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Crypto moves faster than you can say crypto. But what is actually behind this revolutionizing digital currency? According to Pew Research, roughly 63% of Americans say they are not confident in cryptocurrency as an investment—but most can’t even explain how it actually works. 60% of Americans say they have heard of crypto but don’t know much about it. Despite its visibility, the digital currency remains largely misunderstood.
Crypto isn’t much different than our credit cards. Every time we swipe our Amex, Chase, Visa—you name it—a bank verifies and records that transaction. Think of crypto as working in the same way, but instead of a bank, the verifier is comprised of a network of computers around the world. This network, known as a blockchain, stores data in “blocks” which link together (hence the “chain” in blockchain). The idea that there isn’t just one central authority is what makes blockchain uniquely secure, as tampering with one block would require altering every block that comes after it, which is nearly impossible. This system is like a public spreadsheet that everyone can see, but no one can alter.
Trending Coins
According to Coinbase, a cryptocurrency exchange platform, the digital asset’s total market capitalization is $3.77 trillion. This means the value of all cryptocurrencies combined is $3.77 trillion—an astronomically large number. To put things into perspective, the crypto industry is valued on a level that is comparable to the economies of Japan ($4.03 trillion) and Germany ($4.66 trillion).
A trending cryptocurrency is one with lots of market traction, whether spurred by technological advancements, positive market sentiment, or major exchange listings (when an exchange platform makes a coin available to traders). After all, the price of crypto is dictated by what the next person is willing to pay, without traditional anchors of value like profits or physical assets—making public speculation a much larger factor in price than any other system.
Investing in a trending crypto means agreeing to extreme volatility and potential losses—but the rapid increases in price and long-term profit potential of these coins could outweigh the downsides. With trending coins, it is best practice to put in the amount of money you are willing to lose.
Bitcoin and Ethereum
Historically, Bitcoin and Ethereum have been the largest and most popular cryptocurrencies with market caps—the total value of all coins in circulation— ranging from $200 to $450 billion. These coins have high liquidity and market stability relative to other coins, making them preferred among investors.
This is not to say Bitcoin and Ethereum trading is a predictable nor seamless endeavor. By nature, any and all crypto trading involves risk, often spurred by shifting market hype or market manipulation, such as “pump and dump” schemes. These schemes occur when influential individuals or groups inflate a price using social media, and then quickly sell their holdings for a profit.
Still, this same volatility and speculation can make crypto a dynamic investment. The market’s fluctuations create opportunities for risk-seeking investors to hop in at the right time and realize gains in an ever-growing market.
My Own Experience
Last summer, I worked at a company called RockItCoin that operates crypto ATMs around the country where customers can easily buy and sell via cash or barcode scans. Witnessing the enthusiasm that my team had for crypto’s role in reshaping our modern economy–and its potential for significant financial growth–prompted me to invest some of my own money to see how the market really moves.
I decided to invest $75 across 3 different coins on the Uphold app: Ethereum, XLM, and XRP. Why I invested in those specifically, I could not provide sound reasoning. But that’s a part of being a crypto newbie, I suppose—investing in top performers and taking home lessons from the way they move.
My entire portfolio is currently worth $58.57, which means I am down $16.42, or 21.9%, from my initial investment. If I were to sell right now, or “cash out,” I would lose $16.42. At the beginning of October, my portfolio was valued at $75.80, meaning I would’ve made $0.80 from cashing out. This means that the price of my assets has dropped $17.23, or 23% since then.
In fact, by the time I finished writing the previous paragraph—just five minutes later—my portfolio had already slipped to $58.44, a 13-cent decrease. That’s crypto: fast-moving, unpredictable, and highly volatile.
Despite these swings, I plan on holding. As a college student, that $75 is more experimental than anything, and any loss I incur will only be a learning experience. I’m holding out hope that my portfolio will see some gains over time, and maybe one day down the road I’ll put some more money in to see if I can turn a small profit.
Concluding Thoughts
In a world of high-scale innovation and mind-bending technology, having at least a little bit of knowledge on this digital currency revolution could go a long way. Now might be the time to get ahead of the curve in case traditional investing practices are pushed aside for tech-driven alternatives. Better to be ahead of it than left behind it.
