Intro to Investing: Cryptocurrency

Crypto is a digital currency that is secured by cryptography and based on blockchain technology. It's mainly used as a means of payment and has no physical form, though it can be stored in electronic devices such as mobile phones or computers.

Customers can use it to purchase products and services from suppliers who accept these forms of currency.

Explanation: The "new kid" on the block. Crypto has emerged as a new instrument within the last decade.

It first emerged around 2012 when the first few Bitcoin miners appeared. The biggest goal of cryptocurrency is to have a decentralised currency running on blockchain technology.

A couple of big words there, but the most important point to note is decentralised.

This means cryptocurrencies aren't regulated or managed by any one country. The idea is to allow market forces to determine its price and value without the interference of any government.

In theory, this sounds ideal. However, at this point of writing, only two cryptocurrencies have any real commercial value – Bitcoin and Ethereum. This means out of the thousands of cryptocurrencies, only Bitcoin and Ethereum allows you to make actual payment and transactions.

Tesla recently made the news several times for allowing its customers to buy their car with Bitcoin. Then making the news again for removing that option, then announcing a reverse in their decision yet again. Ethereum, on the other hand, is a growing contender for NFT products. (We'll leave this like that for now as it is another vast topic)

Things to Note: What made cryptocurrency become a global sensation was its supposedly quick and easy way for the average, everyday investor to become overnight millionaires. However, most of these millionaires resulted from investing in Bitcoin back in 2012 when it was practically unknown or investing in meme coins that grew in popularity.

Two such coins are Dogecoin, a parody of Bitcoin, and the Shiba Inu coin, created as a parody of Dogecoin. Currently, there are about 1583 different cryptocurrencies, with more new coins popping up every day.

Risks Considerations: If Forex is considered high-risk, then in my personal opinion, Crypto is SUPER high-risk for three main reasons.

First, while the idea of decentralised is good, it also means that no entity can intervene to help a trader should the investment turn sour. An example was the recent Squid Game coin, where the coin's creators scammed its investors of $3.3 million.

Second, a single individual can manipulate the market. Remember the Tesla example I mentioned before? Tesla's CEO Elon Musk was suspected of a pump-and-dump scheme because of those announcements. It might seem like a simple business tweet. However, it became suspicious when he tweeted after Tesla had sold 10% of their holdings at the peak and reaped a $272 million proceed. After the price had plummeted, the company issued the reverse decision when prices were at a low.

Finally, while the main goal is for a coin to be decentralised, the truth is, many coins are owned and controlled by the big players in the market.

For instance, Elon Musk and billionaire

Michael Saylor announced they met with some of the largest bitcoin miners to spearhead an initiative worldwide. There were no specific goals for that group announced. However, they collectively control almost 10% of Bitcoin's network global computing power. This means they could monopolise the Bitcoin industry, which defeats its original goal of being decentralised.

Most importantly, unlike Forex, most cryptocurrencies don't have any underlying asset or value at this moment.

They're mostly traded for speculative purposes, which makes them a highly risky instrument for inexperienced traders.