Crypto: The Hottest Market on Earth
- Russia and Japan lead the way…
- The enormous gains on offer with cryptocurrencies
- Louis Basenese takes you to ‘Cryptocurrency 101’ and shows you why fear of the unknown could be holding you back from a bright financial future…
I get a lot of questions from readers about the cryptocurrencies I’ve been writing a lot about recently.
They’re interested in the immense profit potential, but don’t want to invest in something they don’t really understand.
I admit, they’re not your typical stocks or bonds or other traditional investments people feel comfortable with.
And maybe you think they’re too mysterious or shadowy for your liking, not something you want to invest in. That’s understandable.
So today, I want to review some cryptocurrency basics and clear up some misconceptions many people have about cryptocurrencies.
That’s because I’m truly convinced that this is a market in which you could potentially amass a quick fortune.
Enormous percentage gains on offer in this sector
For example, some lesser-known cryptocurrencies have skyrocketed between 12,000% and 56,000% over the past several weeks. And I’ve received a lot of reader mail telling me how much money they’ve made in such a short amount of time.
The good news is that you don’t need to know anything about Bitcoin or any of these other cryptocurrencies to take part in the bonanza. And you can get started with just a little amount of money.
In fact, I believe cryptocurrencies are one of the last legal ways for small investors to grow rich, starting with just a few dollars in your pocket.
OK, so let’s go back to basics for a moment. What is a cryptocurrency exactly?
Essentially, a cryptocurrency is a digital currency that operates outside of any government control. That means these currencies cannot be manipulated by central banks like our own Federal Reserve, or other central banks around the world.
In many ways they’re the modern, digital equivalents of gold and silver, which were pure forms of money before governments and bankers got around to manipulating them for their own benefit.
So in a sense today’s cryptocurrencies are probably the last “pure” currencies on earth. But their potential impact goes beyond even that…
In the past, all transactions took place with an intermediary — like a bank — overseeing the process. The bank would verify the transaction, adding a certain level of trust. But cryptocurrencies are completely revolutionizing the old system — cutting out the middleman entirely. Instead, digital transactions are made peer to peer, without the middleman.
That brings us to what’s called the “blockchain,” which a lot of people are understandably confused about.
The blockchain is a decentralized database that records each transaction within the system…
Within the blockchain, transaction records and payment details are spread across a massive public database open to all bitcoin “miners” in the network. Blockchain essentially forms the backbone of all cryptocurrency transactions.
These “miners” I mentioned are people with super-powerful computers — each competing to confirm and authenticate each transaction in the network. Once completed, the verified transactions are added to the blockchain database. That immediately makes the process transparent and verifiable.
They’re not doing this for free, mind you. If a miner’s computer program validates the transaction first, he or she is rewarded in the cryptocurrency (Bitcoin for example).
And the next round of money transfers can be authenticated by miners — and so on.
In addition, miners’ computer programs confirm transactions and reset every 10 minutes. Each 10-minute group is called a “block.” Each proceeding block is also verified by the mining software and then linked to the last block — creating a chain.
That’s the meaning of “blockchain.”
There’s no centralized location for transactions to occur. It’s completely decentralised. No one person has or institution has control.
It’s value comes from the network of people using it. Ultimately, this decentralized system — with so much computing power behind it — is hard for hackers to breach without an enormous amount of computing power.
Think of it as millions of locks that would need to be picked in a rapid amount of time rather than hacking into just one place. So it’s ultra secure.
I realize it all may seem very complicated if you’re not familiar with the process, but it’s really quite simple.
It’s also important to know that bitcoin transactions represent only a fraction of what blockchain technology is capable of. The ability to maintain a decentralized system of verified data — which is bulletproof from hackers — has much deeper implications.
It can be used to track electronic voting, health records — ultimately anything that currently requires a “trusted” middleman.
There’s a historic opportunity happening right now
As Don and Alex Tapscott write in Blockchain Revolution, ‘the blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.’
And it all takes place beyond the prying eyes of the government or the banks, so it increases your personal freedom. Luckily for investors, this new paradigm is becoming more and more popular, allowing us to invest in new cryptocurrencies as they hit the market.
The cryptocurrency markets have really taken off ever since two of the world’s most important countries — Japan and Russia — passed or are planning to pass legislation recognizing digital currencies as an official form of money.
Some countries, like Estonia, have plans to launch their own cryptocurrencies. And if that wasn’t enough, other countries — like Canada, the UK and even the U.S. — are beginning to embrace this mega-trend.
In fact, experts have predicted that the United States government even has plans of launching their very own cryptocurrency. Even the Federal Reserve is looking into it.
And the number of businesses accepting Bitcoin and other cryptocurrencies is growing at a rapid pace. That number will only grow in the years to come.
So this is a mega-trend that’s just getting started, even though the first cryptocurrency has been around for several years. The first cryptocurrency exploded on the scene back on May 22, 2010, when a web developer purchased two Papa John’s pizzas using 10,000 units of Bitcoin.
Back in 2010, Bitcoin was trading for less than a penny. In fact, 10,000 bitcoins were worth about $30 at the time. Then the price of the digital currency quickly skyrocketed higher.
By 2014 — just four years later — that same $30 starting stake was worth more than $5 million.
But get this…
Today, that same $30 is now worth about $42 million. Imagine back in 2010 you set aside the amount of money you might have spent, say, buying your family a meal at a fast food restaurant, forgetting about it… then discovering seven years later that your $30 investment had blossomed into more than $42 million.
Indeed, an individual bitcoin is now worth over US$4,268. Here’s the thing, though…
There are now some 900 cryptocurrencies exchanging hands on the ‘open markets’. The vast majority trade for just pennies or fractions of pennies, just like Bitcoin did back in 2010. That means there’s a chance to strap yourself to the next cryptocurrency rocket before it launches into the stratosphere.
That’s why the opportunity in cryptocurrencies is so compelling.
According to BuzzFeed, a number of cryptocurrency users have claimed that with the digital currency’s recent spikes, they are officially millionaires.
The problem is you shouldn’t just go and buy every single cryptocurrency listed. As the rapid growth of Bitcoin proves, picking the right one is key. Especially since there are nearly 1,000 cryptocurrencies out there.
Today presents a major opportunity in the cryptocurrency market that might not be repeated for a very long time — if ever — as you’ll see here.
Hands down, the cryptocurrency market is the hottest market on Earth right now. And I can’t say if we’ll ever see another opportunity like it ever again.
for The Daily Reckoning Australia