What to Understand Before Entering The Crypto Market
The action in the market is heating up, and we’ve seen some wild trading this week! As attention is drawn to the market from new crypto enthusiasts, there will be a lot of questions that need to be answered. I will attempt answering as much as I can to help everyone have a basic education on what the cryptocurrency market is all about.
One of the most basic questions that people ask is, “what am I actually buying when I get involved in the cryptocurrency market?” This was my exact question when I first bought into Bitcoin. Was I buying “stock” in Bitcoin, or exactly what?
The answer is, buying a cryptocurrency is like buying a foreign currency. You are converting your “fiat money” into an electronic currency that has a specific purpose. For example, Big Daddy Bitcoin is usually used as a store of value, like buying gold. Buying Stellar Lumens (XLM) allows you to send money overseas to friends or family members without using Western Union, and the transaction completes in a matter of seconds.
Those are just two examples of coins that have very differing purposes, but actual value. There are literally thousands of different cryptocurrency coins and “tokens” (we’ll discuss that at a later date) that one can buy.
A good way to start is to research the “use case” of a particular cryptocurrency and buy into a project that sparks your interest. For instance, I love the XLM project because of how it is transforming the transfer of money, and how it connects many popular payment platforms like Paypal, the Cash App, Venmo, and more.
While there are specific uses for different cryptocurrencies, the majority of people are buying them for one main reason: to make money. This is called “speculation”, and it’s very similar to buying stocks on the NYSE or NASDAQ. Remember when people were plowing money into Amazon, Yahoo, and Apple during the early Dot-Com explosive growth days? The same holds true here.
While each coin has a purpose, at this point, we have not reached what is called “mass adoption”. In other words, you’re not going to be using cryptocurrencies to shop at Walmart with ease any time soon. What people are gambling on right now is that the value of cryptocurrencies will skyrocket in the future once we hit the mass adoption phase. That’s why we are speculators at this point.
That’s enough general information for now, but if you’ve got a specific question that you’re burning to ask, post it in the comments section and I would be glad to write a blog post to answer it! Stay tuned, more info coming soon!