You must have heard about cryptocurrency in the recently announced Union Budget 2021. A cryptocurrency is a payment form which can be used and tendered online. The cryptos are a virtual currency and work on a technology known as blockchain.
Blockchains are a decentralized technology which is spread across multiple computer systems located across the world. These computers work on this technology to manage and record all the crypto transactions. It is considered to be one of the most secure payment technologies.
What is Cryptocurrency?
Cryptocurrency is very similar to the tokens or chips which you usually buy before entering a game zone. You need to exchange real cash for obtaining them, and you can use them for playing games. At the end, you can exchange the unused tokens at the counter to obtain cash.
So, a cryptocurrency can be defined as a digital form of currency which can be used to acquire services and products. Cryptocurrencies use online ledgers which are secured with very strong cryptography for security. Investors often trade in these unregulated currencies to extract profits when the prices for them go bullish.
Let us discuss about cryptocurrencies in detail and take a brief look at some of the commonly preferred currencies.
1. Market Capitalization of Cryptocurrencies
Cryptocurrencies have gained been a leading investment instrument for investors in the recent times. There are over 6700 different cryptocurrencies which are traded publicly. There are ICO or Initial Coin Offerings which are similar to an IPO in the stock market and are launched for raising money or capital.
The combined market value of all cryptocurrencies as on 10th February 2021 is over $897 billion. Bitcoin which is also the most popular cryptocurrency is pegged at $563.8 billion. For your reference the market capitalization of some of the common cryptocurrencies is given below:
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Cryptocurrency
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Market Capitalization
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Bitcoin
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$ 563.8 Billion
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Ethereum
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$ 142.9 Billion
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Tether
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$ 25.2 Billion
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Polkadot
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$ 13.9 Billion
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XRP
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$ 11.4 Billion
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2. Popularity of Cryptocurrencies
Cryptocurrencies have gained lot of popularity and have been a preferred choice for investors and their supporters due to a number of reasons. Some of the most popular reasons for their popularity include:
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Cryptocurrencies are often considered to be the currency of future by their supporters and as a result investor are racing to buy them. As a result, the valuation of these currencies is rising at a very rapid rate.
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The fact that these cryptocurrencies removes central banks from the transactions and movement of funds is often liked by the supporters. It has been observed that these banks are the one who tend to reduce the value of money via inflation.
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The technology behind the cryptocurrencies i.e. blockchain is one of the biggest reasons for their rapid growth. Blockchain is a decentralized recording and processing technology and is far more secure than traditional payment systems.
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The rapid rate at which the value of these currencies is growing is also one of the major factors liked by speculators. These speculators are least interested in the long-term acceptance of these currencies.
3. Are Cryptocurrencies Legal in India?
The Reserve Bank of India (RBI) has banned cryptocurrencies in India, but the ban was struck down by the Supreme Court of India last year. However, the cryptos are still not a legal tender in India. The exchanges though are legal but are very difficult to operate.
The Finance Minister had made it very clear in the recent announcement of Union Budget 2021 that the government will take all necessary measures to eliminate the use of cryptos as a part of the payment system. The decentralized nature of these currencies has made it the preferred choice of all illegitimate activities. The government however plans to launch their own cryptocurrency soon which will be launched and regulated by the Reserve Bank of India.
Conclusion
The rapid growth which is demonstrated by the valuation of cryptos has made them a very lucrative option for investment. However, the in insecure future of these currencies especially in India has made it very uncertain for the investors to plan any investment in them. It is recommended to wait for further announcements by the government before planning any investment in these currencies. There are various other investment options available in the market as well. A certified investment advisor can help you choose the perfect investment option for all your needs.
The rapid growth which is demonstrated by the valuation of cryptos has made them a very lucrative option for investment. However, the in insecure future of these currencies especially in India has made it very uncertain for the investors to plan any investment in them. It is recommended to wait for further announcements by the government before planning any investment in these currencies. There are various other investment options available in the market as well. A certified investment advisor can help you choose the perfect investment option for all your needs.
Happy Investing!
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