What Is Cryptocurrency?
The main idea of cryptocurrency is to allow for transactions of digital payments between two people with no middleman to oversee its validity. Blockchain is the software infrastructure behind it.
Bitcoin was the first cryptocurrency. There are presently over 1,600 cryptocurrencies listed in Wikipedia.1
What is Blockchain?
You might think of blockchain as a chain of blocks making up a comprehensive ledger of all transactions. This ledger is a shared linear transaction log. Once a block is authenticated and accepted, it can never be altered. Due to that, the blockchain securely holds the recorded history of all transactions.
New blocks can be added to the end of the chain. The acceptance of new blocks is called mining and is done by a complex network of computers that analyze new transactions to verify accuracy. Once verified, the new block is accepted into the chain with a hash value that represents all previous transactions.
If any block were to be modified by a hacker, all the following blocks would become invalid because the hash count would no longer match when the algorithm is applied to the new block. Therefore, no transactions can be falsified.
Markets and Exchanges
An exchange in crypto is essentially the place where you buy your cryptocurrencies. It is pretty simple once you’ve found a exchange that suits you online. They essentially act just like any exchange for the stock market, you are allowed to see today’s volume as well as current trading prices.
You can set limit, market, and stop-limit orders as you would on any other stock exchange. If you are already an investor the learning curve for you is really low, as you aren’t learning anything you don’t already know.
Below I’ll show you an example of a typical cryptocurrency screen so you can gain an understanding of what they look like. I’ll also be doing an article on exchanges and some of the best ones.
I’ll show you some of the ones I personally use for trading.
But How Does Bitcoin Have Value (Price)?
Right now the price of Bitcoin is determined purely by what people are willing to invest in it. The coin has been in somewhat of a bubble (though at this time we have seen a steady decline in the coins value) and it’s price has been driven purely by speculation and media hype. Which is why we see tremendous rises in its price and rapid falls. Though the price is said to grow more stable once the media and general population get tired of it.
But that does not mean the coin does not hold intrinsic value, and cannot grow to being adopted en mass. Quite the contrary it’s value will only grow as it is adopted by more and more legitimate investors. And the more it is adopted the lower it’s volatility will become, encouraging more to adopt the coin.
Bitcoin must ultimately lock down it’s place as an medium of exchange in the market. It must gain a value akin to gold or at the least a percentage of it.With the projection that one day there will be only 21 million coins in circulation, bitcoiin must reach a market cap of 10.8 trillion dollars, or $514,000 dollars a coin.
Also we must look at what markets bitcoin may actually disrupt, and see how that market begins to adopt bitcoin going forward.
Why comparing cryptocurrency prices is wrong.
Price is an important indicator. But it can also be misleading in many cases.
In many of my discussions with my friends about cryptocurrencies, I tell them why comparing the prices of two different cryptocurrencies is wrong. Most of the people don’t get it right away. I was and am still surprised to find out that even people who have invested for more than 3 years fail to see the issue with comparing with the prices of two different cryptocurrencies.
If you don’t have time to read full article just remember.
- Don’t compare the prices of two cryptocurrencies.
- Market Cap = Price * Circulating Supply
- Compare Market Caps or Normalised Prices.
- Use http://www.cryptocurrencyprices.pro/top-cryptocurrency-list/ to get normalized prices.
The price of Bitcoin doesn’t matter. If you think it has potential to grow you can buy Bitcoin. If you have only 100 USD it doesn’t matter. You can buy 100 USD worth of Bitcoin. There is no rule that you should buy a minimum of 1 Bitcoin. Remember that at max only 21 million people can own 1 Bitcoin as that is the maximum supply. There will be millions more who will be owning only partial Bitcoin.
Again the price doesn’t matter. I can create a cryptocurrency with 2 trillion circulating supply. Even if the price of my cryptocurrency is around 1 cent it will have Market Cap of more than that of Bitcoin. So it is really foolish to look for coins below 1 USD.
A look at circulating supplies of TOP 100 coins
Majority of the coins outside Top 100 are scams or overvalued. So let us just take the top 100 cryptocurrencies. Click on Circulating Supply to sort the list in descending order of Circulating Supply. You can quickly find out that many of the projects that had fan boy clubs where the fans were promising insane returns all fall into the category of “High supply, Low price”.
Similarly if you checkout the bottom of the same table you will realise that there are only 15 cryptocurrencies in the Top 100 which have circulating supply less than that of Bitcoin.