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Cryptocurrency introduction for Novices

2021.12.01 11:16

UNICORN 조회 수:165

Hi It's Unicorn

 

Cryptocurrency is a digital currency with strong encryption function that can be used as a transaction medium, purchase goods and services, and protect online transactions. Many teams will issue their own cryptocurrency, usually called tokens. These tokens can be used for related goods or services on their platform. For instance, you need to exchange fiat currency to tokens in amusement parks that you can play the playground equipment; likewise you need casino chips in order to gamble in casino.

 

Most of the benefits from these unregulated currencies are speculation. Some traders raise the price to achieve the target and get profits. Therefore, the cryptocurrency market is more volatile than other financial markets. People who only believe in traditional finance cannot accept Bitcoin because they think the product is too new. However, as the technique of blockchain progresses more people start to invest in cryptocurrencies. The reasons are as following. 

 

Compare to the speed of conversion between fiat currencies, the speed of conversion between cryptocurrency is quicker and its handing fee is cheaper. It usually takes three days to use overseas wire transfer, but Bitcoin transfer only takes few hours, and other cryptocurrency transfers even only take few minutes and no handing fee.

 

Many well-known companies in the United States have purchased Bitcoin, and financial institutions have also begun to adopt it, and even introduced crypto-linked Visa cards.

 

More governments have begun to regulate cryptocurrency and started to levy taxes against cryptocurrency. 

 

Many cryptocurrencies have substantial applications to assist the development of financial technology. 

 

Bitcoin may be the concentration of money flow in the future. This is its value and the trend is upward development in the long run.  Although the risk is higher than traditional finance, there are more potential in the crypto market. Whether to invest in cryptocurrencies or not depends on your risk tolerance.

 

There are many applications of cryptocurrency, and various investment methods. Here I will introduce some as following.

 

Periodic investment: If you are optimistic about the long-term upward trend of cryptocurrency, you can make an investment plan to invest. For instance, you can spend USDT100 to buy BTC every week, and then your principal will increase gradually. You don’t need to worry about short-term market fluctuations and you don’t need to operate it frequently.

 

  Buy and hold for a long time: You can spend a large amount to purchase cryptocurrency and hold it. Many well-known companies in the United States adopt this strategy. After buying, they will not sell it. Due to total amount of some cryptocurrencies like BTC is fixed, the value of these cryptocurrencies will be more precious. 

 

Buy low, sell high: It’s similar to stocks market. Traders buy the asset at a low price and sell it at a high price. However, nobody can always buy and sell at the best timing because it’s difficult to predict the price of cryptocurrency.  

 

Mining: Due to you need a great computing power of mining machine to generate cryptos, you need to upgrade your graphics card or buy a mining machine first. It will include electric, operating expenses and the cost of mining machine. It usually takes few years to break even. 

 

How to reduce the risk of cryptocurrency investment. 

 

Some people may be afraid of investing cryptocurrency because of its high volatility. Nevertheless, the high risks are often from  personal factors. 

 

High-risk behavior:

 

1. Using 100x leverage on contract trading is not the investment. It’s more like a gamble. 

2. Select unknown cryptocurrency exchanges. It’s easier to meet frauds or be hacked. 

3. Purchasing unknown tokens without survey.

4. No funding plan leads to debts.

5. No risk diversification.

 

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Low-risk behavior:

 

1. Using spot trade to buy cryptocurrency and proceed to trade. 

2. Select the exchange which has the biggest market cap.

3. Only trade well known cryptocurrencies like BTC, ETH, XRP and so on.

4. Make a funding plan.

5. Risk diversification.

 

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