Throughout the past decade, cryptocurrency has expanded on a domestic and global scale. There are now more than 5,000 different cryptocurrencies.
The prices of these different cryptocurrencies have changed dramatically, making and losing investors substantial amounts of money.
Despite recent growth, there’s a lot of confusion surrounding the crypto world.
What to know about crypto
In simple terms, cryptocurrency represents a transaction of online data, often in exchange for products. The currency is mined—transactions are verified—using a technology named blockchain. In straightforward terms, blockchain is used to track crypto and generate it.
Crypto are often compared to casino tokens. Both types of currencies only have value if people agree they have financial value and only within certain spaces.
Cryptocurrency has been around a lot longer than many people believe. The idea first began in the late 1990s, although with currencies valued at less than cents per coin. The most popular crypto bitcoin trades for $60,950.27 USD per coin at the time of publication, though its value changes rapidly.
Cryptocurrency can now be used to purchase online items and is often used when attempting to avoid taxes, as it is harder to track than domestic currencies.
The manipulation of crypto
Many unfamiliar cryptocurrencies gained value and popularity online through websites such as Reddit. Currencies such as Dogecoin have gained value based on high demand in a short period of time. Between April and May of 2021, the currency went from $0.07 to $0.57. This is roughly a 700 per cent gain.
Cryptocurrency prices are manipulated by online influence, so do they hold value in an open market? The answer to this question is complex. However, a simplistic view based on the theory of supply and demand suggests crypto is valuable. If crypto has perceived value within our society and there is a limited supply, there must be value.
Should crypto experience restrictions?
Cryptocurrency needs more substantial restrictions in the future to prevent manipulation of its price. We have already seen global economic superpowers, such as China, ban cryptocurrency. A ban may be an easy answer but not necessarily the correct one.
Banning this currency hurts people who currently own it, including many members of the middle class. A ban on cryptocurrency negatively impacts the currency’s price as it lowers demand. The strategy regarding these currencies needs to avoid hurting the middle-class owners of bitcoin, but regulate the currency to make it fair and harder to manipulate.
Bitcoin as a national currency
Recently, El Salvador passed new legislation making bitcoin a national currency, sparking controversy among citizens. New cryptocurrency laws such as this raise the question of whether other countries should follow El Salvador’s lead.
Because El Salvador does not have a large influence in the international business community, it is unlikely other countries feel pressured to follow suit.
Investments in crypto
While crypto becoming a national currency is a longshot in most places, exchange-traded funds (ETFs) and particular companies have begun to develop their holdings surrounding cryptocurrencies.
A Canadian example is Hive Blockchain Technologies Ltd. This company focuses on operating as a cryptocurrency mining company in Canada, Sweden and Iceland.
The company is involved in the mining and sale of digital currencies, such as Ethereum, Ethereum Classic and Bitcoin. They trade on the open Venture Canadian Exchange under the symbol (HIVE.V) and have had a strong past five years. The company often follows the price of bitcoin as many other similar companies do.
Investing in these types of companies is a cheaper way to buy into bitcoin without purchasing the coin itself.
The future of crypto
Cryptocurrency is becoming a more popular and efficient way to transfer money. Although the asset clearly has legal issues and discrepancies over value, crypto has potential to grow as the modern economy becomes more globalized.
Featured image provided by Aleksi Räisä via Unsplash.
