HOW TO KNOW CRYPTO IS REAL
Crossroads
Most people are still not sure about the value of Crypto and doubt whether it’s real or not. Let’s look at various comparisons between Crypto and traditional money. We will also discuss how to derive value from Crypto, how volatile it is, and how to choose the right Crypto. As we start, have an open mind and know that Crypto is just like any other currency you can use to buy goods and services.
Crypto and traditional money
First, let’s compare the form in which traditional money and Crypto. While traditional money is a physical form of money issued by governments, it’s important to note that most fiat currencies also exist in digital form, just like Crypto. Whether it’s online banking, credit cards, or digital payment platforms, most of our financial transactions are already carried out in digital fiat formats.
The only major difference between Crypto and traditional money is their scarcity and centralized control. Unlike fiat money, which can be printed or controlled by central banks, Crypto is decentralized with a finite supply. For example, Bitcoin has a maximum fixed supply of 21 million coins, ensuring scarcity, and any central authority doesn’t control it.
Crypto only exists in digital form, so let’s see what makes them as valuable or even more than traditional money.
What makes Crypto valuable?
Crypto derives its value from different factors. First, Crypto has value because people are willing to exchange goods and services for them. This kind of trading is what makes fiat currencies have value- public trust and acceptance. Second, Crypto’s underlying technology and utility, like the blockchain, contribute to why it benefits people.
It’s also important to address the misconception that fiat money has an inherent fixed value secured by the government. On the contrary, the reality is that the value of fiat currencies varies because of various economic factors like inflation, interest rates, and market sentiment. On the other hand, Crypto is mostly subject to price volatility because of market supply and demand dynamics.
What’s this supply and demand that affects both fiat currencies and Crypto? Let us break it down; when there is more demand than supply for a particular currency, its value increases. Conversely, if its supply exceeds demand, the value decreases. This principle is true for both fiat and crypto markets, even though the factors influencing demand and supply may differ.
The rise and fall in the value of any currency is called volatility. Volatility has been a hot topic in Crypto, so it’s worth our time.
How volatile is Crypto?
Crypto is mostly associated with volatility. However, it is a fact that over the short term, just like stocks and other investments, Crypto is volatile. So, volatility is not unique to Crypto alone. Another thing is that in the long term, Crypto has shown less volatility, more stability, and resilience. Additionally, there are stablecoins in Crypto which are pegged to traditional fiat currencies like the dollar, making them less volatile and more suitable for certain use cases.
From the start, we’ve given examples with Bitcoin and stablecoins, but there are many more types of Crypto. You may be wondering which one would be the best to use. Please don’t stop reading. This last paragraph explains it all.
How do you know which Crypto is the right one?
Deciding which Crypto is best depends on factors like investment goals, risk tolerance, and an understanding of the technology used. The top three Crypto by market domination are Bitcoin, Ethereum, and Binance Coin. Different coins have unique features and use cases. Bitcoin continues to be the most well-known and widely adopted Crypto and is usually considered a store of value. Ethereum, on the other hand, offers a platform for building decentralized applications and executing smart contracts. Lastly, Binance Coin is associated with the Binance exchange and can be used for trading and reducing fees. Far from those three main coins, there are plenty more.
Conclusion
Crypto is an exciting asset that’s new to many people. It might be scary to get into something that’s different from traditional money, but as you saw in this article, there are actually many benefits to giving it a shot. If you still doubt whether Crypto is real, look out for our next post for more insights. As we say, knowledge is power, and you’re armed to make the right decision.
