There is been a resurgence in interest in cryptocurrency like bitcoin, but for many the concept is confusing, if not enigmatic. Cryptocurrencies are still relatively new, and the markets for these digital currencies are highly volatile. While many advocates think that digital currencies can be a part of everyday life, at this point, cryptocurrency markets are dominated by speculative trading.
Financial regulators are concerned about polices on cryptocurrencies, and they have expressed concerns over the long-term viability of currencies like bitcoin. The rise in amateur investors, combined with increasing sophistication in some cryptocurrencies offerings, has been troubling to regulators.
Bitcoin is now considered to be the granddaddy of the cryptocurrencies, with investors (or more accurately, speculators) flocking to other cryptos like Dogecoin. Advocates view cryptocurrencies like Bitcoin as the currency of the future, and are racing to buy them now, presumably before they get any more valuable. Since cryptocurrencies cannot be used to easily make most payments, and do not have any other intrinsic utility, the only reason they are valued is that a lot of people appear to believe that they are a good investment. Supporters of digital currencies need to carefully consider the risks of cryptocurrencies before starting an investment.
Before converting a real dollar, euro, pound, or other traditional currency to BTC -- the symbol for bitcoin, the most popular cryptocurrency -- you should know what cryptocurrency is, what are the risks in using it, and how to protect your investment. For individuals who believe in the future of digital currencies, investing in cryptocurrency represents a way to get high returns while supporting the future of the technology. We can speculate about the value that cryptocurrency could hold for investors over the coming months and years (and plenty of people will), but the reality is that this is still a new, speculative investment with little history on which to base predictions. Bitcoin is a good proxy for the sector, as Bitcoin is the largest cryptocurrency by market capitalization, and the rest of the markets tend to follow its trends.
Prices for cryptocurrencies tend to fluctuate rapidly, and while this means many people made quick bucks buying in at a good time, many others lost money doing the same right before a crypto crashes. The wild swings in value for most cryptocurrencies makes them unreliable as a means of payment. You may have read about some of the more popular types of cryptocurrencies, like bitcoin, litecoin, and Ethereum. Bitcoins and Ethers make up a large portion of the market share in cryptocurrency (see chart 2 below), and we are seeing a lot of new technologies emerge and grow rapidly.
The Blockchain technology behind bitcoin (BTC) and other cryptocurrencies has been described as a potential game-changer in a wide range of industries, from transportation and supply chains to banking and health care. Blockchain has potential applications well beyond Bitcoin and cryptocurrencies. Since Bitcoin was introduced in 2008, a rapid proliferation of different cryptocurrencies has occurred, with a possible number over 10,000, and the overall market value is close to US$2.5 trillion.
