cost of the transaction by more than the cost of the bitcoins?
Now, this is where things get interesting. Cryptocurrencies allow those people who hold these virtual wallets to make digital payments to anyone else in the world, instantly and anonymously. In other words, anyone with internet access can pay you for anything, anytime. The only requirement is that they have a private “wallet” on their computers.
That’s when people really start looking at what they’re holding. And it’s why the price of these coins can skyrocket.
Investing in crypto coins
Once you understand the concept, it’s simple to invest in them — the whole thing is a peer-to-peer network. There’s no central authority that controls how cryptocurrencies are issued or how transactions are processed.
People and businesses can come together on these peer-to-peer networks and exchange money, assets, anything they want, and the network requires that the parties involved in the trade, or trade, agree on a value.
So, one way to invest in crypto coins is to trade directly with another investor. It’s like buying stocks of a company.
Also, a way to invest in crypto coins is to purchase virtual “wallets,” which allow people to make transactions.
Once again, it’s a peer-to-peer system. Here, it’s the company that holds the coins that the owner of the wallet created for their transactions.
It’s important to note that cryptocurrencies aren’t worth any more or less than they are. The cryptocurrency markets are basically a gamble on which ones will be the most valuable and will be adopted by more people.
In short, all crypto coins fluctuate based on the value and adoption of each coin. A lot of speculation happens in these markets, too.
That’s where Bitcoin and other cryptocurrencies are different from gold and real estate. Bitcoins aren’t scarce — we’ll get into the math on that in a moment — but the number of bitcoins that are created is capped.
Gold has many people fooled, but it has truly little, if any, practical value. Just because gold can be used to make jewellery or people assume it has a practical use, that doesn’t make it valuable.
The same can be said for real estate and stocks. When someone buys a home or stock, they’re betting they’ll be able to sell it at a profit. Many think there’s value in buying cryptocurrencies, but few can really explain why.
That will all change in the future.
Buying and owning crypto coins
As you can see, investing in cryptocurrencies is an incredibly risky game. A lot of the theories floating around regarding why cryptocurrencies are so valuable are due to speculation.
In other words, if cryptocurrencies are a real thing, they’ll be adopted by more people, and with more people, they’ll become more valuable.
With that being said, there are a few cryptocurrencies that you can invest in that are more likely to become more popular and worth more.
One example is Ethereum. It’s another virtual currency, created by a decentralized network. In other words, Ethereum uses its own blockchain for transactions.
Another example is Bitcoin, which is currently the most popular cryptocurrency. Bitcoin’s blockchain is the only one that’s been cracked, which makes it difficult to be copied, which makes it extremely valuable.
You can read more about Bitcoin and its blockchain in this article.
Bitcoin and other cryptocurrencies are valuable, but a lot of people don’t know about them and are buying and holding some of the biggest and most popular.
These crypto coins can really go in either direction. They’re susceptible to investor sentiment.
Cryptocurrency investing is a game of speculation.
Lastly, it’s important to note that the prices of most cryptocurrencies are based on how the market perceives them — in other words, the demand for the cryptocurrency.
So, when the market values a cryptocurrency at a high level, that’s typically considered a suitable time to buy, as it shows people are buying into the market.
On the flipside, when the market values a cryptocurrency at a low level, which means there aren’t that many people who want to buy it and that means they’re selling it, which typically indicates lower demand.
Don’t invest if you don’t understand the cryptocurrency market.
Bitcoin’s price is going to go down. That doesn’t mean cryptocurrencies won’t ever be valuable, but right now, cryptocurrency is a high-risk, high-reward kind of investment.
Get in if you want to know where this market is going and how it will do from here. But if you invest in Bitcoin and other cryptocurrencies, I will highly suggest buying coins and holding for a few years before looking to sell them.
If you buy now, you’re going to lose money. And if you’re looking to make a profit, this is one of the worst times to get in on it.