What is the best cryptocurrency to invest in right now? The cryptocurrency boom has not left any investment opportunities untapped. The demand for cryptocurrency has been trending steadily since 2014 but recently has taken a higher level. People seem to be increasingly attracted to invest in cryptocurrencies rather than physical currency.
However, these investments are not easy to take a hold of as such money was not meant for offline investments. The demand for cryptocurrencies is also likely to increase as there are more and more countries setting up payments systems and changing their payment mechanisms from cash to digital money (Nonons, 2015). As these systems gain greater use, digital money should become a medium of exchange.
What is a cryptocurrency?
There are cryptocurrencies that offer unparalleled convenience, which makes them a formidable alternative to physical currency. The advantages of blockchain technology give the cryptocurrency to have a strict chain of authors, where transactions are held long (Nonons, 2015). Unlike traditional financial institutions, blockchain payments require zero costs or intermediaries to process payments (Masselat, 2014).
Certain cryptocurrencies such as Bitcoin are extremely popular in the market with an estimated market value of $168 billion (CFR, 2016). The value of Bitcoin dropped by approximately 50% as the value of currencies globally was impacted by the outbreak of the coronavirus (Walsh, 2016). Other cryptocurrencies such as Ether and Ripple have still been finding demand with the cryptocurrency becoming more popular than its tradable form of crypto. However, the investments of these cryptocurrencies is a different issue from the digital money.
Cryptocurrencies and digital money
Digital money is a method of making payments using digital balances. It is a transparent system where all the transactions are verified and verified by a central authority. The transactions are distributed across different users without any intermediary. In short, digital money is a centralized payment system where all transactions are verified to have used a particular virtual unit (Al-Gharib, 2015). Unlike cryptocurrencies, digital money does not offer unrestricted access and can be spent over and over again. Nonetheless, financial institutions are starting to invest in digital currencies which are integrated into their digital assets. Citibank has launched financial products using digital currencies including Bitcoin (Goodsman, 2014). PayPal and Visa have also said that they support the security of digital currencies while they are under development (Comerford, 2014).
The impact of digital currencies
Digital currencies continue to gain traction in the market especially in the Middle East, Latin America, Africa, and Asia.
The traditional financial system and especially banks are embracing digital currencies to pave the way for more convenient and safer methods of payments (Reid, 2016). The benefit of digital currencies includes quick settlement and automatic transfers of funds to digital accounts (Mino, 2016). In addition, easy and scalable business operations have been proposed in digital currencies, which are far more effective and secure than their conventional, paper-based currency (Kenny, 2015).
Government regulations are also increasingly moving towards digital currencies as countries and local populations express interest in the new way of financial transactions (Al-Gharib, 2015). Furthermore, despite the high security of digital currencies, network effects have been proposed as a substantial competitive advantage for digital currencies over traditional currencies.
In conclusion, the rapid growth of digital currencies is not only a milestone in economic development, but it has also produced real benefits to people. One day, these payments systems are expected to help bring together economies beyond the boundaries of geographical boundaries. Eventually, digital currencies may not only be an alternative to traditional currency but even have a future role in monetary policy as they are trusted on a global scale (Muammar, 2016).
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Goodsman, B. (2014). Digital currencies: a new digital payment system? Daytona Beach, FL: Zoli Publications.
Kenny, T. (2015). Digital currency regulation. Retrieved from http://www.sc.unu.edu/AgNews/us/papers/2016-03/Digitalcurrencyregulation.pdf
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