You will lose a lot of money if you don’t have Bitcoin. See why!
One subject that is making a lot of headlines in traditional and digital media these days is cryptocurrencies. You have certainly heard about them.
You may have heard of cryptocurrencies, but if you have come to this article, it is certainly because you want to better understand what they are and even start investing in this market.
Cryptocurrencies are digital assets, digital currencies that work to exchange between investors in what is already made up and merged as a cryptocurrency “trading” market.
With the use of advanced cryptography, it is possible to ensure the verification of transactions and control the creation of new cryptocurrency units.
As any specific body or country does not control these digital currencies, they are called decentralized currencies, which have a value and are created by a network called blockchain, which stores all information securely.
How does the Blockchain work?
It is a technology that operates as a chain of blocks of information, as if it were a public ledger that stores a networked database in a secure and transparent way.
Everything that is registered in this system cannot be erased or changed, it only allows entries and registrations of new information and queries, and because it is decentralized, for the registration of information to be materialized, it is necessary that all computers approve it.
By putting the information together, a block is formed that is registered forever on the blockchain. The greatest feature of this system is the security it offers. Cryptocurrencies are composed of mining to form the block.
As we explained above, to validate a transaction, it needs to be authenticated and approved by all computers, but to form a block and insert it in the chain along with other blocks, only one computer is required.
The mining process is also called proof of work. There is a place called the mining pool where the information that is already waiting to be inserted into the formation of a block is stored.
The computer that manages to form a block finds a kind of digital (hash11) that is compatible with the previous block, which will be registered in the chain. This computer receives an amount of cryptocurrency for forming the block.
As you can see, it is an operation with a certain complexity, so the computers need to have a good capacity to operate in this system and be able to do the work to obtain the cryptocurrencies.
This method we have detailed is used in the mining of Bitcoin (BTC) which is the best known decentralized cryptocurrency in the world.
Because it has high volatility, cryptocurrencies have attracted the interest of investors because it generates an appreciation movement.
Other points that have stood out in investors’ interest in cryptocurrencies are security, cryptography, transparency, and the advantages of the blockchain system.
All of this has aroused the interest of even the biggest investors in the financial market, in addition to increasing the number of consulting firms and brokerage houses operating with cryptocurrencies.
The potential profitability of these digital assets, added to the fact that they are not tied to political factors of any country, has increased interest in cryptocurrencies.
With operations on a platform that stores all information and transactions securely and transparently, the number of people and amounts invested in this market that is becoming increasingly popular is growing.
The potential of crypto-assets is not limited to investments. Also in 2021, bitcoin was adopted as the official currency of El Salvador, a Central American country, representing a major institutional breakthrough for the crypto world. The idea came from the Executive as part of a financial inclusion policy. When it made the congressional decision official, the Central American nation acquired a stockpile of 1,270 BTC, equivalent to $60 million.
Following the same path, the central banks of the United States, China, and even Brazil have already signaled the possibility of creating digital versions of their currencies. This kind of initiative shows that the world is moving toward a digital financial model, and those who position themselves early have a chance to capture good profits.
Before you start investing in cryptocurrencies, you need to keep in mind that this is a “double-edged sword” market: at the same time that there are possibilities of above-average profits, and volatility can be even higher than in the stock market. Therefore, it is necessary to have diversification as a beacon, both in the portfolio composition and in the cryptocurrency segments themselves.
The recommendation is that the portfolio commitment to these digital assets is between 1% and 3%, especially for beginner investors who may need money in the short term.
In addition, it is important to concentrate most cryptocurrency investments on more solid and consolidated assets, such as Bitcoin and Ethereum, before moving on to more alternative cryptocurrencies.
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