Here’s Digital Currency 101 for newcomers. It can be confusing to follow at first, so try to read at least a few more articles on the topic before chalking it up. This is especially true for aspiring traders/investors. That’s the first rule. Now, let’s start with the basics.
DeFI (Decentralized Finance)
Digital currencies are at the heart of the recent financial revolution. In the not-so-distant past, we had intermediaries (middlemen) like banks who were there to handle our transactions and process our fees. Bank fees and middlemen are currently being tested by decentralized finance.
While a bank is a centralized point for our transactions, DeFi signifies money circulation without the middleman. Blockchain technology, for example, enables users to pay/receive digital money without a middleman. All transactions and processes will exist in the blockchain itself as nodes. All information on the transactions is on the nodes. No middle man required.
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This is why sending/receiving digital currencies does not typically require a fee, unlike in banks. The transfer of digital currencies like Bitcoin is also ridiculously fast compared to transfers in
Banks.
Digital Currencies In The Investing/Trading Sphere
Another revolutionary possibility emerged because of digital currencies. For now, let’s focus on cryptocurrencies. You’ve most likely heard of it before Bitcoin, Ethereum, Shiba, Luna, etc. These are all crypto coins=digital currencies. The revolution that has happened is that in trading and investing platforms/circles, you usually have to have a certain amount of money ready to start trading/investing seriously.
For example, in the American Stock Market, you need at least $25,000 to trade stocks. Most people do not have that kind of money, especially not for trading it. Investing usually does not require you to have a lot of money, but you won’t get anywhere by investing $10 into an asset unless it suddenly flares up in one day, like the Gamestop story.
So, how is this relevant to our topic? In the cryptocurrency sphere, you don’t need $25,000 to start trading cryptocurrencies. You can start very low. Of course, it’d be better if you start somewhere above $100. The point of the matter is – inclusivity has emerged in the crypto space trading/investing sphere.
Digital currencies like crypto have given people a chance to maximize their wealth through trading and investing when before, it was mostly reserved for the rich and the privileged. Of course, people still trade on Forex and Futures, but you get the deal.
NFT also revolutionized the investment sphere. It can be so cheap to invest in certain NFTs that it also heralded a new era of modern-day investing. And it gave artists and entrepreneurs alike a chance to make money off their craft and wit.
Don’t Buy The Hype— Do The Research
However, it’s not all happy news. It’s very risky to invest and trade cryptocurrencies and NFTs since they’re relatively new spaces, and there’s so much hype and scam revolving around a lot of projects. You might buy yourself into a failing project, so don’t be too hasty. Do your research.
Besides, if history repeats itself, institutional whales who run traditional trading platforms are also investing large amounts in these crypto coins. They have a large influence on the price of the coins. Bitcoin, for example, has been quite volatile in the past, but for the last few months has remained at a steady $20,000-$28,000.
Volatility is the double-edged sword that makes trading and investing in cryptocurrencies attractive. High risk equals high reward, so the more volatile a coin is, the bigger its chances of maximizing in price. On the opposite end of it, there’s also a big chance of it decreasing in value. But a volatile coin is what most day traders are looking for. Investors typically need to do more research to find a solid project with the potential to grow since investing is for the long term.
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Now to get to the other point, while many factors could explain the current price, and experts have different opinions, we don’t know how much influence is being exerted by the big players on the price of it in the market right now, especially because cryptocurrencies have become much more popular and are now being regulated more heavily than it ever was when it started.
Bitcoin, Ethereum, NFTs
We’re going to introduce you to the main players so that you can grasp the concept of digital currencies a bit better. Bitcoin is the most popular crypto coin in the market, but it’s not exactly a newcomer. Conceptualized in 2009, Bitcoin was created by a group of users who go under the name “Satoshi Nakamoto.”
Now, you’d be surprised to hear, if we weren’t making it obvious, that Satoshi Nakamoto isn’t their real name. The enigmatic creators have remained in the shadows so far, so we don’t know their real identities.
Ethereum is the second most popular, always trailing just behind Bitcoin on most platforms like Binance. Ethereum is the cryptocurrency of the Ethereum platform. Unlike Bitcoin, it doubles down as a coin and actual website/brand that generates decentralized apps and generates smart contracts.
NFTs refer to non-fungible tokens. Confused? It just means that an NFT is one-of-a-kind. You will not find a copy of it. NFTs usually come as digital art pieces that you can invest in, so it’s sort of the same as buying a painting. The catch is – you can only buy it with Ether (ETH), and you typically need to sign up for a Metamask account to start buying and selling NFTs. The NFT space is a bit more complex to debunk at first than crypto, so be sure to do some additional research.
Final Thoughts
If you want to be well-versed on this topic, you need much more research. It’s not easy to grasp at first, and some terms might confuse you. However, if you do plan to seriously trade and invest in this space, you’ll need to be ready for it. We discourage lofty and unprepared ventures into crypto trading and investing. You need to double down on your efforts to know what you’re dealing with.