An Overview Of Cryptocurrency Investment

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by Gavin in Blog
September 17, 2019 0 comments

Certain forms of alternative investment have been around for years, and are therefore fairly well accepted or trusted (even if that doesn’t mean they’re sure things). For instance, people have long looked to real estate investment as a means to make money outside of traditional stocks and options, and sometimes with very fruitful results.

Every so often a new alternative emerges though, and we seem to be in the process of this happening with regard to cryptocurrencies. Originally designed to spar with ordinary currency, and potentially replace it, cryptocurrency has since become more of a commodity – which is to say it’s seen now largely as something to buy with the hopes of profiting.

It’s too early still to say whether or not this is a good idea, or even whether cryptos are viable in the long term. However, because this form of investment is gaining popularity fairly steadily, it’s worth covering with a general overview.

What Is Cryptocurrency?

For any readers who may not be familiar with cryptocurrency at all, don’t be concerned – many are still getting acquainted with the basic concept.

Cryptocurrency emerged first through bitcoin. It was designed as an encrypted, decentralized digital asset, with no financial backing or corresponding physical form. To put it bluntly, it was made up. However, it gained value through the fact that the process involved in digitally mining it is expensive and difficult, as well as because it was set up to be finite (and in the grand scheme of things, fairly limited). Once put out into the world, bitcoin can be stored, transferred, and used to buy goods and services – all by way of digital transfer on a universal public ledger known as the blockchain.

Some find it helpful to think of bitcoins and other cryptos as digital tokens, which can be bought, used for purchase wherever accepted, stored, and sold for a profit or loss. This simplifies things somewhat, but it’s not entirely inaccurate – and really, it’s essentially describing the nature of a commodity.

How Is It Stored?

We mentioned storage, which naturally invites questions given the part about cryptocurrency not having physical form. Basically, cryptocurrencies are stored on crypto wallets, which come in various forms but serve one purpose: to guard the public address and private key of one’s cryptocurrency until needed.

To clarify, when you acquire bitcoin, because you aren’t gaining anything physical, you are more accurately gaining access to a given amount of bitcoin stored at a public digital address – as well as the private key that dictates how that bitcoin is used. With both of these pieces of data, the bitcoin is effectively yours, and it is these pieces of information that a wallet guards for you. In some cases, as with popular mobile wallet options like Coinbase, the wallet can also be used to directly facilitate transfers of cryptocurrency.

Where Is It Used?

This is a complex question because the answer is always changing, but it still helps to get a feel for where cryptocurrency is most active so that you can gain a better understanding of demand, expansion, and potential price shifts.

While it’s a vague answer, cryptocurrency is perhaps most useful in online retail at the moment. Sometimes this means that products can directly be purchased by cryptos (usually bitcoin), and sometimes it means there are existing workarounds (such as companies that will buy Amazon goods for you in exchange for your bitcoin). This is also the main area in which people are always watching for expansion, in the hopes that some major online stores may start embracing crypto payments.

There are also a few specific industries in which cryptocurrency is either used or being eyed closely. From fairly early on it has been handy at a number of flight- and hotel-booking platforms. Some casinos have begun to accept crypto deposits, and with new sportsbooks in Pennsylvania and New Jersey, and betting on the rise in the U.S., some believe the casino activity will spread to digital bookies as well. Gaming is another area in which cryptos are relatively active with the potential to gain more influence in the short term.

How Has It Performed?

There’s not one comprehensive response to this question, but speaking in generalities, cryptocurrency has had an up-and-down ride. With most major “altcoins” (those that aren’t bitcoin) typically mirroring bitcoin’s trajectory to some extent, it makes most sense to analyze bitcoin’s history. The leading cryptocurrency essentially enjoyed a very slow, gradual rise, with minor dips, from 2013 through early 2017. It then spiked over the course of that year, reaching a dramatic high near $20,000 in late November and early December – before a subsequent, prolonged crash. Throughout 2019 bitcoin has been showing some renewed strength and more stability than usual, spending a lot of time around the $10,000 mark – though we should note that it’s still relatively volatile.

As stated, it’s too early to tell if crypto investment is wise or viable in the long term. These are things for each investor to decide independently, and time will provide the answers. Hopefully though, this overview has given anyone who’s curious about the topic a better understanding of what’s at hand.

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