In addition to buying coffee with Bitcoin, beyond financial applications running on Ethereum, beyond oracles and NFTs, and blockchain-powered games, there is also the crypto market – an unmoderated market for buying, selling, exchanging, and storing cryptocurrencies. Here is a quick tour of the cryptocurrency market and the benefits it offers to investors.
It all starts with Bitcoin
Bitcoin is the first modern cryptocurrency and is a great example to learn what we mean by the word “market.” Bitcoin was created as a general-purpose currency to replace or supplement government-issued fiat currencies. The idea was that you could go to a clothing store and pay for your purchases by making a Bitcoin payment as easy as swiping your credit card through a reader. It is not difficult to see that the number of purchases made with paper money is decreasing. Therefore, it is worth having a new currency that takes advantage of advances in computer and network technology, freeing consumers from the constraints of highly regulated government currencies and bank cards.
Crypto enthusiasts have their twist on describing the future of digital money they dream of: “Buying a cup of coffee with Bitcoin.”
A funny event took place on the road to e-utopia. Online platforms that allowed people to buy Bitcoins also allowed them to sell their coins to others or exchange them for fiat currencies. It became common for people to buy Bitcoins with dollars or euros, wait for the value of Bitcoins to rise, and then sell their coins, converting them back into fiat currency and raking in profits along the way. In addition to serving as a digital currency, Bitcoin also became an investment.
Now multiply by several thousand
Thousands of cryptocurrencies have been launched since Bitcoin’s debut in 2009. Each has a specific purpose – and each is also available as an investment.
This may seem unlikely, but it’s quite common in the non-crypto world. Consider IBM. Its core business is to provide IT products and services to large corporations – but in addition to that, it is also an investment business. IBM shares are traded on the New York Stock Exchange. IBM has a core business function and is also an investment opportunity.
If you want to buy IBM shares, you buy them on the stock exchange. If you want to buy shares of Bitcoin’s total market cap, you buy them on a cryptocurrency exchange – a platform like Kriptomat that allows users to invest by buying, selling, exchanging, and holding cryptocurrencies.
Since Bitcoin’s debut, some coins have been created primarily as investment vehicles, but most of them have been launched in conjunction with projects in financial technology, gaming, gambling, entertainment, and other industries. Coins and tokens are available for purchase on exchanges, where prices rise and fall according to supply and demand – just like corporate stock prices.
Crypto exchanges are like standard exchanges, but of the digital world. Like stock exchanges, they contain hundreds or thousands of shares. Cryptocurrency exchanges allow you to buy, sell, and exchange hundreds or thousands of digital currencies. Together, these currencies make up the crypto market.
On the other side of simple buying and selling
The Amsterdam Stock Exchange was opened in 1611. The financial community has had four centuries to develop and refine tools and strategies for investors. Crypto exchanges are new to the market, but they benefit from these many years of trial and error.
For example, advisors on pre-crypto exchanges recommend cost averaging as a way to minimize the effects of market volatility. Cost averaging is a simple method of making frequent investments and spreading them over time. Instead of making a €12,000 investment at the beginning of the year and risking a price drop that would destroy your portfolio overnight, you make a €100 or €25 purchase each week. As a result (and after a certain period of time), you will own more of the shares that were purchased at the lower price – because a lower price means you get more shares in exchange for investing regularly. It turns out to be an excellent strategy, especially for investors building their portfolio for the long term.
Another example: brokers and investment bankers give wealthy investors access to high-end tools, such as trading bots, that can be programmed to execute trades when certain price thresholds are met. In the crypto world, Kriptomat calls this process Automated Trading, and it’s available to everyone.
Even advanced features like index investing and derivatives are building their way into the crypto world.
Better than real money
Regulation and a closed community of investors have traditionally limited wealthy clients’ access to powerful investment tools. Bankers and the government have the right to write rules that exclude most people from full participation in managing their own finances. One of the most important benefits of the crypto world is that everyone has access to the market. Thanks to cryptocurrencies, everyone enjoys financial equality, dignity, and self-determination.
Bitcoin is primarily a general-purpose electronic currency. Ethereum is originally a platform for running decentralized applications. MANA is designed to support the in-game economy for the Decentraland gaming platform. All three cryptocurrencies – and thousands more – are available as investment vehicles. Are you an enthusiast of metaverse-style gaming? Look out for Decentraland, Tron, Enjin, Loop, and WAX. Do you think decentralized finance applications will grow? Look out for DeFi-related cryptocurrencies such as Ethereum, Cardano, Polkadot, and Avalanche. Regardless of what segment of the industry you’re interested in, you’re sure to find plenty of cryptocurrencies that are ready to play a crucial role in your life. Do your homework, choose a coin, and make your investment.