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Cryptocurrencies
When someone asks me WHAT ARE CRYPTOCURRENCIES, I respond with what I think would be the closest and easiest definition for that person to understand, assuming they are unfamiliar with the subject and wouldn't be able to explain it in a simpler way.
Imagine cryptocurrencies like stocks; you invest your money in a stock. You're investing in a piece of paper that represents an asset (product), but you won't receive that product at home. It's yours, but you can't see or touch it. However, you can buy more or sell what you already have to make a profit. Generally, you buy a stock when it's low (when the price of the product is falling) and sell it when it's high (when the price of the product is rising).
I make this comparison because the path to follow with cryptocurrencies is practically the same: we buy the cryptocurrency when it's low and sell when it's high, and like with stocks, we can do day trading (which is buying and selling this asset several times a day) or simply hold it (which is buying the asset when the price is low to hold it and wait for it to rise in the medium/long term to make a profit).
One of the major differences between cryptocurrencies and stocks, common currencies, or other investments is that cryptocurrencies are decentralized. This means that there is no government that commands or controls cryptocurrencies; they do not depend on a central bank for their issuance or valuation. They are a type of asset whose volatility (highs and lows of the asset) is controlled by the investors themselves, through speculative buying and selling and the scarcity of the asset.
For the movement of cryptocurrencies on the internet, the Blockchain network is used, which is a kind of digital ledger through which all cryptocurrency transactions pass and are permanently recorded through complex and immutable codes. If you buy or sell cryptocurrencies, your movement will be recorded on the blockchain, but only codes and wallet numbers without your ownership, because what matters in the blockchain is where the asset is coming from and where it is going. Therefore, it is like an open book on the internet, with all the cryptocurrency transactions in the world, without the nominal identification of its owner. This is not very pleasing to banks or governments, as it is an asset that circulates anonymously on the blockchain without identification of the sender or recipient.
Bitcoin
Bitcoin was the world's first cryptocurrency. It was invented on October 31, 2008, and its pseudo-creator identifies himself as Satoshi Nakamoto. However, to this day, much mystery surrounds the subject, with speculation about either a single creator or a group of people who wish to remain anonymous for obvious reasons.
Bitcoin, like all other cryptocurrencies, is a type of peer-to-peer electronic money, transmitted between individuals without the intervention of a central bank or government. This is why it's called a decentralized currency; therefore, even if an individual lives in another country, it's possible to send or receive Bitcoin via the blockchain network without having to go through a central bank or government.
When someone tells a layperson that Bitcoin is a "mineable" currency, the reaction is usually, how can someone mine something that doesn't physically exist? I'll try to explain it now in a very simplified way: Bitcoin is actually just a kind of script created in C++. At the time of its creation, only 21,000,000 (twenty-one million) coins were created, and at its creation, 1 bitcoin was worth only 0.00099 cents of a dollar. To obtain bitcoins, you need to mine them. How does that work? By using the correct equipment (mining boards) connected to the network, it is possible to contribute to the development of the Blockchain with your CPU or GPU power, and as a reward we receive cents of bitcoin every minute, or seconds. Since there are only twenty-one million bitcoins to be mined, over time this generates scarcity of the currency. Not to mention that since its creation, it was programmed that every four years a hard fork or halving will occur, which is the increase in mining difficulty by 50%, generating more scarcity and increasingly valuing a currency that at its creation was worth only US$0.00099 to now be worth more than US$73,000.00 (as of March 14, 2024).
Due to the difficulty of mining, nowadays it is no longer viable or profitable to mine bitcoin at home with your computer or GPU. There are large cryptocurrency mining companies with gigantic warehouses and thousands of mining rigs, generating bitcoin every second. Therefore, for us mere mortals, the only option left is to buy bitcoin that is already in circulation and resell it at a higher price when it is high, due to its high volatility. But don't worry about so many companies mining bitcoin, because, due to the halving every four years, there is a prediction that the last bitcoin will only be mined around the year 2140, so we still have a lot of "water" to flow under the bridge.
And what about the other cryptocurrencies?
After the creation of Bitcoin, other cryptocurrencies emerged, such as Ethereum, Litecoin, BNB, Solana, and many others, which today number in the thousands, and more are being created every day, as we can see on the CoinMarketCap website. How is this possible?
The dream of Bitcoin's creator, as we've already mentioned, was to have a global currency, passed from person to person, without the intervention of a central bank or government. Therefore, he created Bitcoin and left the "open source code" on the internet, like a treasure exposed for anyone who wanted to take a piece or add something good and useful to this treasure. Thus, new cryptocurrencies began to emerge every day, each with its own proposal to improve the cryptocurrency ecosystem.
Initially, nobody believed it, and they thought it impossible for a currency to be digital and have any commercial value. But from what we're seeing, the "idea" has evolved and been modified, to the point where world governments are creating their own digital currencies (although these are centralized). In reality, they are not cryptocurrencies; they are merely Government Digital Currencies controlled by a central bank. Cryptocurrencies, on the other hand, are the symbol of financial freedom without ties or constraints. Perhaps in the not-too-distant future, everything will be traded with cryptocurrencies. Imagine being able to buy or sell your car, your house, your bicycle, your cell phone, or even go to the market and pay not only with Bitcoin but with any other cryptocurrency. Although today this is "already possible" through some payment systems or wallets where your cryptocurrencies are stored, and they provide you with credit cards that you pay in your country's currency, with the amount deducted from your crypto balance at the institution.
The future of the world is DIGITAL. The best and greatest investment you can make is to seek information. Stay informed, search, research, learn, and evolve every day. Don't get stuck in the past. Whether you like the subject or not, I guarantee it will be worth learning about it, because in the near future, those who aren't up-to-date on the digital world, artificial intelligence, and especially CRYPTOCURRENCIES, will be left behind.
One of the best places to trade (buy and sell) cryptocurrencies is the world's largest exchange, BINANCE , where we can make our transactions and realize our daily or monthly profits.
Bitcoin ETFs - What are they?
Bitcoin ETFs (Exchange-Traded Funds) are an innovative way to invest in Bitcoin indirectly, allowing investors to buy shares of an exchange-traded fund that holds the underlying asset or Bitcoin futures contracts. ETFs were created as a solution for those who want exposure to the cryptocurrency market without having to directly deal with the purchase, storage, or security of bitcoins, which can be a complicated process for many investors. The idea behind a Bitcoin ETF is simple: the fund buys or holds Bitcoin (or Bitcoin futures contracts), and investors can buy shares of that fund in the same way they would buy shares of a company. This offers greater convenience and security, as there is no need to open a digital wallet, deal with private keys, or worry about technical issues such as the risk of losing access to bitcoins. Furthermore, since ETFs are traded on traditional stock exchanges, investors can buy and sell shares as easily as they trade stocks. The first Bitcoin ETF to be approved in the United States was the ProShares Bitcoin Strategy ETF (BITO), launched in October 2021. This ETF, however, does not invest directly in physical bitcoins, but in Bitcoin futures contracts, meaning that its performance may not exactly mirror the spot price of Bitcoin, but rather the expected future price. The creation of this type of ETF was seen as an important milestone, as it paved the way for traditional investors, who were previously hesitant or prevented from entering the cryptocurrency market, to gain exposure to Bitcoin. Advantages of Bitcoin ETFs Accessibility and Ease: Buying shares of a Bitcoin ETF is simpler for most people than buying and storing the cryptocurrency directly. ETFs are available on conventional brokerages and can be easily bought and sold. Regulation: Unlike the cryptocurrency market, which still operates in an evolving regulatory environment, ETFs are highly regulated and supervised, offering more security for investors. Diversification: Some cryptocurrency ETFs invest not only in Bitcoin but also in other cryptocurrencies or blockchain-related assets, providing automatic diversification for the investor. Security: For those concerned about Bitcoin storage, such as the risk of hacks or loss of private keys, ETFs offer a safer solution as assets are held by institutional custodians. Disadvantages of Bitcoin ETFs: Management Fees: ETFs typically charge an annual management fee. This can reduce net returns, especially during periods of low volatility or when the price of Bitcoin is stagnant. Contango Risk (in the case of futures-based ETFs): ETFs that use futures contracts can suffer from so-called contango, which occurs when the future price of Bitcoin is higher than the spot price, which can negatively affect the fund's performance over time. Lack of Direct Exposure: Some ETFs, such as BITO, invest in Bitcoin futures contracts, not in the cryptocurrency directly, which can cause the fund's performance to not accurately reflect the spot price of the asset. Bitcoin ETFs in 2024: By 2024, the Bitcoin ETF market is already more consolidated, with several products being launched in different global markets. While some ETFs focus exclusively on futures contracts, there is a growing movement of funds that offer direct exposure to Bitcoin, especially outside the US, such as in Canada and Europe. In Canada, for example, ETFs like the Purpose Bitcoin ETF and the Evolve Bitcoin ETF pioneered offering direct exposure to Bitcoin, allowing investors to purchase shares backed by physical bitcoins. The approval and expansion of Bitcoin ETFs are signs that the cryptocurrency market is becoming more institutionalized and accessible to the average investor. For those who believe in Bitcoin's long-term potential but prefer the security and convenience of regulated investments, ETFs offer an excellent alternative. In short, Bitcoin ETFs are an innovative and convenient way to gain exposure to Bitcoin without having to directly deal with the complexities of the cryptocurrency market, making them an attractive option for both traditional and novice investors.
LEARN A LITTLE MORE ABOUT BITCOIN:
Bitcoin is a revolutionary digital currency, created in 2008 by an individual or group of people under the pseudonym Satoshi Nakamoto. Its innovative proposal arose in response to the global financial crisis, with the intention of creating a decentralized financial system that would eliminate the need for intermediaries such as banks or governments. The first Bitcoin transaction took place in 2009, marking the beginning of a new era in the global financial market.
The foundation of Bitcoin is the blockchain, an innovative technology that functions as a public digital ledger where all transactions are recorded transparently, immutably, and securely. Each block in the blockchain contains a set of transactions verified by miners, who compete to solve complex mathematical problems. Once solved, the block is added to the chain, ensuring that the records are reliable and that the currency cannot be counterfeited or duplicated.
Since its creation, Bitcoin has experienced extraordinary growth. Its volatility is one of its most striking characteristics, with frequent price fluctuations reflecting both high demand and market speculation. In its early years, Bitcoin had negligible value, but over time it has seen surprising appreciation. In 2010, for example, 10,000 bitcoins were used to buy two pizzas, a transaction that today would be worth millions of dollars. Throughout 2020 and 2021, Bitcoin reached all-time highs, surpassing the US$60,000 mark, which consolidated it as one of the best-performing assets of the last decade. Despite subsequent dips, its long-term growth remains impressive when compared to traditional assets such as stocks and gold.
Bitcoin offers numerous advantages over other investments. It provides a high-potential return investment alternative in a constantly expanding digital environment. Being decentralized, it is not subject to government interference or monetary policies, which can provide greater security during times of economic instability. Furthermore, Bitcoin's liquidity allows investors to buy and sell quickly, without the need for intermediaries, reducing costs and transaction times. Another significant advantage is its programmed scarcity: there will only ever be 21 million bitcoins available, creating a limited supply that, in theory, increases its value over time.
However, Bitcoin's volatility also represents a risk, and it is recommended that investors use it as a small portion of a diversified portfolio. Despite the risks, many believe that, in the long term, Bitcoin may appreciate even further as global acceptance grows. Governments, companies, and even large institutional investors are increasingly eyeing this cryptocurrency, contributing to its legitimacy in the global financial landscape.
Investing in Bitcoin in 2024 can still be a good choice, especially for those who understand how it works and accept its volatility. With increasing global regulations and growing adoption by payment companies, Bitcoin is becoming increasingly established as a store of value and a hedge against inflation. Therefore, it remains an attractive option for those seeking to diversify their portfolio with digital assets that have great growth potential in the future.