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in the case of the most popular currencies, you often have to wait even several dozen minutes for the execution of the transaction. Less used cryptocurrencies, as a rule, are associated with much faster approval of operations.

It should be emphasized that the described mechanisms do not exist in all virtual assets. It is enough to mention that some of them do not have a mining process, and some cryptocurrencies (e.g. ripple) are not fully decentralized. There may be more of these types of distinguishing features, but they are not relevant to the considerations presented in this article.

a body of intermediaries, while remaining beyond the control of governments and financial institutions.

Interestingly, to this day, it is not clear who actually created bitcoin. We know that it is the responsibility of an outstanding programmer or a group of programmers nicknamed Satoshi Nakamoto. However, we do not know his (or their) true identity, and no one has ever proven that he participated in the creation of the first digital currency.

It is worth adding that although bitcoin is officially recognized as the first cryptocurrency, similar solutions (including bit gold or hashcash) were created just before it, and the first concepts of decentralized electronic payments appeared in

Some people love cryptocurrencies, others hate them, and others have not even heard of them. Less of these, because currencies are only talked about and written not in the financial media. If you also want to know what you want their phenomenon to rely on and how you will invest in them, up to ten are for you.

Cryptocurrencies - what are these assets and what makes them stand out?
How do you have cryptocurrencies? Technology, excavation and other technical packaging
The risk, potential and time horizon of investing in cryptocurrencies
Investing in practice, i.e. how and when is it best to buy cryptocurrencies?
Is it worth investing in cryptocurrencies?
Investing in cryptocurrency has resulted in losses for many, and although a small capital drive, there are also those who will bring really severe losses. Their lovers often exploit them for money and money, and give them the embodiment of freedom; Bitcoin itself, the oldest and most important virtual currency, is seen as a store of value, something like "digital gold". Crypto opponents see them mainly as values ​​for speculators, useless and useless assets, and even ... financial pyramids.

Crypto has been written and excited about, but often a lot of people want to talk enough and emotionally. There is a big problem that people of the country of this market would like to present. In this article, we have described crypto in how to proceed by state so that you can judge if I will be one for you.

Keep in mind that you should enter the information in the text to only a separate part of the page that you should explore to gain access to cryptocurrencies. We focused on more important issues that come from the investor's perspective, but we cannot necessarily benefit from the technical benefits in the same sense and meaning of blockchain. If you can or don't want to read them (they are about problematic problems, but we tried to talk about them in language), we immediately turn to the subject of strictly cryptocurrency trading.

Cryptocurrencies - what are these assets and what makes them stand out?
About what cryptocurrencies are, a lot of their name itself, which says that we are dealing here with cryptography and currencies. It must be added immediately, however, that these are concrete currencies, because the court is in a digital form.

Cryptocurrencies have no place, but champions had value, they could be called virtual or mi money. This means that the user can manipulate the given cryptocurrency, you can do it via the website or website, legally, as well as change the currency or another currency (they are for the so-called fiat). What's more, if, for example, a friend gives you your address, transfers the given cryptocurrency, then in the initial way, bypassing the bank and other intermediaries, you can transfer any of her teams to him. This way, it's easy to spread out to count on expenses.

The fact is, however, that today hardly anyone uses cryptocurrencies for their payment function. This is this is will be will be and people, note that you hope they are exhibiting. Their selling action is mainly made on cryptocurrency exchanges, which in ways resemble traditional stock exchanges, exchanges, currencies and raw materials.

As for the accessibility, it is enough that bitcoin cost the cost of the courses, but a few cents later it tried $20,000, and after 4 years to nearly$ 65,000 (the peak in 2021). However, it must not be forgotten that in the meantime it recorded many huge price drops. By buying a cryptocurrency at the top before the crash, it was possible to lose 70-80% of the portfolio value in a few weeks, sometimes even days.

Bitcoin and the first cryptocurrency
It is widely believed that bitcoin (BTC) is the beginning of cryptocurrency and blockchain technology. It was established at the beginning of 2009, i.e. right after the outbreak of global business, the consequences of which we felt for several years.

For the topic under discussion it is a fact that it has now very heavily strained the banks to be used as the central governments that were created. for the advancement of the real estate bubble or the subsequent mass printing of money. In order to access fast, safe and secure operation without payment ud

the 1990s.

Altcoins, or alternative cryptocurrencies
It is quite common to believe that the emergence of the concept of blockchain technology was more important than the appearance of bitcoin itself. The range of its potential applications is wide; it is used not only to create new cryptocurrencies, but also to experiment with many other solutions that are based on cryptography or a distributed database (we will come back to this topic later).

Cryptocurrencies that arose after bitcoin are called altcoins (from the English words: alternative and coin). The oldest and most important of them are ethereum, litecoin, ripple or monero, but keep in mind that there are currently several thousand virtual currencies and tokens. Some offer useful, even revolutionary solutions, but there are also worthless projects and even scams, i.e. simple scams. Interestingly, despite the huge, dynamic development of the market, bitcoin still accounts for 40-60% of its total capitalization.

It is worth adding that older altcoins were often based on solutions adopted in bitcoin, but they were supposed to be faster, more efficient and more useful. Dozens of such "bitcoins 2.0" have been created, but none has revolutionized the market. More hopes are placed on newer cryptocurrencies, especially those that have their own blockchains for creating decentralized inwestujfinanse.pl applications (e.g. ethereum, cardano or polkadot). Projects that lead to solving the problem of connectivity, the so-called smart contracts with external data sources (e.g. chainlink), as well as platforms supporting multiple blockchains at the same time (e.g. polkadot).

A complete list of existing altcoins, their prices, charts and exchanges on which they are listed, you can find, among others on the website: https://coinmarketcap.com/.

How do cryptocurrencies work? Technology, excavation and other technical issues
Several concepts have already appeared in the text that may be incomprehensible to a person unfamiliar with the subject of cryptocurrencies. So let's explain how virtual assets actually work and what makes digital currencies different from tokens.

Let's start with the fact that many cryptocurrencies use the same technology and function in a similar way. Their essence is a decentralized system, which in most cases is based on blockchain (blockchain). The latter is a public register of transactions within the network of a given cryptocurrency, which are concluded, verified and encrypted using cryptography, i.e. complex mathematical calculations. These calculations are performed on an ongoing basis by many network users (or rather their computers with high computing power), for which they receive remuneration in the form of cryptocurrency units.

Importantly, blockchain technology works in such a way that it prevents the counterfeiting of both cryptocurrencies and the operations in which they participate. It does not require the presence of intermediaries, because the transaction takes place directly between the sending and receiving party. It is also worth adding that only the parties to the transaction know all its details, although the accounting register itself and the basic data about the operation are publicly available.

What is cryptocurrency mining and decentralization?
As you can see, cryptocurrencies and transactions with them look different than ordinary currencies and operations in the classic financial system. Virtual money does not need intermediaries, nor is it subject to the control of the central bank or other institutions. No external organization can decide on the size of crypto emissions or directly influence their functioning.

These benefits are provided by the blockchain of a given cryptocurrency itself, which is a decentralized and distributed database based on a peer-to-peer model. In this case, network users called miners (minerals) are responsible for handling transactions and storing related information. The process by which they verify and add transactions to the public register, as well as the mechanism for putting new cryptocurrency units into circulation, is called mining.

Since many miners perform their work simultaneously, the operation of the network of a given cryptocurrency can run smoothly and undisturbed. When any of them stop sharing their computer, system functionality will not be affected. The fact is, however, that in

Cryptocurrency and token
Many people refer to cryptocurrencies as all virtual assets that can be traded on exchanges. This is not surprising, because even the exchanges that enable this trade operate under the name of "cryptocurrency exchanges". In fact, we distinguish between cryptocurrencies such as bitcoin (BTC) and litecoin (LTC), as well as digital tokens such as binance coin (BNB) or cardano (ADA). It is worth adding that there are many more tokens than cryptocurrencies, but you will not be surprised if you understand the mechanisms described below.

The cryptocurrency operates in its own blockchain network (one network is one cryptocurrency), while the token is created on "someone else's" blockchain using the so-called smart contract. Since a given network allows you to build an unlimited number of smart contracts, many different tokens can exist on the same blockchain. In the case of bitcoin (BTC), there are no such tokens at all, but for example in the ethereum network, apart from the associated ethers (ETH), there are hundreds of other tokens.

There are other functional and technological differences between cryptocurrencies and tokens, but they are of little importance to the average investor. Both are listed on exchanges and are subject to the same trading rules. Regardless of which of them you will invest in, the changes in their prices will be of key importance. However, know that cryptocurrencies act strictly like money, while tokens can be used, for example, to raise funds for project development, reduce stock exchange fees or reward network users (utility tokens) or take on features similar to shares (investment tokens).

Some tokens are partially or 100% secured by standard goods, e.g. gold or currency (stable coins), and their exchange rates follow the prices of these goods. Stable coins include tokens such as tether (USDT), USD binance (BUSD) or USD coin (USDC). Pay attention to them, as they are primarily used for trading on cryptocurrency exchanges. They are a kind of virtual fiats (usually dollars), for which investors buy and sell other tokens and cryptocurrencies. They use them mainly because, according to the regulations in force in most countries, when BTC, ETH, LTC or other cryptos are exchanged for stable coins, no tax obligation arises (however, this does not mean that you do not pay tax on profits from cryptocurrencies!).

In the rest of the text, for the sake of simplicity, we will use the term cryptocurrency, but keep in mind that there are actually different types of cryptocurrencies and tokens with different design and functional solutions.

The risk, profit potential, and time horizon of investing in cryptocurrencies
Cryptocurrencies attract with huge price increases, but also with their powerful fluctuations, which are eagerly used by traders, especially those trading on futures. When the market enters a bull market, the value of many digital assets increases at least a dozen times over a period of literally several or several months. Moreover, there are then days when the prices of some cryptocurrencies rise by several hundred or even several thousand percent. No other market offers such profit potential, but remember that it is also accompanied by high, even extremely high, risk.

To better understand the specifics of digital assets, take a look at some of the charts below.

Bitcoin price in 2012-2021, logarithmic scale
Bitcoin price in 2012-2021, logarithmic scale
Bitcoin has been around since 2009, but exchanges allowing you to trade and track cryptocurrency prices appeared a little later. The above logarithmic chart shows the behavior of the BTC / USD exchange rate from May 2011 to May 2021, but this is more than enough to capture its strong long-term uptrend.
Considering the very appearance of the chart, it's hard to agree with the voices of Bitcoin's opponents who say it is one huge speculative bubble. Currently, there is little evidence of it, and certainly not the historical record of its price. You can see, however, that we are dealing with a cyclical market where "small bubbles" and periods of several months of bear market occur from time to time.

The Bitcoin price chart shown here looks pro-growth, but we cannot be sure that this long-term trend will continue. Today it is difficult to imagine, but theoretically it is possible that in the future

TC will return to the level of several thousand or even several hundred dollars.

Bitcoin price in 2019-2021
Bitcoin price in 2019-2021
This chart shows Bitcoin's price performance on a standard scale over a much shorter two-year period. As you can see, from March 2020 to May 2021, the market was in a very strong uptrend, which was from less than $5,000 to around$ 64,000. These levels have been achieved on the Bitstamp exchange, but bear in mind that there are many crypto exchanges, each with its own listing system. For this reason, the current rates of bitcoin and other cryptocurrencies always vary slightly depending on the stock exchange.
Note that the period preceding the dynamic increases was only seemingly calm. In March 2020, during the panic sell-off in the financial markets, the price of bitcoin fell by more than 50%. Declines of a similar scale and suddenness occurred in May 2021, although their reasons were completely different. It is considered that he was responsible for them, inter alia, the flood of bad news for the cryptocurrency market, but some indicators of technical analysis also sent red flags.

Also note that in the period from February to early May 2021, the demand side was unable to cope with the permanent breakout of the $60,000 level, which finally formed a pattern resembling the so-called head with shoulders. This layout is often an announcement of a correction or a permanent change in the trend. The price of the dogecoin cryptocurrency in the period March-June 2021 The price of the dogecoin cryptocurrency in the period March-June 2021 Source: tradingview.com We chose the chart above to show you what profits (or losses) can be gained from investing in cryptocurrencies in the short term. It shows the price of Dogecoin (DOGE), which has become popular basically only due to Elon Musk's tweets. As you can see, the rate increased 10-fold in just one month, although, naturally, it recorded strong corrections along the way. If you bought Dogecoin close to the top, which is around$ 0.7, two weeks later you could sell it for less than $0.3. Breeding - a popular way to invest in cryptocurrencies The presented charts clearly signal that in the cryptocurrency market you can earn (and lose) both as a trader and a so-called hodler. Let's add that the second of these terms refers to long-term investing and comes from a typo in the word "hold", which was made in 2013 by a user of the most popular bitcoin forum. It is important that his entry "I am hodling" appeared after a sudden, nearly 50% drop in the price of bitcoin, which previously exceeded$ 1,000 for the first time in history. The mistake appealed to cryptocurrency enthusiasts, who have since called cultivation long-term investing, as well as keeping coins until they make up for losses.

As the first of the presented charts shows, breeding seems to be a very good strategy in the bitcoin market. Even if you bought it at the peak of the boom in 2013 or 2017, sooner or later you would more than make up for your losses. What's more, in the meantime, you could buy BTC to average the purchase price - by the way, this is quite a common practice with hodlers.

The strategy of breeding and, if necessary, averaging the price has also worked well for ethereum, litecoin and dozens of other cryptocurrencies. However, there is no guarantee that it will also be the case in the future. Also, keep in mind that there is no shortage of cryptos that have never even come close to their former peaks. These are often those behind which there are little useful or even worthless projects, although offering interesting technological solutions does not always ensure success. It is still a young market where emotions and marketing play an important role, and what is valuable is not always appreciated.

Breeders usually keep a few, a dozen or even several dozen different cryptocurrencies on their wallets. However, this market is also made for traders who like to take advantage of the high volatility of the prices of virtual assets. It is it that makes it possible to generate really high profits (or losses) within a few weeks, days, and even ... hours.

Thanks to the availability of cryptocurrency futures contracts, you can earn (or lose) not only on increases, but also decreases in their prices. What's more, you can play with leverage, i.e. make transactions with a value much greater than the amount you have on your investment account. However, be aware that in this case the risk is extremely high - even experienced investors suffer heavy losses due to sharp price changes.

Unregulated and immature market
Regardless of whether you would like to become a crypto trader, a hodler, or maybe a combination of both, you have to remember that the cryptocurrency market is still young and immature. Besides, it is not subject to over

zorowi of any international control institution and does not have regulations and solutions that would guarantee the security you can count on when investing in the stock, bond or forex market.

In the past, there have been situations in which entire cryptocurrency exchanges disappeared overnight, and with them all the fiats and coins stored by investors. Today, many cryptocurrency exchanges care a lot about security and are trusted by investors, but it is better to treat them only as platforms for trading. You should keep your assets, especially those bought for a longer term, on external cryptocurrency wallets.

The lack of top-down regulations carries with it several significant, mostly negative, consequences. One of the most important is that tokens and cryptocurrencies can be freely issued by a wide variety of entities, including fraudulent ones. They do not have to comply with any disclosure requirements, and usually they can effectively protect themselves against potential investors' claims. It is worth noting, however, that most virtual assets are spent on the basis of the regulations of a specific country. In addition, the exchanges themselves, at least those that care about their reputation, do not place random, suspicious coins on the market. Therefore, it is not entirely the case that the market is completely "free American".

Another important issue is the fact that on the cryptocurrency market, trading lasts 24 hours a day, 7 days a week, which favors rapid price movements, especially during periods of reduced liquidity (e.g. at weekends or holidays). Let us add, however, that it is still a relatively small and young market, so even in the "working week", when the turnover is relatively high, there are significant price fluctuations. The immaturity of the market is evidenced by the fact that strong increases or decreases are often the result of a rumor or tweets of one influential person (the example of Elon Musk and his impact on bitcoin and dogecoin prices).

In addition, unlike stocks, trading in cryptocurrencies on exchanges never stops due to, for example, extreme market emotions and the associated rapid price movements. Crypto investors are not given time to "cool down", hence a wave of panic sales can quickly lower prices by several dozen percent. On the other hand, the lack of restrictions for dynamically changing rates makes investors highly optimistic and the so-called fomo (widespread fear of losing a chance to earn a lot of money) sometimes lead to really crazy increases in valuations.

Watch out for "beaters" and manipulations
There is no other market where emotions, gossip and marketing play such a large role. This has its advantages, as it promotes huge price increases in boom periods, but at the same time it is also responsible for certain risks and distortions. What should you be careful about?

On the Internet, especially on Twitter, there is no shortage of long-range users who praise selected projects just to raise their prices. Obviously, it is about tokens and cryptocurrencies in which they invest themselves. Usually these are assets with a relatively small market for which a small inflow of capital can strongly boost the valuation. Although "reprimanding" does not necessarily mean that a given token or currency is unworthy of attention, keep in mind that in the world of cryptos, these and other manipulations (e.g. deliberately publishing fake news) are not uncommon.

Effective marketing is important to virtually every company, but in the case of the cryptocurrency market, its importance seems excessively high. There are coins issued by teams that work on valuable projects, have real achievements, but cannot break through to the awareness of a wider group of investors. On the other hand, there is no shortage of very useful and even worthless cryptocurrencies, which, thanks to aggressive marketing and reprimanding, have experienced huge price increases.

Investing in practice, i.e. how and when is it best to buy cryptocurrencies?
As we have already suggested, cryptocurrency exchanges constitute the central part of the entire ecosystem of virtual assets. Investors from all over the world trade on them, although keep in mind that you can also buy selected cryptos in special exchange offices. Regardless of where you will be purchasing, check out how to store cryptocurrencies in a safe and convenient way.

Crypto exchanges provide online trading platforms where you can freely trade bitcoins, ethers, litecoins, and many other altcoins. Currently, there are several hundred cryptocurrency exchanges that differ in the level of security, transaction commissions or the offer of available digital currencies and tokens. The choice is therefore considerable, but by checking the cryptocurrency exchanges from our ranking, you will make it much easier for you to find the best service provider. Thanks to the ranking, you will also see which parameters of offers to pay attention to and how exchanges protect clients' funds.

Ranking of cryptocurrency exchanges - August 2021

here to lower price levels. Often it is better to simply accept that the "train has departed" than to succumb to fomo and risk suffering severe losses.

When looking to invest in cryptocurrencies, you should first learn at least the basics of technical analysis as well as specific indicators and tools that only work in the crypto market. You should also understand what the so-called market dominance of bitcoin (BTC dominance), as well as to know how the behavior of its price affects the rates of other cryptocurrencies. Thanks to this, you will be able to better determine when to buy and when to sell your virtual assets.

Is it worth investing in cryptocurrencies?
If you have managed to get through our entire study, you are surely already able to assess whether cryptocurrencies will be an attractive form of investment for you. We can add from ourselves that the market is certainly noteworthy, not only due to the high profit potential, but also the technologies that appear on it.

Cryptocurrencies are issued by entities related to the blockchain industry, artificial intelligence and other future solutions. There are many projects in areas such as decentralized finance (DEFI) or the Internet of Things (IoT), which will probably gain in importance in the coming years. It sounds promising, but at the moment, due to the aforementioned reasons, investing in the cryptocurrency market is still associated with high risk.

It should also be remembered that the governments of some countries are not friendly to virtual assets and try to limit their functioning, at least on their territory. In Poland, crypto remains legal, so you can freely invest in it, but the possible introduction of restrictions by countries of great importance, such as China, India or the USA, may have a negative impact on the entire market. On the other hand, we have the example of the Salvadoran government which made bitcoin its legal tender in June 2021. This shows that the attitude towards virtual assets is very different.

To sum up, it makes the most sense to use the approach that many both beginners and advanced investors choose to invest in cryptocurrencies only as much as you can lose. In most cases, it is best to treat them as a supplement to an investment portfolio, and not as a replacement for traditional financial instruments such as stocks or bonds. It is worth noting, however, that experienced traders and hodlers who understand the crypto world well are able to generate excellent rates of return, unavailable on any other market.

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#### Inwestuj Finanse

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