Cryptocurrencies: everything you need to know before investing in them
Bitcoin, the most popular cryptocurrency is on a roller coaster crazy. It has recently gone from hitting all-time highs to $ 42,000 (34,500 euros), six times more than in the previous year, to fall to $ 29,000 (24,000 euros) a week later. Everything is a mystery around a product that nobody has seen and nobody has been able to touch. But despite the vertigo of the ups and downs and the general ignorance, many people and companies are betting on cryptocurrencies. The DUX Internacional de Madrid, a football club that competes in the Second Division B, starred in the first transfer with cyber currency on January 15 and more and more businesses accept it as a means of patment. What do we know about bitcoin and the rest of cryptocurrencies? Can we trust them? These are some of the questions investors ask themselves.
What is a cryptocurrency?
In this way, transactions do not go through a single central place, but are approved from different sites. Jorge Soriano, co-founder and CEO of Criptan, a cryptocurrency trading platform with custody service, announces that it is "a new form of money that brings a different way of interacting with it."
Bitcoin was one of the first cryptocurrencies to appear on the market. He did it at the hands of the Japanese Satoshi Nakamoto after the financial crisis of 2008. A mysterious character whose identity is not known, it is even suspected that it could be the name of a group. That year he published an article on bitcoin and generated a debate that led to the creation of a software to carry out transactions.
It was about the creation of a decentralized digital currency, that is, without a central bank to control it, without commissions on its transactions, and without any elite group making decisions about its use or value.
How many different cryptocurrencies are there on the market?
There are more than 7,000 types of cryptocurrencies, according to data from CoinMarketCap, a website that shows its capitalization market. Five are the most widespread: bitcoin, ethereum, litecoin, dash, and ripple. Bitcoin monopolizes the cryptocurrency market, followed by ethereum.
What are cryptocurrencies used for?
Investment is one of their strengths, but they were created as a means of payment. Companies like Criptan are planning to launch a debit card and a payment gateway in bitcoins for more than 10,000 hotels and for a supermarket chain. There are real estate agencies that allow you to pay for homes in bitcoins and in November of last year PayPal announced that it would allow payments with this type of currencies in 2021. On January 15, in addition, the first signing of a soccer player with cryptocurrencies was made: David Barral, ex of Real Madrid Club de Fútbol, Real Sporting de Gijón and Real Racing Club de Santander, signed at the age of 37 by DUX Internacional de Madrid, a Second Division B soccer club, of which Criptan is a sponsor. The amount has yet to be disclosed.
How and where can cryptocurrencies be bought?
To access them, the options are to buy them, accept them as payment or create them. Large computer equipment controlled by powerful economic groups, known as whales , are the main producers. "There are real computer farms dedicated to this work," acknowledges Jesús Pérez, founder of Crypto Plaza, a center that functions as an ecosystem of entrepreneurs on encryption and finance, and director of the consulting firm Digital Assets Institute.
They can also be purchased at ATMs created exclusively for it. Before doing so, it is convenient to read the conditions, since each entity charges different commissions. Once purchased, they are assigned a unique and personal password, which should be kept safe.
What is the value of the most popular cryptocurrency: bitcoin?
It does not have a single or stable value, since it fluctuates according to supply and demand. For example, at the beginning of 2020, bitcoin was trading at just over $ 7,000 (5,760 euros) and at the beginning of 2021 it marked an all-time high of $ 42,000 (34,500 euros), while, in the week of January 18, the bitcoin had lost up to 30% of its value, reaching a price of just under $ 29,000 (24,000 euros). On Friday the 22nd, however, he staged a recovery to $ 31,000 (25,500 euros). To know the value of each cryptocurrency at all times, it is advisable to consult specialized pages.
Can I invest in cryptocurrencies?
Yes, but it is a risky and speculative market where it is possible to win and lose large amounts in a short time. The most profitable and least dangerous are, according to experts, bitcoin and ethereum.
Bitcoin is currently the seventh most capitalized asset in the world, around 700,000 million dollars (almost 575,000 million euros), behind Amazon or Google. It is important to keep in mind the saying that circulates on the stock market: past returns do not guarantee future returns.
Where are cryptocurrencies kept?
They are stored in so- called purse (wallet ) that must be created on purpose , of which according Statista there are 64 million worldwide. It is software that can be stored on a computer, mobile or any other digital device, but the most convenient way is to leave it in custody in a cryptocurrency bank.
Is there a regulation for cryptocurrencies?
No, but since 2015 the European Union (EU) has considered bitcoin and other cryptocurrencies as a form of payment, with the same validity as the euro. Despite this, Christine Lagarde, the president of the European Central Bank (ECB), shows her reluctance and has declared that a regulation of bitcoin is necessary because it is "a very speculative asset." The ECB has announced the creation of a digital euro, an electronic form of money that Europeans could use to make their daily payments as a supplement to cash. It would not be a new currency or a cryptocurrency, but a digital euro would have the same value as a cash euro.
environment already available. It is intended to experiment with the practical aspects and possible design options, analyzing their possible impact on the sector, in addition to promoting innovation in payments and the digitization of the economy, preparing new digital services based on programmable and intelligent digital money.
This test is produced as a continuation of the Smart Payments programmable payments sector initiative also carried out by large Spanish entities, such as Banco Sabadell, which was successfully completed in July 2020, and which allowed validating the viability of initiating immediate transfers programmed in smart contracts from blockchain networks , through their connection with the National Electronic Compensation System (SNCE). In this way, more than 20,000 immediate transfers were completed.
In Spain, any expense or income derived from trading operations with cryptocurrencies must be included in the income statement. In October 2020, the Draft Law on Measures to Prevent and Combat Tax Fraud was published, introducing the obligation to provide information on the balances and holders of cryptocurrencies and purchase, collection, payment operations, transfers, among other transactions.
Outside the EU, as its use spreads, it is regulated. The canton of Zug, in Switzerland, will accept the payment of taxes with bitcoins from February. Japan has also recognized this currency as a means of payment, the United States (USA) has opened a futures market (where they speculate with raw materials, currencies ...)
What risks does investing in cryptocurrencies entail?
The main risk is volatility (strong rises and falls in value) that can cause large losses in hours. "Although there are also stable cryptocurrencies that have parity with the dollar or the euro such as the USD Coin (USDC) or the DAI", they assure from Criptan.
Another not inconsiderable is the loss of the purse key. "It is unrecoverable," says Pérez. According to data from Chainalysis, an expert company in blockchain, between 17% and 23% of bitcoins are lost. Several cases have jumped to the press. The most recent is that of a programmer from San Francisco (USA) who lost the paper where he had written down the password of the wallet where he stored 7,002 bitcoins, which today reach more than 220 million euros. Although it is not a risk, it should be noted that the transactions are fixed, that is, if a shipment is made to another person it cannot be stopped or undone. The risk of scams associated with cryptocurrencies should also be taken into account: according to a report by the company Cipher Trace, dedicated to the development, security and tracking of digital currencies, cybercriminals have pocketed more than 4.26 billion dollars (3.501 million euros) in 2020.