Day 5 - Why do folks invest in Crypto?

Day 5 – #30daysofWeb3 Learning Challenge

Why do people invest in Crypto?

‘The smartest and the dumbest people are on Crypto. Wonder what I should take away from that’,

said someone on LinkedIn the other day.

The global crypto market was $2.7T as of late 2021

As with any investment, there are early adopters, naysayers and fence sitters.

Where should you be – depends a lot on how much you know.

#1Understanding Fiat and Cryptocurrency?

Fiat Money is government issued currency as a legal tender that isn’t backed by any commodities such as gold. A good example is most modern paper currencies such as US dollar. Cryptocurrency is digital money that is stored on a blockchain.

#2How is Crypto different?

Sending and receiving crypto happens without

Banks acting as middlemen with an attached fee
Sans any personal details
Across the world, to anyone at any time
In ‘fractional shares’ (as 0.000001 bitcoin for example)

But it does involve

Paying a fee for the network (Think Ether gas)
Potentially large fluctuations
Phishing attempts or scams

Owning crypto can be rollercoster ride – as evidenced in the visual below, there are all time highs and crashes

#3 Why do people invest in crypto

As per Odyssey, here are 3 reasons why. Source in comments

As a long term investing strategy : Bitcoin is the best performing asset class, beating even US NASDAQ 100. It is the ‘5th largest company’ in the world with a marketcap of $1.2 trillion
Crypto as a hedge against the financial system – There are three key challenges in the traditional financial system that crypto seeks to offset – Inflation (bitcoin is capped at 21M, governments can always print more currency), Limitations with Banks (fees, compromised personal info etc) and Banking not being available to all ( 1.7 B adults don’t have a bank account across the world)
It is a utility beyond an investment – In the future, one may need to hold crypto to ‘participate in the economy’

#4 What are the crypto’s folks buy?

The top three are Bitcoin, Ethereum and Binance. There are other stablecoins such as USDC backed by fiat currency held in reserve.

#5 Where do folks buy crypto from?

Most do through a centralized exchange such as Binance or Coinbase that handle your wallet and transactions. Odyssey lists out the below as factors to consider when choosing one – Security, Liquidity, Fees, User experience, Customer Support, Crypto selection and regional availability. The experts also choose decentralized exchanges or stock brokerage apps such as Robinhood

Here is some solid advice Odyssey shares on the topic that is worth concluding with –

‘Be careful FOMOing into a new coin. It could go down as fast as it goes up.’

And if you choose to invest, base it on awareness and not on FOMO.

P.S – None of this is investment advise.

Ranjani Mani

#reviewswithranjani #30daysofWeb3 #Day5/30

#Technology | #Books | #BeingBetter

**************************Sources/More details:

What is Web 3.0 :

https://www.odysseydao.com/articles/what-is-web3

https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq

The ownership economy