What Are Cryptocurrencies?
If you are new to cryptocurrency investing, most likely, this is one of the very first questions you’re going to ask. The most straightforward answer is that cryptocurrencies are digital assets that can be exchanged for cash. There is no central authority that maintains the value of each cryptocurrency. The investors decide the value of each cryptocurrency. The more investors are willing to buy, the more valuable the cryptocurrency. Some use crypto to purchase regular goods and services, while others invest in cryptocurrencies similar to how people invest in stocks and precious metals.
Cryptocurrencies can be bought, sold, traded, and sent worldwide without relying on banks or financial institutions. This is important because nearly 1.7 billion people worldwide still do not have bank accounts.
Right now, you may be thinking to yourself, “I have a bank account; why would I need cryptocurrency?” There are three main reasons why you would need cryptocurrency. Reason one, the money in your bank account is losing value. Based on 2021 data in the United States, inflation increased by roughly 7%. Simply, this means if you had $100 in your bank account on January 1, 2021, on December 31, 2021, that $100 now has the purchasing power of $93. This is because items like eggs, cars, homes, gas, and meat are all increasing, but the dollars in your bank account are not. If correctly invested into cryptocurrency, your money will grow rather than decrease sitting in a bank account.
Reason two, have you ever tried to transfer money from your bank account to someone else’s bank account? Transferring money can take days, and it could take even longer if sent internationally. You can send many cryptocurrencies across the globe in seconds. For example, person 1, Mr. Richards, wants to send person 2, Ms. Johnson, $1,000. The only problem is Ms. Johnson needs the money ASAP, and to make things worse; she lives halfway across the world from Mr. Richards. Mr. Richards could send Ms. Johnson $1,000 in USD coin (a cryptocurrency that equals the value of $1). Ms. Johnson would receive that $1,000 in USD coin within seconds. She can then exchange the $1,000 in USD coin for $1000 in US dollars. If Mr. Richards sent a wire transfer from a bank, this could take up to 5 business days.
Reason three, cryptocurrency is an emerging market in the technology sector. Often emerging markets are some of the most profitable ones. Could you imagine investing in companies like Apple, Intel, Atari, eBay, Adobe, and Google during the tech boom? You would most likely be a multi-millionaire. Cryptocurrencies and blockchain technology is emerging market that has created many millionaires and continue to create them today.