One of the greatest levers for the global adoption of cryptocurrencies is the ease of trade, custody and transfer. These operations can be immediate and free of intermediaries.
1. The Great Promise of Cryptocurrencies
The great promise behind cryptocurrencies is their potential to become a global currency. This means being a currency independent of any geographical boundaries or economic-political limitations.
Just think that cryptocurrency can give concrete opportunities for many people who are cut off from traditional financial instruments. As a matter of fact, 1.7 billion people live without a bank account.
Cryptocurrencies are a digital representation of value based on cryptography. They can be traded or used to make payments.
They are based on the blockchain technology, that allows peer-to-peer transitions, which means that you can send money to a friend without any intermediary, in complete safety.
2. A High-Growth Industry
DeFi, decentralised finance, is undoubtedly the area of greatest interest for cryptocurrencies. It is the collection of all those Dapps (decentralised applications) and projects that provide financial services on the blockchain. The economic value deposited in the various DeFi services exceeded $1 billion in early June 2020. In 2022 it reached hundreds of billions of dollars. You can monitor its precise value here.
The cryptocurrency industry and especially DeFi is not yet “mainstream”, but Bitcoin has reached levels of state and institutional adoption that were unimaginable in 2009. The NFT boom in 2020, furthermore, has encouraged the adoption of blockchain and especially of Ethereum. What will be the next industry-related trend?
3. Volatility Can Be an Advantage
The price of cryptocurrencies depends on the balance between supply and demand. Moreover, the smaller the market capitalisation, the more prone prices are to large fluctuations and volatility.
On a daily basis, standard markets on average fluctuate between 1% and 2%.
The volatility of the cryptocurrency market resembles that of the traditional markets, but magnified. The fluctuations are strong both in terms of ups and downs. Over a few hours, our crypto wallet can report significant losses or considerable profits.
Here’s an example:
- On June 25, 2019, the price of Ether was $335.10. On July 16, it was worth $205.86. This is a 40% drop in 21 days.
- On February 7, 2019, Bitcoin was worth $3451.55. On July 9, it cost $12,647.99. This is a growth of 3.6 times in approximately 150 days.
4. Take part in a new economy: the Cryptonomy
Buying cryptocurrencies involves embracing a new concept of economy and a new trust system.
Cryptocurrencies are not related to a mere speculative activity, instead, they originate from a vision that concerns the global economic and social system. The origin and development of cryptocurrencies, in fact, are based upon the concept of economic freedom.
Just as cryptocurrencies, economic freedom is something greater than things like “generating a profit easily” or “the growth rate of a national economy”.
Economic freedom is a coefficient calculated for every country of the world. It is the result of a number of variables such as private property, the right to an income, increased life expectancy, literacy level, corruption rate, etc.
Cryptonomics is not the promise of future widespread wealth, it is instead a new way of trading and exchanging money. Just as the internet has allowed the free exchange of information, cryptonomics has the potential to make the exchange of value free and fair.
How Can I Buy Cryptocurrencies?
An economy is not made up of individuals but of networks of people who exchange goods and services. In cryptonomics, this network is, in most cases, blockchain-based. This is not a simple technology, however, which is why cryptocurrency exchanges were born.
A cryptocurrencies exchange is a platform where you can buy and sell cryptocurrencies. Its main function is to provide the liquidity and technology needed for this kind of exchange.
A cryptocurrencies exchange is nothing more than a market, just like the Forex. It provides a number of useful services, such as:
- a secure wallet where you can keep your cryptocurrencies
- market information
- trading and transfer functionalities
This kind of exchange is centralised. It allows you to get familiar with the crypto market and the different trading strategies without having to worry about the technical aspects that are required by the current decentralised platforms.
In addition, unlike traditional markets, exchanges do not have off-days, instead, they are always active and you can operate at any time.
The Cryptocurrency Market Data
As we have already explained, the crypto market is a young market with a small market capitalisation, however, it’s growing fast.
In fact, bitcoin’s market cap in March 2020 was around $100 billion and together with other cryptocurrencies was up to $370 billion, while in March 2022 it was around $800 billion, with a total crypto market cap of $2 trillion.
It may already seem like a huge amount, however, the capitalisation of Microsoft is 1.050 billion, followed by Amazon with an amount of 943 billion or even Saudi Aramco that has a market size that exceeds two trillion dollars.
It is therefore a market with ample margins for growth.
Which cryptocurrency should you choose?
A lot of them were born in the last few years and while some of them developed successfully, others lasted just a few days.
For a couple of years, until mid-2011, there was no currency on the market other than BTC.
Then, since 2013, after Litecoin was born, the phenomenon grew significantly.
While it is interesting to see how the number has grown over the years, most of the capitalisation is still attributable to the top 10 cryptocurrencies on the market.
There are more than 20,000 cryptocurrencies that are different in technological and technical features, in addition, each cryptocurrency is often part of a larger project that is created for a specific purpose.
The birth of alternative currencies, including cryptocurrencies, comes from the premise that the traditional financial system has some critical issues to solve.
Therefore, each project has its own mission that we tried to analyse in the Cryptocurrency section of the Academy. We suggest you read them before buying any, in order to get familiar with the first forms of fundamental and technical analysis.