When crypto performs better than the stock market

If you’ve heard the word ‘digital currency’ or ‘cryptocurrency’ over the past few weeks, it’s fair to say you’re probably feeling a bit confused. Cryptocurrencies, in particular, have been a hot topic this week as the debate has grown more heated than ever. Both major parties have launched their own cryptocurrency plans and a growing number of political and business leaders have spoken out against the idea of regulating them. It's not clear which entity will prevail in this battle for dominance – but whoever does, it will be one that does so with better-than-stock performance. That's because cryptocurrency does better than most other investments when played exclusively rather than alongside conventional stock market bets. The reason why is quite simple: cryptocurrencies offer a different perspective on reality altogether. Instead of trying to make sense of the money changers around them, digital currencies focus on making sure everyone can transact safely and securely without fear of cyberattacks or other hardship. In other words, they're much more like stock markets than like central banks or other financial institutions.

What is a cryptocurrency?

A cryptocurrency is any volatile digital currency that has not been issued or long since issued by any particular national or regulatory authority. All cryptocurrencies are not created equally. Some are more valuable than others and some can be used to purchase almost any product or service.

How to buy crypto

There are a variety of ways to buy cryptocurrency, and they all have their pros and cons. The most popular way to buy cryptocurrencies is through an exchange. An exchange is a platform where you can buy or sell cryptocurrency in exchange for other cryptocurrencies. Once you’ve bought or sold the required amount of cryptocurrency, the exchange will refund any funds you didn’t get back. There are many different kinds of exchanges. Some are entirely digital and others are mainly digital assets, like dollars and cents.

The benefits of cryptocurrency

Like all investments, cryptocurrency is likely to increase in value over time. That’s because it’s built around a concept called ‘financial assets’ – money, shares, bonds, commodities, etc. At its core, a cryptocurrency is a contract. A contract is a legal document that binds two parties together. If one party breaches the contract, the other party has two ways to enforce their claim: 1) Where do I find the money to pay the debt? And 2) Where do I find my legal identity? To build a blockchain with all of the necessary information to self-execute and enforce the contract is one of the most important tasks ahead of any business. The blockchain needs to store data that is related to the contract, like details about the amount owed or the assets the parties have agreed to share.

Strategies for profit from cryptocurrency

Here are a couple of strategies for profit from cryptocurrency. Staking - Staking is taking control of an asset through trust. When you own a cryptocurrency, you are controlling it as well as owning it as a security. For example, if you owned $100 worth of Ethereum, you could potentially profit from $20 in short-term investments. Staking allows you to gain ownership of an asset that you haven’t yet the right to. So if you want to invest in Bitcoin, you’ll need to first determine if you’re actually allowed to hold that asset. Once you’ve determined if you can do so, you can wait a few months before investing in that asset again. Rent-seeking - The purpose of a rental is to try to unload an asset at a higher price via a lower-quality competitor. You might rent shares in a company that is making a lot of money, or you might rent out a building to avoid paying property taxes. Rents usually benefit those with access to cheaper labor or better access to markets.

How to store virtual money with safety and integrity

You’re likely going to save money virtually by putting money into a digital wallet like Bitcoin or Ethereum. You can buy or sell the coins in the wallet and then store them in a secure online location. You can also take the coins out and use them at any point in the future.

Final thoughts

Now that you know what cryptocurrencies are, what they do, and what strategies exist for profit from them, it’s time to put your knowledge to the test. By analyzing the performance of the leading cryptocurrencies, you’ll be able to identify the most promising opportunities and set yourself up for success.

This is no financial advice!

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Photo by Chris Liverani

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