Is it too late to invest in cryptocurrency?

The mixed fortunes of Bitcoin led some to think it’s too late to invest in cryptocurrency. But there’s much more to the market than its most famous name. Here’s a look at what the future has in store for crypto.

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Depending on who you talk to, cryptocurrency is either an opportunity that’s been and gone, a complete mystery, or the future of cryptocurrency.

It’s not surprising why people think like this. Bitcoin reached a high of $20,000 in December 2017 but 12 months later, 1 bitcoin was valued at about $3,200 (its value has since risen again).

For people who follow national exchange rates or stocks, which are more accustomed to small fluctuations over long periods, the volatility of cryptocurrencies’ prices can be a put off.

However, others see it as a sensible medium to long-term prospect. Let’s find out why.

Is it all about Bitcoin?

Bitcoin is the household name of the crypto world. Released in 2009, it was the first decentralised cryptocurrency.

Bitcoin’s fame was helped by the rush of people trying to make quick profits by buying in, or trying to earn money by mining it.

Bitcoin

Crypto investors are now looking more widely for opportunities, keeping an eye on Bitcoin as one of many options. Ether, Ethereum Classic, Litecoin, Ripple and 0x are all hot topics right now.

Here’s a little about some of the other popular cryptocurrencies...

  • Litecoin: Charlie Lee, a former Google employee, created Litecoin by modifying the Bitcoin code. Compared to Bitcoin, it has higher coin circulation and increased block frequency. It also has a custom hashing algorithm.
  • Ethereum: Popular with users because it supports Smart Contracts - programs that automatically execute an action, such as a payment, when certain criteria are met.

Ethereum is an open-source blockchain based platform that allows all sorts of decentralised transactions to take place. Anything from content to shares in property can be transferred on the platform.

Ethereum
  • Ether: Described as “a fuel for operating the distributed application platform Ethereum” - which means it pays the owners of the machines performing the transactions. It’s not a currency, asset or share, but a token to pay for computation.
  • 0x (“Zero X”, ZRX): Uses the Ethereum network to enable people to exchange assets. It’s a relative newcomer, founded in 2016, but has quickly found its feet.
  • Ripple: A smart, modern and fast means of sending money already being used by large finance companies such as Santander, American Express and Standard Chartered.

Ripple’s own currency is XRP, but using the RippleNet, anyone can make their own cryptocurrency.

All the cryptocurrencies available through Skrill come with their own benefits and risks, so do your research before investing.

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Is the cryptocurrency market just a bubble?

During the 1995 – 2000 dotcom bubble, the unrealistic valuation of many online businesses led to dramatic drops when expected profits didn’t materialise.

But nobody would say the internet died when the bubble burst.

If you take a look at medium-term performance charts of the major cryptocurrencies a pattern emerges.

Ether had a sharp peak of $1,386 in January 2018 but gradually settled to its current price. Bitcoin’s famous peak of $20,000 took just 3 months to fall to $7,000. Litecoin peaked at $306 in December 2017 but sunk to $31 a year later.

An often-overlooked factor is what happened after the peaks. All the major cryptocurrencies have settled at rates higher than their pre-peak levels, and performance is more stable after the shocks.

When cryptocurrency was brand new and investors were afraid of missing out, it was almost inevitable that they would become overvalued and cause a bubble. As time has passed, there has been a relative calming down, although large price spikes continue.

The future of cryptocurrency

If the past decade was cryptocurrencies’ proof of concept stage, the next decade will see them become rooted in the everyday fabric of life.

Investing in crypto can still yield returns but paying attention to price movements and carefully timing your purchase is crucial.