Reminder about the concept of Cryptocurrencies: What are virtual currencies?
We call cryptocurrencies to currencies that are “cryptographic” or the system that allows this kind of peer-to-peer payment method.
In conclusion, we can explain what cryptocurrencies are by saying that they are virtual and dematerialized money, which have no physical support. Cryptocurrencies therefore have no coins or bills allowing their physical or material exchange. These currencies cannot be used with traditional banking methods such as checks or credit cards.
Cryptocurrencies are thus an alternative to traditional currencies. Due to their complete independence from the traditional monetary system, they also do not have legal price in any country in the world. This independence makes it compete side by side with gold and with other currencies since their price is not indexed on any price of another value. Finally, it is obvious that cryptocurrencies are also totally detached from any specific central management entity.
However, Cryptocurrencies are not considered as risky currencies since they have, on the contrary, undeniable advantages in terms of security and transparency. The cryptography system used for cryptocurrency transactions allows you in fact to secure these transactions by systematically verifying and registering them in a public domain. Also, Cryptocurrencies users have the guarantee of confidentiality and genuine authenticity. The technology to encrypt these transactions is called “Blockchain”.
How can we have access to Cryptocurrencies today?
In order to own and use Cryptocurrencies today, there are several different methods you can use. You could for example choose to sell a good or a service online and request to be paid with a virtual currency, which will be credited to your crypto account.
Just like any other currency, you can also get crypto money by converting another currency such as Euros or Dollars. In order to do this, there are several online services specializing on the conversion of currencies to cryptocurrencies, including Bitcoins. Of course, to convert some of your money to a cryptocurrency, you will have to register on a platform specially created for this purpose and provide some documents such as a copy of your identity card or a recent proof of address.
Now that you know how to obtain Cryptocurrencies, you are probably wondering how they will be stored or preserved since they are not materialized the only way to keep cryptocurrencies is by owning a specific file.
This file is evidently a virtual account with an address in the form of a sequence of numbers and secured by a password. It is relatively easy to create this kind of Cryptocurrency file online in a platform dedicated to this purpose. It should be noticed that every kind of Cryptocurrency has its own platform and therefore its own file, but certain platforms allows you to have several different Cryptocurrencies.
Using your cryptocurrency, once in your virtual file is quite simple you only have to do it through an intermediary such as a trading platform (broker) or a software that you can download for free.
The service is not completely free however and most of these intermediaries charge a commission on the transactions made.
With this information, it can seem obvious that owning cryptocurrencies virtually is not necessarily the best way to invest on shares in the future. We will see below how trading online is a more suitable solution.
What are the most interesting Cryptocurrencies listed on the stock market at the moment?
You have probably already heard about the most popular Cryptocurrency among particulars, the Bitcoin, since this virtual currency was the first to come out. But since then, the cryptocurrency market has changed significantly. Since the Bitcoin started to show limitations in terms of transaction execution speed, other virtual currencies using blockchain technology have appeared and it is now possible to trade online with them.
To guide your choice of investment, we will give you a list of the ten most important Cryptocurrencies in terms of market capitalization in 2017:
- The Bitcoin: Created in 2009, the bitcoin is still the Cryptocurrency with the largest market capitalization with more than 54 billion dollars. It still ranks first in our list.
- The Ethereum: is in second place of this list. This virtual currency created in 2015 has a market capitalization of almost 27 billion dollars.
- The third position of the list is occupied by the Ripple which was launched in 2012. This Cryptocurrency has a stock market capitalization of nearly 7 billion Dollars.
- Bitcoin Cash, was launched in 2017 to compensate for the defects of the original Bitcoin, it occupies the fourth position in the list with a capital of 5 billion dollars.
- In fifth position, we find the Litecoin, launched in 2011 and whose market capitalization nears 2.5 billion Dollars.
- The NEM, launched in 2015, currently counts with a market capitalization of 2.4 billion dollars, it occupies the sixth position of our list.
- The seventh position is currently occupied by the Dash, created in 2014. Its market capital is currently 1.4 billion dollars.
- The IOTA, recently launched in 2017, occupies the 8th position in this list with a market capitalization of nearly 1.4 billion dollars as well.
- On the ninth position we find, the Cryptocurrency Ethereum Classic, created in 2016 with a market capitalization of 1.4 billion dollars.
- Finally, the tenth and last place of this list is occupied by the Cryptocurrency NEO, launched in 2016 and with a capital of 937 million dollars in 2017.
Of course, all those Cryptocurrencies are not necessarily offered as an investment asset by online brokers. You will not find however any difficulty in speculating on the course of the Bitcoin or the Ethereum which are very popular among investors around the world today.
Cryptocurrencies and their advantages as investment assets:
As we have just seen, Cryptocurrencies are increasingly becoming popular as a secure method of payment for online transactions. But their recent success has also made them prime investment assets among particulars around the world. The same way than other assets such as currencies, stocks or raw materials, the price of Cryptocurrencies is constantly changing, and it is therefore possible to speculate on the trend that these prices will follow on the market.
It must be said that Cryptocurrencies are rather attractive assets and present certain undeniable advantages compared to traditional assets. Some people considered them as a more profitable long-term investment than traditional investments proposed by banks or brokers. In fact, during the summer of 2017, the bitcoin reached the 4000-dollar mark, when it was only traded for 434.22 dollars in January 2016, it multiplied almost 10 times the price in only one year and a half. We can imagine the potential for traders and investors who placed their savings there.
This impressive performance is not only about the bitcoin but most of the other Cryptocurrencies, all of which remain particularly attractive assets for long term investment strategies. But the volatility of these assets also allows to do very interesting short-term strategies, in particular by using contracts such as CFDs which allows you to invest in the rise and fall.
Investing on Cryptocurrencies is more or less speculating about an advanced technology that could change the way we use money and pay our transactions.
The most cautious investors will be happy to bet on the bitcoin which remains, today, the leader on the market of virtual currencies, and the most adventurous will bet on the growing success of other Cryptocurrencies such as the Ethereum, in good position to dethrone the bitcoin in the medium term.
How to trade with Cryptocurrencies online with CFDs?
As we mentioned before, creating a Cryptocurrency portfolio to take advantage of the eventual price increase of this asset is not the ideal solution and it has many inconvenients.
Fortunately, there is another solution with CFDs or contracts of difference, offered by online brokers. Those contracts allow you to invest on the price of the most popular Cryptocurrencies without having to actually own them through a completely online management. Here are the different steps that you should follow to start investing on Cryptocurrencies online:
First, you need to open an online trading account with an authorized broker like the ones we recommended you before on this site. You do not need to own a Cryptocurrency portfolio to do this since the deposit of capital will be done first in the currency of your choice.
We advise you to then take the time to carry out your analysis carefully taking into account the technical indicators and news about these markets by using the tools made available to you on the trading platforms that you have chosen. You could then be able to set up a real investment strategy on Cryptocurrencies, according to the results obtained during your analysis and your prevision about the change of price.
From your strategy, you will then buy or sell by choosing the size of your position and placing close orders at low and high prices that you estimate probable. You can of course manually close your position by clicking on a single button, either because the price of your Cryptocurrency has reached the objective that you had set or to reduce your losses in the case the price changed in the opposite direction.
On the online trading platforms of these brokers you will find numerous analysis tools that will help you manage your position and identify possible investment opportunities but also to limit the risk of significant loss of your investment. Whatever the Cryptocurrency you have invest on, your trading account will remain credited on the currency of your choice.