What is Cryptocurrency Bitcoin? What's Bitcoin ? How are cryptocurrencies made? What makes them valuable? What are the different types of them? How to invest in crypto currencies? Our Top 10 Cryptocurrency in circulation as well as the price of the main cryptocurrencies of the day. Operation, uses and recommendations, taxation, find out everything you need to know before investing in digital currencies such as Bitcoin, Ethereum, Dogecoin, Binance Coin, Ripple ... which are no longer virtual.
CRYPTO CURRENCY AND DIGITAL CURRENCY: WHAT IS IT?
HOW IS THE CRYPTO CURRENCY MADE?
BITCOIN, ETHEREUM: THE MAIN CRYPTOCURRENCIES
RIPPLE, BINANCE COIN, DOGECOIN: MEDIUM AND SMALL CRYPTO COINS
But there are many other digital currencies. We can notably mention in medium-sized crypto currencies, which represent between 0.8% and 2% of the total capitalization of crypto currencies, the Ripple for example, which is not only a cryptocurrency (XRP) but also a transfer system operating independently. of the XRP token. It is first and foremost a digital payment protocol designed to facilitate interbank payments. Binance Coin, Dogecoin, Litecoin, Cardano, NEM, Monero, Stellar, or Iota are also cryptocurrencies that are regularly among the 10 most important cryptocurrencies. Small crypto currencies, which represent less than 0.8% of the total capitalization of crypto assets, still together represent 14% of the total crypto market.
Since the creation of Bitcoin by Satoshi Nakamoto, approximately 5,500 cryptocurrencies have emerged. It should be noted that crypto currencies are numerous, that new ones can emerge and challenge the heavyweights of the sector, but also that disagreements within a community can lead to a "fork", that is to say a split within the community and the creation of a new currency based on the technology of the old but with modifications.
PRICES OF THE MAIN CRYPTO CURRENCIES OF THE DAY
THE CRYPTO CURRENCY: AN ANTI-CRISIS REFUGEE VALUE?
If the coronavirus crisis has also impacted the price of crypto-currencies which have experienced a massive decline since the confinement of populations in the hope of stemming the Covid-19 epidemic, they largely caught up at the end of year 2020 and, overall, continued their bullish rally in 2021, until the crypto crash of May 2021 from which they are already recovering. In this troubled environment, cryptocurrencies have finally succeeded in establishing themselves as a safe haven. As Nathalie Janson, Economist and teacher-researcher at NEOMA Business School underlined at the beginning of December 2020: "radical economic uncertainty, negative rates, weak dollar" are all factors that contribute to the rise in the price of crypto currencies. “In recent months, we have started to hear a clear and categorical speech explaining that bitcoin is becoming a store of value in the form of digital gold.
It is not uncommon for one to compare crypto currencies to gold considering that it is, in both cases, a safe haven.
Jerome Powell, the chairman of the US Federal Reserve, even recently said that bitcoin is "essentially a substitute for gold rather than the dollar." The only thing missing is the historical status of a store of value. But their recent creations may allow us to see Bitcoin and other crypto currencies as the digital gold of younger generations who do not have the same relationship as the previous ones with the precious yellow metal.
CLASSIFICATION OF CRYPTOCURRENCIES ACCORDING TO THEIR 2021 MARKET VALUE
Coinmarketcap.com performs a ranking of cryptocurrencies according to their market valuation.
You may be wondering which cryptocurrency to buy or looking for information on which cryptocurrency to invest in or which cryptocurrency to trade. Investors often favor cryptocurrencies with a large market capitalization and relatively high prices, which reflects a certain confidence in the currency and a relative strength of the token.
Discover the ranking of the 10 most important digital currencies taking into account their market capitalization, that is to say the total value of all tokens in circulation (price of a token X number in circulation).
1. Bitcoin (BTC)
- Creation date: 2009
- Market capitalization as of July 27, 2021: $ 718.315 billion
- Price variation over 1 year (USD): + 248% approximately
2. Ethereum (ETH)
- Creation date: 2015
- Market capitalization as of July 27, 2021: $ 268.147 billion
- Price variation over 1 year (USD): around 614%
3. Tether (USDT)
- Creation date: 2015
- Market capitalization as of July 27, 2021: $ 62.557 billion
- Price variation over 1 year (USD): - approximately 0.05%
4. Binance Coin (BNB)
- Date of creation: 2017
- Market capitalization as of July 27, 2021: $ 53.140 billion
- Price variation over 1 year (USD): approximately 1,412%
5. Cardano (ADA)
- Date of creation: 2017
- Market capitalization as of July 27, 2021: $ 41.488 billion
- Price variation over 1 year (USD): approximately 755%
6. Ripple (XRP)
- Creation date: 2015
- Market capitalization as of July 27, 2021: $ 29.910 billion
- Price variation over 1 year (USD): approximately 179%
7. USD Coin (USDC)
- Date of creation: 2018
- Market capitalization as of July 27, 2021: $ 27.213 billion
- Price variation over 1 year (USD): around 0.15%
8. Doge Coin (DOGE)
- Creation date: 2013
- Market capitalization as of July 27, 2021: $ 26.929 billion
- Price variation over 1 year (USD): approximately 6,423%
9. Polkadot (DOT)
- Date of creation: 2020
- Market capitalization as of July 27, 2021: $ 14.013 billion
- Price variation since its creation in August 2020 (USD): around 414%
10. Binance USD (BUSD)
- Date of creation: 2019
- Market capitalization as of July 27, 2021: $ 12.126 billion
- Price variation over 1 year (USD): around 0.16%
WHAT IS THE CRYPTO CURRENCY FOR?
Cryptocurrency as a means of payment for the purchase of goods and services
What are the reasons for using cryptocurrency? Like any currency, cryptocurrencies enable the purchase of goods and services. Not being under the influence of a central authority and escaping any regulation, they have long been the prerogative of illegal transactions (ransomware, drug trafficking, etc.) but they tend to get rid of their bad reputation by becoming democratizing and attracting a wider audience. Cryptocurrencies are increasingly used for legal transactions today.
Digital currencies, like Bitcoin -BTC-, are used to buy many common consumer goods. For example, it is possible to buy with Bitcoins, computer equipment of course, but also food, jewelry, decorative objects, cultural products, etc. Overstock, general merchant site accepts payment in Bitcoins, just like Shopify. Paying for everyday goods with other cryptocurrencies is more difficult, but not impossible. The Ether, for example, could be used to buy works of art exhibited by young artists. The digital currency that wants to compete with Bitcoin has thus done, on this occasion, its entry into the real world. At the end of 2020, Paypal said in a statement its intention to “join the cryptocurrency market by allowing customers to buy, sell and hold bitcoin and other digital assets, by using the Company's online portfolio accounts ”. This announcement makes it possible for certain and rapid democratization of the virtual currencies that will be offered by this online payment companies.
Despite everything, it is more difficult today to carry out a daily transaction in cryptocurrency than with the currency that is current in the country where you live. Ditto for digital payments. However, cryptocurrencies could ultimately lower the cost of a digital transaction. And the financial and banking sector is watching these advances very closely. In the future, electronic payment based on cryptographic evidence may be the norm. Enough to embarrass the banks by forcing them to completely review the transaction model!
Cryptocurrency as a financial asset for investing
Cryptocurrencies must find their balance between means of payment and financial asset. Because it is indeed a good on which investors overwhelmingly have positioned themselves in recent years. For many who have flocked to these new kind of financial assets, cryptocurrencies are first and foremost a potentially profitable investment.
However, are digital currencies an investment like any other? What is certain is that altcoins or digital alternative currencies can be a new kind of investment, while participating in the new digital economy. It is common to include crypto-currencies in the category of miscellaneous goods and other atypical investments. This typology is relevant in the sense that it calls for prudence and to invest only a very small part of its capital in such assets.
Crypto currency as a means of making capital gains
Bitcoin was around $ 20,000 in December 2017 after a record year when the famous crypto currency saw its price multiplied by 15 in dollars. And Bitcoin has been talking about it again for several months with a spectacular rise that began at the end of 2020 and which continued at the start of 2021 with a high of more than $ 60,000 on March 13, 2021 (its value was multiplied by 10 over the last 12 months), before experiencing a resounding crash on May 19, 2021 and losing 20% of its value. It was also a crash crypto because it involved a large number of tokens, which often found bullish trends the same day or the next few days. Still, this severe correction reminded investors that the meteoric increases in the price of crypto assets are accompanied by significant volatility! Even so, the increasing volume of trading and the massive rise in the market capitalization of cryptocurrencies clearly indicates investor interest in these new financial assets. Investors remain attracted to these digital currencies, capable of posting impressive performances matched only by their volatility.
Keep in mind, however, that buying crypto currencies is more or less investing in innovative technology. If the digital currency you have invested in becomes dominant (they all try with varying degrees of success to dethrone Bitcoin), you will have made a good deal.
Crypto staking to earn regular income
Some crypto currencies also make it possible to generate income by simply holding them. This is for example the case of Decred (DCR), Cosmos (ATOM), Tezos (XTZ) or even Algorandi (ALGO). This is called staking, a term derived from "proof of stake", meaning proof of possession or proof of stake. In exchange for holding locked tokens, which are used to validate transactions, the individual investor who holds them receives rewards (most often interest, or even token compensation).
The interest in the network is twofold: on the one hand, this practice allows better security of the exchange network and a reduction in Blockchain energy consumption; on the other hand, holding the token in question causes a scarcity of supply and a rise in the price.
Stablecoin: cryptocurrency as an investment medium in a given underlying
Finally, digital currency can also be used to invest in financial assets that have nothing to do with virtual currency. Thus, stable coins are crypto currencies backed by an underlying whose variation they replicate. These include Tether (USDT), indexed to the dollar, just like USD Coin or Dai. The cryptocurrencies Tether Gold and Pax Gold are they, as their name suggests, indexed to gold. Their low volatility helps reduce the risk of a cryptocurrency portfolio. But stablecoins are also very easy and simple to trade (sometimes much easier than the underlying they are linked to). Finally, the capital gains are secured and converted into stablecoins (if 1 USDT = 1 $, if the dollar goes up, you will own more Tether). Thus, the cash traditionally held in the portfolio can be directed to stablecoins.
Best of all, stable coins can allow you to secure your crypto capital gains without being taxed. Indeed, to collect a capital gain in cryptocurrency (such as Bitcoin for example), you can convert it into a stable coin rather than recovering your earnings in euros. In fact, the capital gains realized during transactions involving the conversion of your crypto-currencies into national currency are currently taxed at the flat tax. If you stay in the Blockchain, you are not taxed. This practice, known to experienced active investors, therefore helps to delay and mitigate taxation.
Crypto-equity crowdfunding: another use of crypto currency
Finally, crypto-currencies have another function, more niche but just as important: the financing of projects by raising funds from people (individuals and institutional investors or business angels). You may be wondering: what is a cryptocurrency ICO? This is no more and no less than a cryptocurrency fundraiser.
Crypto-currencies can indeed also be used to finance companies via crypto-equity crowdfunding, crowdfunding in digital currencies. The process, which has grown significantly since 2014, consists of financing equity crowdfunding through virtual currency. This type of practice is referred to as an ICO or Initial Coin Offering. Several platforms offer this solution, such as Swarm for example.
WHAT MAKES A CRYPTO-CURRENCY VALUE?
Why cryptocurrency is going down? Why is a cryptocurrency falling? How does a cryptocurrency increase in value? Find out what are the factors that influence crypto prices.
Confidence in virtual currency
First, as with any currency, virtual or real, the founding element is trust. People need to trust cryptocurrencies in general and trust a particular cryptocurrency, but that is not impossible - far from it. During the Greek crisis, some massively bought Bitcoin, a currency that inspired them more confidence than that, real and regulated, which suffered the full brunt of the monetary crisis and had to face galloping inflation.
In addition, in order to flourish and see its price rise, a cryptocurrency needs a supportive regulatory framework and a benevolent approach from regulators. On September 26, 2019, Bitcoin jumped 42%, from around $ 7,000 to over $ 10,000, after Xi Jinping's statements about the potential of Blockchain technology, which he called a "major breakthrough" for innovation independent of basic technologies ”. The 3rd highest daily rise in Bitcoin is therefore largely due to China's pro-Blockchain policy. In its wake, other cryptocurrencies adopted a bullish movement. China, by praising the underlying technology of Bitcoin, gave a strong buy signal to market participants who saw in the Chinese President's statements a clear desire to allow the development, if not the acceleration of cryptos, this which naturally boosted the entire sector.
More recently, at the start of 2021, it was the sudden appearance of the single word "Bitcoin" in Elon Musk's Twitter biography that caused the price of digital currency to soar, shortly before the billionaire whimsical announces having invested 1.5 billion dollars in Bitcoin and offers Tesla customers to buy their cars with the most famous crypto currencies. The boss of SpaceX and Tesla poses as a true influencer and ambassador of Bitcoin, helping to create a feeling of confidence in this cryptocurrency in particular, but also in cryptocurrency in general. Elon Musk has indeed also provided support to Dogecoin -DOGE-.
Note, however, that Elon Musk's exits also have the opposite effect depending on the content of the remarks made by the boss of Tesla. Thus, on May 13, the latter finally returned to the possibility of buying a Tesla in Bitcoins. The May crypto crash followed shortly after this statement. On June 4, 2021, bitcoin lost as much as 8% after Elon Musk tweeted suggesting a potential break with the first cryptocurrency by posting a heartbroken emoji and a reference to a popular song.
Whoever establishes himself as a true cryptocurrency guru significantly varies prices according to his tweets which have a direct consequence on the confidence of investors in a particular currency.
The number of cryptocurrency users
What also makes the value of a virtual currency is the size of its network and the number of people who use it all over the world.
The more users a cryptocurrency has, the more its value increases, which means the price of the token goes up.
Two essential factors will push people to buy a virtual currency: the penetration rate in the real economy (that is to say the ease with which one can buy goods and services in real life by paying with said crypto). currency) and the prospect of positioning itself in a crypto-asset while achieving a relatively large capital gain.
Speculation is still the main driver of the development of cryptocurrencies and their prices vary considerably depending on the appreciation of traders who think they will make money easily or not on a particular token, creating bubbles as in 2017-2018. . Intrinsic value doesn't really matter much. And the situation is very likely to continue as long as demand in the real economy remains relatively weak.
The growing democratization of virtual currencies is boosting the price of cryptos
The democratization of virtual currencies reflects the growing confidence of the general public in this type of asset. Individuals will now be able to pay for more purchases of goods and services via virtual currencies with their Paypal account as we have seen previously or with the future Facebook token, the Diem, which will make it possible to pay for purchases on the marketplace of famous social media.
Governments and central banks are also showing more inclination to adopt virtual currencies with an effort made on the regulation of cryptocurrencies and the emergence of digital central bank currencies. Finally, the financial markets also seem to be making room for cryptos. Many brokers now offer to invest in virtual currencies. Several large investment banks have a unit dedicated to crypto assets, and more and more traditional funds and hedge funds are positioning themselves in crypto assets. Last notable event: Coinbase, the U.S. crypto exchange platform went public in April 2021.
HOW TO INVEST IN THE CRYPTO CURRENCY?
In January 2020, a research study revealed that 74% of those surveyed were aware of cryptos as a means payment (13% are familiar with how it works) and the proportion of people who would be ready to pay for their purchases if they were accepted everywhere is close to 20%.
It must be said that according to a study carried out in April 2019 by the crypto exchange BitFlyer, two thirds of the 10,000 people surveyed believe that cryptocurrencies will still be there in ten years. However, barely a tenth of those surveyed bet on the use of cryptos as a currency in the future.
Are you one of the many people who do not know how to buy cryptocurrency but you don’t miss the urge and don’t know how? Find here our explanations and advice on how to position yourself in crypto currency.
Two ways to buy your Cryptocurrency
There are two ways to get crypto currencies:
- by selling a good or service and demanding payment in the cryptocurrency of your choice;
- by converting "classic" currencies (euro, dollar, etc.) into encrypted currency.
Binance, Bitstamp, Poloniex, Coinbase ..etc, make it possible to convert any currency into Bitcoins quite easily, or even into other altcoins.
To convert your Dollar or Euros into Bitcoins, you must signup on an exchange platform by providing an electronic copy of identity document and a recent invoice (gas, electricity, internet) to prove your address.
Choose your crypto currency exchange platform or virtual currency broker
Cryptocurrency exchange platforms like Coinbase, Bitpanda and Binance allow you to acquire and trade active crypto directly, without going through derivatives.
To avoid scams and to see more clearly in the offer of crypto-currency brokers, law have set up a new specific regime governing these service providers on digital assets. Since December 2020, financial regulators have established new rules and laws so as that brokers will be able to offer crypto-asset custody services or access to crypto-assets or the purchase / sale of crypto-assets against currencies having legal tender, must be registered. with the financial market policeman who will ensure the reliability of the service provider. So any actor who has not registered may end up on the blacklists.
In addition, an optional authorization can also be requested by the PSAN which, after having obtained it, will have the right to be able to canvass new customers.
Create a cryptocurrency wallet
Regardless of how you obtain it, you will need to create a "wallet" in order to hold your change.
A crypto wallet is an address in the form of a sequence of numbers accessed by a password. You can create a Bitcoin address and password for yourself for free and quite simply on a dedicated platform like Binance.com that supports several currencies.
Finally, to pay with cryptocurrency (or receive payment in cryptocurrency), a broker is necessary. You will have the choice between:
- a trading platform similar to a broker;
- software to download.
Please note, these brokers usually charge commissions. We also cannot recommend enough that you choose your broker carefully, as many of them have already gone bankrupt.
Also watch out for scams of all kinds that flourish on the web and "brokers" who refuse to return the sums held in your account.
How to trade cryptocurrency
All over the world, new initiatives are developing to invest in the cryptocurrency market. Thus, the New York Stock Exchange, announced in August 2018, the creation of the "Bakkt" platform by the Intercontinental Exchange (ICE), parent company of the New York Stock Exchange (NYSE), which makes it possible to buy, sell and store Bitcoins. But the United States is also seeing the creation of trust companies specializing in crypto currencies such as LLC and ITbit, two companies which, in addition to meeting the requirements of the New York State Department in terms of capitalization, reserves, compliance, protection of consumers and cyber-security, also provide guarantees of computer storage systems and cold storage vault systems for Bitcoin holdings of the famous GABI fund. In addition, several US banks are taking a keen interest in virtual currencies, such as JP Morgan who launched the JP Morgan Bitcoin Trading Desk a few years ago.
In Europe and Asia, individuals who want to position themselves on the crypto-currency market can turn to a specialized online broker who offers virtual currency trading via CFD-type derivatives. For example, eToro.com allows you to trade Bitcoin -BTC-, Ethereum -ETH-, Ripple -XRP-, Bitcoin Cash -BCH-, and Cardano -ADA-. Binance.com allows you to trade Bitcoin, Ripple, Bitcoin Cash, Litecoin -LTC-, Ethereum, Litecoin and many other altcoins. You will also be limited in terms of leverage. Indeed, a CFD on cypto-actives cannot have a leverage greater than two. Recall that 89.4% of retail traders lose money according to the Study of results of retail investors on CFD and Forex trading based on the results obtained by nearly 15,000 retail traders from 2009 to 2013. The study also points out that the financial brokers who markets this type of CFD must be approved..
6 TIPS FOR INVESTING IN THE CRYPTO CURRENCY
1. Understanding Blockchain Technology
Before investing in this type of currency, make absolutely sure that you understand this innovation and especially the technology behind it. It ultimately comes down to fully studying the Blockchain technology from which crypto currencies originate. Also, and above all, pay attention to the details that differentiate currencies from one another: the programming language, the blockchain validation system, governance, the currency's ability to adapt to an order of magnitude change of demand for example.
2. Take into consideration the token expansion limit
The unit of cryptocurrency is called a token. The number of tokens created can be limited, as is the case with Bitcoin which will be limited to 21 million Bitcoins in circulation, making the product relatively rare, which of course contributes to its value. But a cryptocurrency can also follow a deflationary pattern. In this case, the quantity of money in circulation is unlimited, which could over time encourage the stagnation (or even decrease) of its price.
3. Check the transparency of virtual currency
Favor a cryptocurrency with a website with clearly identified investors and developers, a presentation of the project, possibly a roadmap indicating the planned technological advances. If none of this is accessible, beware, you could invest in a Ponzi scheme.
4. Stay informed on cryptocurrency websites
To be up to date in this ultra-niche and ultra-geek field, and therefore to ensure an investment under the best conditions by having all the information on the targeted asset, it is better to look for the information where it is found, that is to say on the web! Many cryptocurrencies offer their own websites, but broaden your search to community websites such as Reddit or Slack which will allow you to publish, consult articles, discuss and share issues and opinions. The Bitcointalk forum fulfills the same role but is exclusively devoted to cryptocurrencies (not just Bitcoin because it has a dedicated altcoins section).
5. Learn about the quality of virtual currency developers and their funding
What makes the success of a cryptocurrency above all is the quality of the developers who are at the origin of this innovation. So check their experience, training, work history, etc. Do they form a close-knit team with good rapport? You can verify that their interactions on the Slack or Reddit community are both cordial and constructive.
Finally, you absolutely have to know who pays the developers: a company or a private equity fund outside of cryptocurrency? Are developers paid with their cryptocurrency? The important thing is to be able to assess the motivation of the developers and possible conflicts of interest.
6. Limit your investments in these volatile, high-risk assets
One of the major characteristics of cryptocurrencies is volatility. Thus, the value of a crypto currency, i.e. its price, can rise or fall, very quickly, in unpredictable ways. In question: its young economy, its unusual nature and especially its sometimes illiquid markets. And the number of platforms further adds to the lack of liquidity of the tokens. Thus, at the end of 2019, "a volume of 143 bitcoins is enough to vary its price by 1% on the Bitstamp platform. Coinbase and Kraken are much more liquid, and it is respectively 456 and 672 bitcoins that must be exchanged to move the price of the crypto leader by 1%.
Investing in crypto currency is therefore not recommended for cautious profiles with a strong aversion to risk. For others, think all the same not to keep a large part of your savings in Bitcoin or others which remain high-risk assets. There is a real risk of losing a large part of the money invested in this way.
If the adventure of cryptocurrency tempts you, go for it with money that you are willing to lose. It must be an investment representing a very small portion of your financial assets. Cryptocurrency is more of an experiment to try if you feel like it than a reasoned investment made with a view to diversification. Wanting to make money really fast is never a good reason to invest in cryptocurrency.