A digital currency or cryptocurrency is in the form of digital money that only exists on the internet. The difference with the digital money we already use every day (cards and remittances via e-banking) is that this type of currency is not issued by any bank or government, but is largely decentralised and based on blockchain technology, which is secure and encrypted. This means that anyone can own and use a cryptocurrency without any restrictions or interference.
The main reason for the high volatility in the cryptocurrency market is mainly the lack of regulatory and legal framework, especially in the USA and the EU, which triggers the easy manipulation of the market, but also the deception of some people by various scams, as well as the size of the market which is still relatively small and with any large purchase or sale can affect the entire market. The good news is that governments have already begun to create regulatory and legislative frameworks in favour of cryptocurrencies, such as Great Britain, Canada, Japan and others.
The EU and the USA have announced that creating the right framework around blockchain technology and cryptocurrencies was a priority. This is an important event, as investments in this technology will increase and many financial institutions and not only, will start using cryptocurrencies, to offer services and build useful applications on blockchain technology, which will stabilise the cryptocurrency market.
The cryptocurrency market has been “running” for years, but during the pandemic it accelerated even more. Cryptocurrencies, and especially bitcoin, are increasingly seen as investment products against inflation or in times of economic uncertainty, much like gold.
There is a wide variety of online currencies and designs in which you can invest. If you are new to this “game”, it is best to invest in currencies that are well-established and well-known in the market, such as Bitcoin and Ethereum. Although their prices continue to fluctuate, the regulatory framework governing them is clearer than other cryptocurrencies, which means that the risks are mitigated.
Experts suggest that you invest a small portion of your investment capital in cryptocurrencies.