CRYPTOCURRENCIES like Bitcoin and Dogecoin are seeing record prices this week, but what’s the difference between them all?
Some of these currencies are gaining legitimacy thanks to the support of well-known mainstream companies like PayPal, Mastercard, Facebook, and Tesla.
Prices also go up before the float from Coinbase – a company that lets you buy and sell other cryptocurrencies.
Because of the sky-high prices, some people are trying to invest in currencies like Bitcoin, Dogecoin, and Ethereum to take advantage of the promotion.
However, it is important to note that some of these cryptocurrencies are doing very well right now, but prices are extremely volatile and investors should be careful.
The volatility means that your money can go up as well as down in the blink of an eye.
It’s also important not to group all cryptocurrencies together as they all have different backers and stock prices.
Here we explain what you need to know about five of the most popular or widely used cryptocurrencies.
- Current price on CoinMarketCap.com – $ 61,064.51
Bitcoin is a virtual currency that is traded between people without the help of a bank. Instead, each transaction is recorded in a public ledger or “blockchain”.
Bitcoin is created through mining, which uses computer processors to solve difficult math problems.
Bitcoin can be traded anonymously, making it a popular method of funding illegal activities.
Mastercard, Paypal and BNY Mellon have announced plans to add Bitcoin to their stores.
As with all cryptocurrencies, the value of Bitcoin fluctuates widely, for example, the value last April was $ 7083.24, while the peak price so far this week was $ 64,586.63.
- Current price on CoinMarketCap.com – $ 2,406.61
Ethereum is the second largest cryptocurrency – one that some have said could overtake Bitcoin as the dominant coin in the market.
It is also a ledger technology – using “blockchain” – that companies use to create new programs.
Encrypted data can be transmitted securely in blockchain, so that duplication or falsification is almost impossible.
There were eight co-founders of Ethereum, all of whom have “great personalities, great egos, some more than others,” cryptocurrency writer Camila Russo told Decrypt.
- Current price on CoinMarketCap.com – $ 1.64
XRP is a form of digital currency that can be used on the Ripple network. It can be transferred either between individuals or banks.
For example, if you need to send Euros to someone using dollars, the Ripple network will convert that to XRP.
The main difference between the two is that XRP is a coin while Ripple is a network that enables money transfer.
The founders of Ripple started XPR before the Ripple company existed.
XRP has been used as a method of transferring money over the network since 2012.
- Current price on CoinMarketCap.com – $ 0.27
Dogecoin is a cryptocurrency that was introduced in 2013 and marketed as the “fun” version of Bitcoin.
The Dogecoin was originally invented as a joke by software engineers Jackson Palmer and Billy Markus and has the image of a Shuba Inu dog as a logo.
Two weeks after its launch, the value rose 300% after China banned banks from investing in cryptocurrencies, according to Investopedia.
Dogecoin then soared along with other cryptos during the bubble that peaked in 2017 and fell with the others over 2018.
The price of Dogecoin has increased by 20,000 percent over the past year compared to that time.
It comes even though the cryptocurrency isn’t listed on several popular exchanges and trading platforms.
- Current price on CoinMarketCap.com – $ 317.13
Litecoin entered the cryptocurrency market in 2011 as a competitor to Bitcoin.
Like the other cryptocurrencies, it is executed in blockchain. Every single Litecoin is called a token. This is the digital asset that you own when you invest.
According to GoBankingRates, Litecoin was the first cryptocurrency to complete a Lightning Network transaction in 2017.
5 Risks of Crypto Investments
The Financial Conduct Authority (FCA) has warned people about the risks of investing in cryptocurrencies.
- Consumer protection: Some investments that generate high returns on the basis of crypto assets may not be subject to regulations beyond the anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptoassets combined with the inherent difficulties in reliably valuing cryptoassets creates a high risk of loss for consumers.
- Product complexity: The complexity of some products and services related to cryptoassets can make it difficult for consumers to understand the risks. There is no guarantee that crypto assets can be converted back into cash. Converting a crypto asset to cash depends on the demand and supply in the market.
- Fees and charges: Consumers should consider the impact of fees and charges on their investment, which may be higher than those for regulated investment products.
- Marketing materials: Companies can overestimate the return on products or underestimate the risks involved.
Note that investing in cryptocurrency can cause you to lose your money if it falls in value.
For example, Bitcoin and other major currencies crashed by £ 120 billion on January 9, 2018 after major surveillance platform CoinmarketCap decided to drop trading prices from South Korea.
Cryptocurrencies themselves are only regulated in the UK for combating money laundering and terrorist financing.
If you choose to invest, your money will not be covered by the Financial Services Compensation Scheme (FSCS), which protects up to £ 85,000 of your savings if a company goes bankrupt.
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