The cryptocurrency was created with the idea of people being able to have an alternative way to pay for goods and services than just using cash or a debit or credit card.
Crypto is different from fiat currencies such as the Euro, Peso, or US Dollar in that cryptocurrency is digital and its transactions are recorded on a decentralised electronic record, known as the blockchain. Hence, it’s not centrally controlled via central banks like fiat currencies are.
Below, we’ll discuss the most popular cryptocurrencies, the risks and rewards of investing in cryptocurrency, and how to get started.
What are the most popular Cryptocurrencies?
The top two cryptocurrencies are Bitcoin and Ethereum respectively. Each has its special market caps and specific reasons that people invest in them or wish to use them as payment for goods and services.
Risk and Rewards of Investing in Cryptocurrency
Since the last almost decade and a half since its origination in 2009, Bitcoin has climbed the ranks to become the most popular cryptocurrency worldwide that has a market cap exceeding $1 trillion.
What is unique about Bitcoin versus other cryptocurrencies is that you can mine for new coins and create another record on the blockchain technology that’s used to record those digital transactions. Since not all the coins are in circulation as they are yet to be mined, this crypto is influenced by supply and demand, media coverage, how investors utilize the crypto, and government regulations affiliated with its use.
The potential benefits from buying and trading cryptocurrencies include:
- It can help you diversify your portfolio from more traditional types of assets.
- You own your bitcoin investments without your holdings being government-regulated.
- Highly usable currency since more businesses are accepting Bitcoin as a form of payment.
- If traveling to other countries, you’ll save on currency conversion fees if a business you buy from accepts Bitcoin, too.
- Potential for a higher return, but also with increased risks due to the volatile price movements of cryptocurrencies.
The risks that are involved with cryptocurrencies include:
- There have been instances of hackers hacking into Cryptocurrency exchanges over the years, which is why it’s always recommended to move your crypto to a hard wallet in order to avoid leaving it on the exchange where it’s vulnerable to hacks.
- It is unregulated which means that if your crypto wallet on the exchange is hacked that you cannot receive the assistance like you can if your money was taken from a central bank.
- Even though created in 2009, cryptocurrency is still a fairly new trend in the market and not everyone is digitally savvy to be able to fully understand its concepts.
What Makes Ethereum An Alternative to Bitcoin?
Ethereum is the next leading global cryptocurrency and has a market cap of $300 billion. This crypto operates on its blockchain network much like Bitcoin. The token or cryptocurrency of the Ethereum network is called Ether.
It acts as an alternative to trading Bitcoin because it is also a highly affected entity by the same factors that affect its value much like Bitcoin. Since Ethereum also operates on blockchain technology, it operates like Bitcoin but on its own platform.
Another difference with Ethereum is that it’s also a platform for decentralised applications (dapps) to be built and run on. This means that Ethereum has a growing ecosystem of users that are continually developing and refining applications that are based on its platform.
Ethereum is a decentralized, open-source blockchain network that has its digital currency called Ether or ETH. ETH is the second-largest cryptocurrency in the world by market cap. You can buy Ethereum in New Zealand you will need to sign up for a free trading account with a registered New Zealand Ethereum Exchange platform such as Swyftx .
Whether you decide to go with Bitcoin, Ethereum, or another digital coin, you can start to diversify your portfolio and get exposure to this fast-growing sector while investing in cryptocurrency.