Cryptocurrencies were originally created to provide an alternative system in response to the global crisis. The developers sought to eliminate the main problem – centralization, dependence on intermediaries and lack of anonymity.
Any transactions are controlled by banks and payment systems, which undertake to disclose personal information.
Essense of digital money
To understand the essence of digital money, we turn to the original source. In the official White Paper Bitcoin, cryptocurrency is defined as a decentralized electronic money system. It is a mistake to accept bitcoin and altcoins only for digital currency.
Cryptocurrency is both a digital monetary unit and a full-fledged payment system using blockchain technology for distributed data storage.
That is, the digital unit and technology in this case are inextricable and make up a single layer: unlike national currencies, bitcoin does not allow settlements outside its own blockchain structure.
Bitcoin – digital gold
The community dubbed Bitcoin “digital gold.” This title Bitcoin received more than deservedly. Now the price of Bitcoin is many times higher than real gold and almost all stocks on the stock market, except for Berkshire Hathaway, which cost up to $ 296,000.
Value of Bitcoin
The second factor is the value of bitcoin for the international economy. Stocks, gold and currencies do not have a significant impact on technological progress, while Bitcoin spawned a huge infrastructure and set the stage for the development of a whole layer of fintech innovations.
Cryptocurrency and blockchain are the main figures in the new global financial system.
Cryptocurrencies are multifunctional
Digital currencies can also act as a means of payment, and as an exchange asset and as a unit of account – an artificial supranational currency. For example, Venezuela released its own cryptocurrency called Petro, whose goal is to attract foreign investment bypassing US sanctions.
Cryptocurrencies have many features
International exchanges offer trading in spot contracts and bitcoin futures. Unlike stocks, national currencies and other types of assets, cryptocurrencies perform a greater number of functions in addition to combining the functions of these types of assets.
Cryptocurrency trading infrastructure
The cryptocurrency trading infrastructure is still underdeveloped and has low liquidity, which discourages large investors. The largest cryptocurrency exchanges, such as Binance, Kraken, Huobi, KuCoin, Bittrex and Poloniex, have proven their transparency and security for users.
Cryptocurrency exchanges provide good security and flexibility for working with cryptocurrencies, but low liquidity makes it possible to manipulate the market.
How to optimize the cryptocurrency portfolio?
To create an optimized cryptocurrency portfolio, the service Holderlab.io was developed, which provides tools for automation and optimization of the crypto portfolio and portfolio rebalancing. Holderlab.io provides access to 10 major exchanges through the API and offers a test mode with which you can check the system on historical charts.
Holderlab.io for experienced investors
For experienced investors, the platform will facilitate the portfolio management process, and for beginners it will help to deal with investment and automatically configure the cryptocurrency portfolio, choosing the most optimal digital assets to maximize portfolio performance.
Will cryptocurrencies become a means of payment?
In some countries, for example, in Japan, cryptocurrencies are recognized as legal tender. Other countries have identified cryptocurrencies as a form of ownership or goods.
Despite the recognition of cryptocurrencies as a means of payment, due to the high volatility and low liquidity of the market, bitcoins and altcoins cannot yet become a full-fledged means of payment, which is why many retailers do not accept them for payment for goods and services.
The cryptocurrency market continues to develop
But the cryptocurrency market continues to develop and more and more investors are showing interest in it, and if the trend continues, then in the future volatility will drop to acceptable values, and many stores will start accepting cryptocurrencies for payment.
Key differences between cryptocurrencies and fiat
The key difference between cryptocurrencies and fiat as a means of payment is limited issue. Central banks regulate inflation by issuing new notes, as a result of which their value falls. With the ever-growing demand for digital currencies, their value will only increase.
And something else about cryptocurrencies
Summing up, we can say that cryptocurrencies not only perform the functions of all known exchange-traded assets and currencies, but also expand their capabilities. Companies may close and currencies may depreciate because they are managed by one center. Cryptocurrencies are decentralized and supported by the community, so they will exist as long as people are interested in them.
Digital currencies are unlikely to replace fiat, but they can become a supranational payment unit. This will allow people to fully use cryptocurrency to make money transfers and pay for regular purchases.
Thank you for your attention, we recommend to read about top incredible working cryptocurrency trading strategies in 2019.