Should You Invest In CoinMarketCap Token HODL?
This past year has been a rollercoaster when it comes to cryptocurrencies. The people who got in early got massive gains and quadrupled their initial investments. People were joining in on the ride every step of the way.
However, those that got in at the end suffered massive losses when the market crashed. This turns many people off because they think that the crypto world is similar to a pyramid scheme. That couldn’t be further from the truth. Click here to read more.
The world of crypto works just like the world of stocks and bonds, and the same rules apply. The law that is set in stone is the law of supply and demand. If many people are demanding a scarce thing, the price will go up astronomically.
That’s what happened with Bitcoin. It crossed over the 64 000 dollar mark, and then people started massively selling to make profits. Now, everyone can agree that Bitcoin is the king of all cryptocurrencies since it was the first one that came to life.
It paved the way for every other coin. Now, there are more than 9000 different cryptocurrencies, and it can be difficult to pick the right one that will make you a lot of money. That’s why we’re going to cover the basics of altcoins, as well as the ones that are likely to explode soon.
Altcoins explained
The name altcoin is given to a cryptocurrency because it’s different from Bitcoin. This means that every other coin except for Bitcoin is considered as an alternative. Each of those projects has a problem that it’s trying to solve.
For example, the second place in this niche is Ethereum, which has millions of nodes, and you can use it as a platform to make games and programs on top of it. The same thing is true about Cardano, Enjin, Polkadot, and other ones.
The main goal of these new projects is to use a different consensus process, and they set themselves apart by offering new features. However, you should always bear in mind that the core foundation is always the same. The main philosophy behind the creation of these coins is a decentralized peer-to-peer network.
Those terms mean nothing when you hear them for the first time, so we’re going to explain them a bit more. A decentralized network is one where transactions don’t get validated by a governing body like a bank or the government. The peer-to-peer part comes because the transactions are between people. Here’s a great way to look at it.
Let’s say that you go to your grandmother’s house, and on your way out, she gives you twenty bucks. You got the cash, but you’re not reporting those twenty dollars to the IRS to get taxed on them. The only people that know about the transaction are you and your grandmother.
Well, altcoins work similarly. In the case of altcoins, everyone knows that a transaction has been made, but no one knows who did it. The only thing that the network knows is that person X sent some coins to person Y. It’s a brilliant way to enhance the financial system of today.
The reason why there are so many different altcoins is that Bitcoin is not perfect. It has limitations, and every new upcoming coin aims to build on the perceived shortcomings of Bitcoin. Follow this link for more info.
Should you invest in them?
There are two types of cryptocurrency investors. The first type is called paper hands, and the second type is called diamond hands. Paper hands sell their coins as soon as the prices begin to drop. You can find a lot of day traders in this group too.
On the other hand, diamond hands are people who hold their coins for long periods of time. There’s a special term for these people, and they’re called HODLers. The cool thing about this niche is that the same rules of economics and investing work. If you follow the wise words of Warren Buffet, you can become rich. As he says, time in the market beats timing the market.
Generally, there are two types of altcoins. One group works on a proof of work system, and the other group works on a proof of stake system. The latter gives you more coins if you stake your coins inside the network.
Think of this as paying you dividends each month. The dividend rate can be anywhere from 8 to 20 percent. That’s a massive difference from a traditional Roth IRA, which gives a 4 percent annual yield. This is what makes the space so lucrative. The best thing is to HODL and waits a couple of years. The market always goes up.
Using a dollar-cost averaging strategy is the best way to ensure that you get the market’s ups and downs. Sure, there are massive fluctuations, but with time, every market improves on the previous price. You can see that in stocks too. The crash of 2008 happened, and then in a couple of years, everything was better than before.
The differences between PoW and PoS
A PoW is a proof of work system which forces a computer to do work before it gets a coin. That’s how Bitcoin works, and that’s why the people who try to get one are called miners. On the other hand, staking relies on the entire network to collect coins in a pool and complete projects.
Using these two systems, developers are battling the centralization of each coin. Since the market is still in its infancy, it’s quite fascinating to see what will happen next. There are no concrete rules for investors, and everyone is going on a gut feeling.
Some people hit a lucky strike, and others lose a lot of money. Before you do anything, you should be prepared to invest money that you’re willing to lose. The crashes in crypto can be quite low, but you can also make millions overnight.
