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BITCOIN OR ETHEREUM: WHICH CRYPTOCURRENCY TO CHOOSE TO INVEST?
Have you had enough of the business that pays nothing, and of life insurance where the money is frozen in a bank account? A large number of people around the world are looking for methods to put their money to work. In 2021, cryptocurrency is enticing, but there are well over a hundred digital currencies already available on the market. What is the best way to choose?
An Overview of Bitcoin vs. Ethereum
After bitcoin, Ether (ETH), the Ethereum network’s cryptocurrency, is likely the second most popular digital token (BTC). Comparisons between Ether and BTC are only inevitable, given that Ether is the second-largest cryptocurrency by market capitalization.
In many ways, ether and bitcoin are similar: both are digital currencies that are traded on internet exchanges and held in various types of cryptocurrency wallets. Both of these tokens are decentralized, which means they aren’t issued or governed by a central bank or other governing body. Both make use of blockchain, a distributed ledger technology. However, there are a number of key differences between the two most prominent cryptocurrencies in terms of market capitalization. We’ll look at the similarities and differences between bitcoin and ether in more detail below.
The Fundamentals of Bitcoin
Bitcoin was first made available in January of 2009. A unique concept offered by the enigmatic Satoshi Nakamoto in a white paper was launched: bitcoin offers the promise of an online currency that is secured without the involvement of a central authority, in contrast to government-issued currencies. There are no real bitcoins; instead, there are simply balances connected with a public ledger that has been cryptographically safeguarded. Bitcoin was not the first attempt at an online currency of this type, but rather the most successful in its early attempts, and it has come to be known as a precursor in some form to practically all cryptocurrencies that have been produced over the previous decade.
Since its inception, the concept of a virtual, decentralized currency has received wide acceptability among regulators and government organizations. In spite of the fact that it is not officially recognized as a means of payment or a store of value, Bitcoin has managed to carve out a space for itself and has been able to coexist with the financial system despite being routinely analyzed and disputed.
The Fundamentals of Ethereum
With the use of blockchain technology, developers are able to build apps that go beyond simply facilitating the use of digital currencies. Ethereum, which was launched in July 2015, is the largest and most well-established open-ended decentralized software platform in the world.
Ethereum enables the deployment of smart contracts and the development and operation of decentralized applications (dapps) without the need for any downtime, fraud, control, or intervention from a third party to be experienced. Unlike other cryptocurrencies, Ethereum comes with its own programming language that runs on a blockchain, allowing developers to create and execute distributed applications with ease.
The possible applications of Ethereum are numerous, and they are fueled by the ether cryptocurrency, which is Ethereum’s native cryptographic token (commonly abbreviated as ETH). 2014 saw Ethereum announce a presale for their cryptocurrency ether, which was met with a tremendous reaction. Ether acts as a fuel for the Ethereum network, allowing commands to be executed and is used by developers to create and run apps on the platform.
Ether is primarily used for two purposes: it is sold as a digital currency on exchanges in the same way that other cryptocurrencies are, and it is used to operate apps on the Ethereum network, which is a decentralized network. “People all throughout the world use ETH to make payments, as a store of wealth, or as collateral,” according to Ethereum.
While distributed ledgers and cryptography are at the heart of both the Bitcoin and Ethereum networks, the two are vastly different in terms of technology. Transactions on the Ethereum network, for example, may include executable code, but data attached to Bitcoin network transactions is often used merely to keep track of transactions. Other differences include block time (an ether transaction is confirmed in seconds, whereas a bitcoin transaction takes minutes) and the algorithms used (Ethereum uses ethash while Bitcoin uses SHA-256).
But, more crucially, the Bitcoin and Ethereum networks are not the same in terms of their overall goals. While bitcoin was founded as a substitute for national currencies and so seeks to be a means of exchange and a store of value, Ethereum was designed as a platform for immutable, programmable contracts and applications using its own currency.
Although BTC and ETH are both digital currencies, the fundamental goal of ether is to make the Ethereum smart contract and decentralized application (dapp) platform easier to use and commercialize.
Ethereum is another application for a blockchain that supports the Bitcoin network, however it should not be considered a direct competitor to Bitcoin. However, ether’s success has forced it to compete with all cryptocurrencies, particularly from the standpoint of traders. Since its debut in mid-2015, ether has ranked second to bitcoin in terms of market capitalization for the most of its existence. However, it’s crucial to remember that the ether ecosystem is significantly smaller than bitcoin’s: ether’s market worth was just under $16 billion in January 2020, whereas bitcoin’s was nearly 10 times that, at over $147 billion.
WHAT IS THE BEST CRYPTOCURRENCY TO INVEST YOUR MONEY?
When discussing cryptocurrencies, the name Bitcoin is frequently used. Bitcoin is the most well-known digital currency among the general population, and it’s where it all started. When we wish to invest in cryptocurrencies, however, we see that the movement has accelerated. New digital currencies are still emerging today, and some are achieving rapid success, bringing riches to those who had the foresight to believe in them.
When you don’t know much about a subject, it’s a good idea to ask questions ahead of time. Many of the terms are in English, which does not make the subject any easier to understand. There are, however, websites that describe the advantages and disadvantages of each digital money.
Cryptocurrencies are very volatile financial instruments, and while they can be used to gain a lot of money, they can also be used to lose a lot of money if you are not on the correct platform. Because, while banks are beginning to regard decentralized money as a real competitor, few still offer it, and you must go to cryptocurrency trading platforms to buy, sell, or even swap it with one another. But how do you decide which platform to use and which cryptocurrency to use?
HOW TO INVEST IN DIGITAL CURRENCIES?
On the internet, there are a variety of platforms. However, because there involve financial transactions, they must be regulated on a regular basis. The AMF (Autorité des Marchés Financiers) is the body in charge of this in France. Even though other regulating agencies are just as trustworthy, this can be reassuring when you don’t have the necessary information.
Bitcoin was the first digital currency and has gone from a price of $ 0.001 to $ 10,000 today, which may be a starting point for choosing it.
More recent Ethereum is, after Bitcoin, the most famous cryptocurrency, even if its price is undoubtedly less dreamy. Does this mean that we should refrain from investing? Certainly not.
You may even argue that investing in both is worthwhile. When you invest in a single financial asset, the risk of loss or gain is concentrated on that instrument. This is why it is always a good idea to diversify by portfolio on a variety of products.
If the price of Bitcoin falls, the investment is balanced by the rise of another commodity. And we can say that the world of cryptocurrency currently offers a wide range of options: Litecoin, Ripple, EFX, or even stablecoins, or cryptocurrencies with less unpredictable prices, which might reassure newcomers.
RISK IN INVESTING IN CRYPTO CURRENCY
1. The Market Is Volatile And Fluctuating
The value of bitcoin fluctuates on a regular basis. Bitcoin was worth $6,461.01 on November 6, 2018, according to the Bitcoin Price Index. If you were to buy a bitcoin on December 17, 2017, the price would have reached $20,000 at the time. After a few days, on the 24th, buyers were unable to sell their investment for anything more than $14,626. As of the time of this article bitcoin has reached 62,173.00 USD and ethereum was 3,794.92USD. The bitcoin market is continually ebbing and flowing in both directions. It’s impossible to foresee whether or not you will receive a return on your investment in such an uncertain market. Keep a close check on the market in order to prevent suffering a big loss. Make tiny investments; they will prove to be more advantageous in the long run.
2. Theft via the internet
Given the fact that cryptocurrency is a technology-based investment, it makes it vulnerable to cyber-attacks. Because there is no method to recover bitcoins that have been lost or stolen, hacking is a major risk to take. According to several reports, many buyers lose their investments due to currency losses and mining losses. Exchanges are more vulnerable to hacking than other types of financial institutions — even if you use a smart wallet to protect your funds. Furthermore, even if you do have a wallet and you forget or misplace your key, there is very little that can be done to recover your funds. Make a thorough investigation of your bitcoin wallets to ensure that you are using the most dependable solution.
3. Fraud is number eight on the list.
There is a considerable degree of fraud in the bitcoin market, in addition to the hacking that occurs. A growing number of buyers and sellers are trying to trade bitcoins online, however with bitcoin’s surge in popularity, some of these exchanges have been exposed as being fraudulent. The Consumer Financial Protection Bureau and the Securities and Exchange Commission have issued warnings against these types of transactions, in which naïve investors are cheated out of their bitcoins through fraudulent exchanges of digital currency. For investors, this lack of security represents a significant risk. While systems have been developed to deal with these issues, security continues to be a significant concern.
4. There is little to no regulation.
At the moment, there are no substantial laws governing the bitcoin market’s operation. The government does not have a clear position on bitcoin because the market is still in its infancy. It is not subject to taxation, which can make it an attractive investment prospect. However, if bitcoin were to become a serious competitor to the government’s currency, the lack of taxation could cause complications. Even if cryptocurrency is not widely acknowledged at this time, the future is constantly changing and evolving. It’s impossible to predict where the bitcoin market will be in a few years’ time, let alone today.
5. Reliance on Technological Resources
Bitcoin is a digital currency that operates entirely online and is reliant on technology. Various techniques are used to mine coins digitally, exchange them via smart wallets, and keep track of their whereabouts. Cryptocurrency has no value until it is backed by this technology. For the first time in the history of currency or investment, there is no tangible asset to back it up with. When you possess gold, real estate, bonds, or mutual funds, you are acquiring something that may be exchanged for another. As the owners of a digital currency that is 100 percent based on technology, bitcoin holders are more subject to cyberthreats, online fraud, and the possibility of the system being shut down.
6. Block Withholding
In order to generate new bitcoins, mathematical equations known as “blocks” must be solved. New blocks are generated every time a bitcoin exchange goes live on the internet. Instead than broadcasting the discovery of a new block to the network, a mining pool can use computational power to mine a block and conceal it from honest miners. Essentially, this is a mechanism for a select few to reap the rewards while the majority of the population is left holding the bag.
7. Limited Applicability
Bitcoin may be a step forward in the development of a new monetary exchange; nevertheless, there are just a few businesses who recognize it as a legitimate form of payment. A small number of online retailers, including Overstock.com, Newegg, and Monoprix, currently offer cryptocurrency exchanges. Bitcoin owners can also utilize their cash to travel with firms such as AirBaltic, Air Lituanica, and CheapAir.com, who accept bitcoin payments. A large number of businesses, unfortunately, do not recognize bitcoin as a genuine exchange.
8. Loss of Financial Resources
Bitcoin has been compared to as a Ponzi scheme, with those at the top of the pyramid profiting on the inexperience of those at the bottom. As more people invest in bitcoin, the economy becomes increasingly inflated. When the bubble breaks, bitcoin will essentially become worthless, as there will be a large number of people hanging onto cryptocurrency with the intention of selling but unable to do so due to the lack of liquidity. There is no return on the investment, which might result in a financially devastating financial loss for the investor.
9. Is it better to invest in currency or in an investment opportunity?
Cryptocurrency has the potential to be a useful online currency exchange; nevertheless, buyers of bitcoins do so with the intention of making an investment, just like they would with stocks. Some people even believe that bitcoin is a good investment option for their retirement years. With a continuously moving market, no regulation, and no tangible collateral, investors may find themselves in a position where they have lost everything they have invested. While bitcoin has the potential to be profitable, it is advisable to proceed with care while making this investment. Small investments and baby initiatives will go a long way toward achieving greater results.
10. Technology that is still in its infancy
Cryptocurrency is a relatively new technology that is still in its early stages. Bitcoin was created almost ten years ago, and it has yet to mature into a reliable financial instrument. With so many changes taking place in the market during the last several years, it’s impossible to predict how the market will develop. Bitcoin, as we currently know it, may become obsolete in the near future. The most prudent strategy to taking advantage of this new investing opportunity is to proceed with care and due diligence. Take the necessary actions to protect your funds, and prepare yourself for the market’s future direction.
Invest money you are willing to loose. Every investment carries an amount of risk or/and reward
The material given on this website is not intended to be investment, tax, or financial guidance. It is recommended that you seek guidance from a licensed specialist on your individual situation.