Cryptocurrency Simplified

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The ongoing pandemic has brought along with it many uncertainties around health, jobs, and finances to name a few. Businesses shut down, employees were laid-off, the money market was mostly in a bad mood and the economy seemed to be going down the hill. Fast forward two years, the pandemic is still intact, but the economy is well onto a recovery path. Business activities are opening up and the market is experiencing positivity. Now that some uncertainties around finances are going down, people have started thinking of alternate ways to build up their investments, in case the economy has to take another lethal hit anytime soon. From time to time, some promising money horse shows up to the money market creating hype. This time around, an old horse has returned to the derby and become the “new buzz in town” – Cryptocurrency.

Here’s a simple explanation of Cryptocurrency:
It is a form of digital currency which is both – an investment and a currency for trading. It is not backed up by any govt. or private financial institution which means that it is not a secured investment option. It does not have a central authority to regulate it. Rather, it’s the job of the users involved in the system to verify and validate the transactions taking place through cryptocurrency exchanges. This verification is done by a process called Mining.

How to earn Cryptocurrency?
Cryptocurrency can be bought through exchanges like Coinbase, Gemini, Binance by paying a small fee. Most popular form of cryptocurrencies are Bitcoin(BTC), Ethereum(ETH), Dogecoin(DOGE) and Binance coin(BNB). The price of a Bitcoin as of 1 September 2021 was 47335.42 USD. The closing price for Dogecoin on the same day was 0.294401 USD. Yes, the price difference is that big. But you need not buy the entire cryptocurrency if. Instead, you can buy small units of it.
Another way to earn cryptocurrency is to engage in the mining process. Mining is the verification of the transactions for different cryptocurrencies. Nowadays one would need advanced computer systems to be able to mine the currency.

Can anyone invest in cryptocurrency?
Yes, anyone with valid identity proof and a bank account can invest in cryptocurrency provided that the activity is not illegal in their country. Turkey, Nigeria, Algeria, and Bolivia are some countries where crypto is banned.

Is it a safe investment?
The cryptocurrency market is extremely volatile. Also, it is decentralized, which means your investment is not insured by any financial institution. It is advised to only invest in crypto if you have a high-risk tolerance. It can be a part of your portfolio, but not a significant part of it because it is still a new money instrument, unlike stocks and shares.

What about scams and theft?
Like with other online banking and trading activities, cryptocurrency is also susceptible to hacking. Experts suggest storing the private keys to your digital currency in a cold wallet i.e in an offline external device(like a USB stick). As far as the cryptocurrency data is concerned, it is considered to be quite safe as the currency is backed by a technology called Cryptography where the transactions are stored in form of codes.

Final words on investing in cryptocurrency
Like stocks and shares, cryptocurrency is also based on speculation. But the big difference is that when you invest in stocks, you are actually investing in a company that has credibility and a responsibility towards its investors. The crypto market is fairly new and much more volatile than the stock market. That being said, more risk also means there are more possibilities of higher returns. So if it is a legal activity in your country, you have a valid ID and bank account, and you have a high threshold for risk, you can invest in cryptocurrency, keeping in mind the security tips.

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