Cryptocurrency started being known by the general public in the last few months. Cryptocurrency is basically a digital medium of exchange that uses cryptography. The first cryptocurrency to operate was Bitcoin, in 2009. Cryptocurrencies’ systems ensure the safeness, integrity and balance of its accounts, being almost impossible to break into its systems.
Use of Bitcoin and other cryptocurrencies
The use of cryptocurrencies, such as Bitcoin or Ripple, make the “Internet of Things” possible, which basically allows its users to trade value in the form of cryptocurrency. This value can be intellectual property, shares, contracts or any kind of property that has a value. The same is possible through the use of platforms such as Paypal. Although, when paying using a cryptocurrency, you are not paying through the standard networks, and the money will go directly from the buyer to the seller.
In the last few months of 2017, a historic growth in the value of Bitcoin was registered, the same being seen with other cryptocurrencies. Unfortunately for some investors, this rapid growth was followed by a continuous and gradual decline in value, to this day. According to some economists, this accelerated growth in value in the last months of 2017 can be justified by the spontaneous interest and demand from inexperienced investors. This makes some economists wonder if the value of Bitcoin and other similar coins are only driven by speculation.
Risks of investing in cryptocurrencies
In our opinion, the greatest risks when investing in cryptocurrencies include the lack of regulation for these currencies, a great fluctuation in its valuation when compared to other currencies (such as the Euro or U.S. Dollar) or the reluctance of governments and financial institutions about these currencies. Of course, we have to note that this reluctance can be due to the interests of these parties, as these may certainly suffer a great loss with cryptocurrencies in the future. Other motives include the anonymity of its users, difficulty tracking money and people, the use of Bitcoin to buy and sell drugs online, or to simply transfer “dirty money”.
It is important to point out that the value of these cryptocurrencies is correlated, which means that when, for example, when Bitcoin goes down in value, the others will probably follow. This may be justified by a lack of instruments to analyse their value, making it quite possible that a certain currency shoots down in value simply because others do. This may indicate that the value of these cryptocurrencies is affected by the demand of investors and speculation, being hard to have an idea of their real value at the moment. We have to point out that, contrary to other currencies, there are almost no economic indicators or any other tools that can be used to easily analyse their value.
Where to buy cryptocurrencies
Buying cryptocurrencies in South Africa is possible, unfortunately, normal companies such as Tradeo, Charles Stanley Direct, CMC Markets or UFX Trading are still not offering the possibility to buy these.
Did our introduction to cryptocurrencies raised your interest about it? We can only recommend that you do an in-depth research on it and know where you should invest your money, especially if this is your first time investing. Don’t forget to check our Investing category and check which companies offer cryptocurrencies consulting services!
Photo: Marco Vech