Before we dive into the Crypto-world and get to know these Digital Currencies that have caused a global craze, we need to adopt the right mindset. What does having the right mindset entail? You’re about to find out.
As with any kind of trading, investing in Cryptocurrencies is not much different when it comes to the fundamentals. You need to keep your eyes peeled for opportunities and pitfalls, and once the result is in, don’t whine or complain about your decision – after all, we’re all accountable for the choices we make, aren’t we? Look, I’m not trying to be aggressive here, but what all traders need to understand is that the markets can’t hear your complaints and even if they could, they wouldn’t care. The markets will be the markets – but, if you really want, to at least scrape the tip of the iceberg giving you a better chance (knowledge being the weapon here), grab a cup of coffee, a notepad (if you’re like me and like to take notes), and let’s dive into the magical world of Cryptocurrencies.
1. WHAT THE HECK ARE CRYPTOCURRENCIES?
While not everyone understands the exact nature of how Cryptocurrencies work, one thing everyone does know, is that they’ve created a global craze. International Banks and Companies seem to be well aware of how important Cryptocurrencies have become, not only because each individual coin can reach a market cap worth that of a relatively big company, but because of the way they operate giving people almost full control over the digital currencies. Given these two facts alone, it would be ignorant to not acknowledge their presence and the impact they’ve had in the financial world over the past year.
Now Cryptocurrencies in simple English, are in essence digital money. Their technology allows them to exchange digital information through a process known as cryptography which secures transactions and controls the creation of more units by verifying them – making them unique. Now what makes them different from your regular Dollar, is that they are decentralized. Decentralization by definition is “movement of departments of a large organization away from a single administrative center to other locations.”
Basically, Cryptocurrencies aren’t tied to the government or banks and are peer-to-peer transactions that require no “middle-man” to verify that the transaction has indeed taken place, which come to think of it takes a significant portion of the transaction costs away. Now before we dive into the trading aspect of Cryptos, let’s have a look at some of the Cryptocurrencies out there. I say some because many come and go every day, so to be more specific let’s take a look at the two most popular that have come and stayed.
2.TYPES OF CRYPTOCURRENCIES
At the moment, there are over 1400 Cryptocurrencies out there, and I’m being modest with this figure. I’d like to introduce you to the two most prominent digital currencies out there. Without further ado, I present to you the ‘King of the Crypto-World’, Bitcoin.
BRIEF HISTORY OF BITCOIN
Not only is Bitcoin the most sought out Cryptocurrency out there, but it was the first one created by a software developer going by the pseudonym, Satoshi Nakamoto in 2009. To this day, no one knows who or what Satoshi Nakamoto is. There are many theories out there, but let’s get real – they’re all just theories so we’ll never really know no matter how much we sit and speculate. Anyway, back to Bitcoin.
It was introduced as an electronic payment system that is based on mathematical proof, rendering “centralization” unnecessary. This has made Bitcoin and many of its peers, independent of central authority. Bitcoin is widely known as the “digital gold standard” in the Cryptocurrency world because as we previously said, it’s been the pioneer of Blockchain technology that has made the transfer of digital money viable.
Since its creation, Bitcoin has fluctuated tremendously – from $0 to $8K per coin to date. It has managed much higher levels, $19K and some change during December 2017 before its dramatic drop began – again. I say again because, since its birth, Bitcoin has crashed several times, and each time it has bounced back harder, and stronger so the question on everyone’s mind whenever the ‘Digital Gold’ drops a little is “HAS THE BUBBLE BURST? IS THE CRYPTO-CRAZE OVER?” Well, looking at historical data, it really doesn’t seem to be the case.
Each time we’ve seen a drop, we’ve seen an even stronger correction, so it seems, Bitcoin at least, is here to stay. An insane advantage Bitcoin has over its fellow “alt-coins” is that it’s impossible to counterfeit or inflate. The reason for this? Very simple. 21 million coins were created for mining. Nothing more – nothing less. At the rate we’re mining them, analysts have predicted that by 2140 we would have mined them all. But Bitcoin is not the only Cryptocurrency around, so without further ado, I present to you the second most popular Cryptocurrency or altcoin as most would call it – Ethereum.
BRIEF HISTORY OF ETHEREUM
Ethereum was created in 2015 by Vitalik Buterin and its derivative Ether has managed second place in the Cryptocurrency hierarchy. Analysts have projected that Ether will surpass Bitcoin to become the Cryptocurrency of the future, with its current value at around $581 per coin. At this point I’d like to clarify something, any other coin other than Bitcoin can be referred to as an ‘altcoin’ because in essence all of these other Cryptocurrencies were created to rival Bitcoin. Are they similar? In some ways, yes and others no. Let me explain.
The main difference between the two is that Bitcoin’s blockchain technology primarily focuses on tracking the owner while Ethereum is part of the blockchain technology primarily focusing on running the network.
Instead of having to code an entirely new Blockchain for every new transaction, Ethereum enables the development of hundreds of different applications on one single platform. In Ethereum’s Blockchain, miners need to work to earn Ether which is the actual Cryptocurrency and helps run the network. I guess you could say it’s entire functionality is based on rewarding miners for their efforts.
The more you work, the more you earn. The most obvious benefits here are, of course, decentralization giving the people full control over their transactions and no third party can just come and make changes to the ledger, where all the data is stored. The system is corruption and tamper-proof. And of course, just like its peer Bitcoin, Ethereum is backed up by cryptography rendering it secure and anonymous.
There you have it, a brief history of the two most popular Cryptocurrencies, but just before I end this article I’d like to talk about this teenage millionaire.
ERIK FINMAN’S STORY
A small disclaimer at this point, I’m not advising anyone to do anything – just reporting on Erik’s story. In one sentence, from high school drop-out to a millionaire. So, at age 15 Erik was done with school and was begging his parents to let him drop-out. Of course, they themselves being highly educated, weren’t so keen on the idea so they made a deal. If Erik could become a millionaire by 18 then he didn’t have to go to university.
Guess what. Now at 19, Erik is an up-and-coming tech prodigy and… a millionaire. In fact, he says that “if you’re not a millionaire in 10 years then it’s your fault.”
His journey to premature success (understatement) began at 12 when his beloved grandma gave him a gift of $1K. Unlike most other 12-year olds, he didn’t spend it on candy or video games – he invested it in the then emerging Bitcoin and bought himself 100 digital tokens. Of course, he was tipped off by his older brother, but he acted on the information he received and look at him now, only 19 and STILL rounding his zeros.
According to Erik, “the area is still relatively small — the market capitalization is just over half a trillion dollars. I do not want to be misunderstood — this is, of course, a very high amount, but in comparison to other asset classes, it’s small. Therefore, I say if you do not become a millionaire in the next 10 years, then it’s your own fault.”
This article is for educational and informative purposes only and should not be considered as investment or trading advice.