2020 is being a bit hectic for the markets due to all the recent events that are happening, and many investors are looking for new investment alternatives. Therefore, at this moment we bring you a new recommendation, investing in cryptocurrencies, which are assets that since their creation have experienced a great revaluation and, according to experts, will continue to have an upward trend. Therefore, we are going to explain what a cryptocurrency is, how it works, how to invest, in which cryptocurrencies to invest and which are the best in 2020.
What are cryptocurrencies
The most widespread definition of virtual currency is that it is a digital currency, not a physical one, that uses cryptography to secure and manage transactions, as well as to create new currencies.
This explanation of what a cryptocurrency is includes the two most important characteristics of these electronic currencies. The first is that it does not have a physical support. That is, there are no bills or coins as there are euros, dollars or pounds. Cryptocurrencies are virtual and although they can be stored on physical devices, they do not have a physical representation.
The second is that cryptography is used to create new units, which for practical purposes implies that it does not depend on any government or country. With virtual currencies, there is no central body or government in charge of creating new currencies and putting more money in the market. As an example, Bitcoin uses blockchain technology to regulate the creation of new units. Also, in this case, the number of coins available is limited, something that is not always the case with other cryptocurrencies.
Types of cryptocurrencies
Dash, Ethereum, Ripple, Litecoin … There are many virtual currencies beyond the famous bitcoin. In fact, today the number of virtual currencies far exceeds 1,300 worldwide.
What differentiates the types of cryptocurrencies is the technology they use on the one hand and their philosophy on the other. To understand it better, most virtual currencies use blockchain technology but with certain changes that can make them faster in processing transactions, for example. In addition, there are also currencies that use completely different formulas. To this is added the philosophical part such as putting a finite number on the coins that will be in circulation or not, as well as the degree of transparency in the transactions.
Although when investing it is necessary to have sufficient financial knowledge and to know exactly what are the products in which we are depositing our money and what risks we are assuming. At smartcapitalonline.com we tell you which are the best cryptocurrencies to invest and what you should take into account to choose them. However, remember that if you do not have the necessary training it is best to go to a financial advisor before gambling everything to one card.
What cryptocurrency to invest in?
Winning coins with cryptocurrencies is possible, but you have to know which one to bet on and how to do it. In this sense, there are different ways to invest in cryptocurrencies from trading with cryptocurrencies to mining virtual currencies. Choosing the asset well and the form of exploitation is key, especially when they are so volatile and have so much risk.
Most profitable cryptocurrencies
As the stock market saying goes, past returns do not ensure future returns. The evolution of a virtual currency is a good indication of its potential, but that does not mean that it is the best cryptocurrency to invest in 2020. The price of virtual currencies, with falls of more than 50% since the beginning of the year is a good example. Is this an indication that you have to flee the sector in a hurry? Not much less, just that the price was too inflated.