Welcome back dear loyal readers of Invest In The Stock, we are always happy with the affection you show us on a daily basis. In today’s article we will talk about finance, specifically, we will deal with the situation of cryptocurrencies: what is happening, whether it is worth investing and buying right now and how the collapse of FTX affects cryptocurrencies.
What are Cryptocurrencies?
First of all, let’s try to understand together what cryptocurrencies are and how cryptocurrencies work.
Cryptocurrencies are basically virtual currencies managed through decentralized cryptographic algorithms, and their prices are influenced by the number of investors.
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Lately, cryptocurrencies today are having a great success, not only as a payment currency, but especially as an investment asset that guarantees a high return.
For some years now we have heard more and more talk of investments in cryptocurrencies (newly conceived virtual assets), but not everyone knows correctly what companies such as Bitcoin, Litecoin or Ethereum represent only for the best known.
Because in general it is known that there is the possibility of making good capital gains and high earnings with cryptocurrencies, but only some inform themselves and study the sector in order to be able to invest in cryptocurrencies in the best way possible.
Invest in cryptocurrencies
Now let’s see the basics to start investing in cryptocurrencies. Let’s say right away that there isn’t just one method for using cryptocurrencies to make investments.
One of the most used methods is online trading, which allows you to buy through cryptocurrencies today, for example, CFDs (also called Contracts for Difference) which represent derivatives that can be bought and sold on trading platforms such as Etoro, Plus500 and XTB extension. We remember you CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
Among other things, the cryptocurrency market is very sensitive to price changes, due to the effect of a great crypto volatility which makes it possible to make good profits, even if the risk of losses increases exponentially.
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To trade online with declining cryptocurrencies today, investors do not own digital currencies, but simply use their derivatives.
In fact, those who decide to buy bitcoins or other types of cryptocurrencies must rely on platforms that are different from the classic financial brokers.
The dedicated platforms are called, precisely, Exchange. Consequently, these sites allow you to buy and sell cryptocurrencies using FIAT currencies (for example euros, dollars and pounds), and after making the purchase, you have to wait some time before being able to resell the cryptocurrencies themselves.
What is the volatility of cryptocurrencies?
Unfortunately one of the aspects concerning cryptocurrencies and risks is certainly the general volatility of virtual currencies.
As ascertained by various sector studies and years of monitoring, the crypto market is extremely volatile.
So if you decide to invest in cryptocurrencies, the risk of large losses in value, in a completely sudden and sudden way, is around the corner.
What happened to Bitcoin?
One of the most striking examples is the case of Bitcoins, whose price soared when Elon Musk announced his willingness to accept and use virtual currency as one of the types of payment to buy Tesla cars.
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And to obtain the opposite effect, when he retraced his steps, he quickly changed his mind, due to the fact that cryptocurrency mining, or the search for virtual coins, is heavily polluting; and consequently, extremely energy consuming.
This is to underline how fluctuating this financial market is, now slowly recovering due to the conflicts that are unfortunately taking place on Ukrainian territory.
Cryptocurrencies minimize risks
One of the tactics to reduce losses and avoid the risks of investing in cryptocurrencies is to not buy more than necessary, that is, not to buy much more cryptocurrencies than you can afford to lose.
In that we must be aware that from one day to the next cryptocurrencies are no longer worth anything.
Another aspect to be carefully evaluated is fraud. Of course, because scams in the world of cryptocurrencies are not so rare, even if they are based on blockchains, a technology that greatly reduces the risks of investing in cryptocurrencies.
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We also recommend avoiding making purchases and paying with digital currencies, especially from unreliable ecommerce sites, because it may happen that you don’t receive anything and it will be difficult to recover the amount spent.
Cryptocurrency market crash
In the last period, the value of cryptocurrencies in decline today has fallen rapidly, to give an example: Bitcoin, the leading exponent of the category, is worth much less than the historical peak reached at the end of 2021.
But it is not the only one to have suffered this significant drop, in fact Ethereum (ETH) and Binance Coin (BNB), other well-known cryptocurrencies, have also recorded a significant drop in price.
For this reason, it could be the ideal time to buy, in the hope that this momentum does not last long and the market settles down.
FTX failure consequences
One piece of news that has particularly shaken the crypto market collapse and which may have repercussions on investors is certainly the bankruptcy of Ftx, a US platform headed by the expert Sam Bankman-Fried, who promptly resigned as CEO.
Truth be told, the occurrence of the FTX crypto crash marks a turning point; for the cryptocurrency sectors it recalls what happened with Lehman Brothers which triggered the 2008 crisis.
Domino effect of cryptocurrencies: what is happening
The serious FTX meltdown could trigger a kind of setback in the growth of the entire cryptocurrency market, confirming the unreliability and volatility of a very opaque sector.
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In addition, FTX, Alameda Research and all related companies said they have more than 100,000 customers to repay and have an estimated liability of $10 billion to $50 billion.
As a result of what has happened, the value of many cryptocurrencies, Bitcoin above all, has already started to fall.
For the moment, the signals of an impact have been of medium intensity, but this does not seem to have reassured investors and market analysts; and in a sector such as cryptocurrencies where trust is essential, it is not the best.
Well dear friends of Invest in The Stock, as you have been able to see the crypto market is very fluctuating and it is therefore right to understand well about cryptocurrencies: what is happening.
Invest In The Stock, The Editorial Staff
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