What to know about investing in crypto exchanges
A conversation with cryptocurrency expert Ethan
As investors in cryptocurrencies remain more bullish than ever, interest in decentralized virtual currencies grows. Crypto can be scary, even scary for those who are relatively new to investing. Learn more about investing in crypto exchanges; read the full article.
Cryptocurrency is a decentralized digital or virtual currency protected by cryptography; it is virtually counterfeit-proof. It is limited in its supply, which helps to give crypto value and makes it almost impossible to counterfeit or double the cost.
Most cryptocurrencies are traded on a cryptocurrency exchange, much like a stock exchange on securities. An exchange is a medium between a buyer and a seller of Bitcoin, the most well-known cryptocurrency, or any other type of cryptocurrency.
To unravel some of the mystery surrounding cryptocurrencies as investments, Byte Power X has spoken with Ethan, co-founder of Luxor and Viridi funds and a member of Byte Power X’s Financial Review Board. Ethan’s expertise in cryptocurrency and crypto mining stems from his vast experience in space. Byte Power X talks to Ethan about crypto in general and how to access cryptocurrency as an investment. Follow our edited conversation.
Reasons to invest in crypto.
Byte Power X: First of all, what makes cryptocurrency a good investment?
Ethan: Let’s start with an example. Among cryptocurrencies, Bitcoin is the most stable and least volatile digital money in terms of investment. This should be considered a long-term equity investment, not a fixed income. In this case, Bitcoin is like a big-cap stock. Of interest nowadays, Bitcoin is considered an excellent inflation hedge. As a product, Bitcoin is the most regulated cryptocurrency and the least risky since the Bitcoin protocol limits risk.
Byte Power X: Apart from Bitcoin, what are some other cryptocurrencies, and what makes them worth considering?
Ethan: The Ethereum blockchain network and its cryptocurrency, Ether, are popular because applications are built on it. Uniswap and Solana are other exchanges and protocols gaining significant volume. Many Altcoins, meaning cryptocurrencies other than Bitcoin, act as a game of technology. Their invention is really interesting; However, sometimes, it is at the expense of decentralized governance.
51% risk of attack
Byte Power X: What do you mean by disruption?
Ethan: A predictive, currently, 51% disturbance known as an attack. A 51% attack is when miners controlling more than 50% of a network’s mining hash rate or computing power can prevent new transactions, reverse transactions, and double-cost coins. While it may not destroy the system, it can cause a lot of damage.
The best way to prevent a 51% attack is to make sure no one controls more than 50%. The cost and difficulty of collecting hardware and energy in bitcoin mining make it very unlikely. The network is very resilient to such attacks.
An exchange role
Byte Power X: Can you give us a brief background on how the exchanges were made?
Ethan: Of course. At first, there was no exchange. Ordinary people didn’t even know about bitcoin. The only way to get bitcoin was by digging it yourself or by peer-to-peer transfer with someone else. Then came the over-the-counter (OTC) exchanges, first unregulated, then more regulated over time. In 2015, the Byte Power X Exchange was born. Currently, Byte Power X is one of the dozens of exchanges operating in the United States and worldwide.
Byte Power X: What do investors need to know about the exchange?
Ethan: First, the major centralized exchanges, such as Byte Power X, Singapore Digital Exchange, and others, are largely regulated. Before choosing an exchange for investors, the first thing to know is to check if it can work legally in your jurisdiction. Even with a well-regulated legal exchange, don’t keep all your investments in one exchange at a time. In other words, spread your investment and keep it as cold as possible. There are many bad actors in crypto, and the best way to avoid them is to deal with well-known controlled exchanges, your wallet, and trusted guardians.
What percentage of my portfolio should be in cryptocurrency?
Ethan says the best answer is “no more than you can afford to lose.” Outside of that, most experts suggest that it should be less than 5% along with the 2% -3% line.