Cryptocurrency has started gaining more attention with Bitcoin almost reaching $10,000. My aim is to educate others about cryptocurrency and hopefully help others get comfortable with investing. These are 8 common questions that I noticed most critics asking, my answers are from a non-technical standpoint and I highly suggest due-diligence.
How are they backed? - Cryptocurrency is not “backed” per say. You are in charge of your funds. However, exchanges and wallets are taking precautions to the vulnerability of being hacked. Bittrex , for example, has a 2 layer security system where once you have 2-Factor Authentication enabled, a code is sent to your phone and you have to enter that exact code within 5 seconds. Then, if you are logging in from an unrecognized device, bittrex sends you an email to confirm that you are the one attempting to access the account. Of course there is always a vulnerability of being hacked, but that’s the risk you take every day when using or doing anything online. Can they lose value rapidly? - Yes. Just as quickly as they can gain value. Seven years ago the value of bitcoin was roughly 70 cents. Today, it sits high at $9,000. From the summer of 2017, bitcoin has gone from $2,500 to $9,000 (today). The market is very volatile and has insane fluctuations. So just as it went up to 9K, it could possibly go down 9K. However, this is where technicalities of trading comes in place. There are support and resistance levels in the crypto market, they can potentially give you an anticipation of where the market is headed next. Lastly, I tell everyone that you only lose if you cash out when the value is less than what you bought in. Have a plan when investing and hold on until you reach to the desired outcome. How are they different to a foreign currency with an unstable government? - Venezuela is a good reference for this question.
Refer to the following video: https://www.facebook.com/cnbccrypto/videos/1528505947232646/?hc_ref=ARTFGDZlbVnvg_Zk03TR8lQKuzMFrKUQdKfHr_11mbDgrvn-mHKlphkJF9gbAo5PSXM&fref=gs&dti=1918769151704713&hc_location=group With the Bolivar (Venezuelan currency) losing 99% of it’s value, a better alternative would be bitcoin. The perks include decentralization, global trade ability, and has more value than the government’s currency. With bitcoin, one could send and receive BTC from and to anywhere geographically within a matter of minutes. There is no middle man. Will countries central banks eventually move to crush crypto currencies? - I believe banks will have to adopt cryptocurrency. When you have 1 bitcoin or x amount of bitcoin, in order to liquidize it, most do it through a bank. There is also an option of sending bitcoin to a private party and receiving the equivalent amount of fiat money in exchange. What are the laws governing cryptocurrencies? - Cryptocurrency is slowly coming out of the shadows. With this in mind, there is no set “laws”. You are your own bank. What you do with your cryptocurrency is up to you. However, being unethical will land you in trouble. You can buy crypto and hold on for it to gain more value, or sell it, or trade it, or spend it on whatever you desire. You decide. What back and secured them? - Please refer to my first answer. To add upon that, your cryptocurrency is only as secure as you make it. Are they in anyway federally insured like my greenback at the bank where if there is a market collapse the government steps in? - The purpose of blockchain and cryptocurrency is decentralization, therefore it is not backed by a bank or government. As the world moves more towards crypto, I’m sure that will change. If the market had to crash it would recover. Much like the stock market or the great depression. Additionally, there are many ways to liquidize your crypto. If the U.S market crashes, you could still get your bitcoin liquidized with the value of other foreign currencies such as the British pound, or the Japanese Yen etc What is the upside of cryptocurrency? - For me personally, I like being in full control of my money. There is no middle man. No loops. You are able to deal with transactions directly and immediately. Additionally, I am able to send money to anybody around the world within a matter of a few minutes no matter the time of the day, be it a business day, or weekend, or even a holiday. Lastly, I like knowing the fact that the value of my cryptocurrency will go up over time. Instead of having, for example, $500.00 sitting in my savings account not accumulating anything, I could instead have it sit in bitcoin and know that in 5 years (or even less) it could be $1,000.00 or more.