How to invest in cryptocurrencies?
If you are wondering what cryptocurrency is and how to invest in such assets through the eToro platform, you have come to the right place.
In this guide, we will explain what cryptocurrency is and introduce everything you need to know about these new assets that are getting more and more attention.
What is Cryptocurrency?
The concept of crypto-currency was born on November 1, 2008 with the distribution of the Bitcoin White Paper in a mailing list specializing in cryptography, by an anonymous person operating under the pseudonym of Satoshi Nakamoto.
Based on cryptographic processes, this open source technology quickly developed.
In these different crypto-currencies, the currency is therefore now created by computer and is maintained directly by contributors (called miners for example on Bitcoin) who operate a network node and make computing power available in order to keep and to validate the transactions of the different networks.
The promise of a peer-to-peer currency without a centralized trusted third party and offering the possibility of exchanging value cheaply, quickly and anonymously quickly won over many libertarians.
Since then, thousands of crypto-currencies have been invented, all trying to address very different issues. While some like USDt, Facebook’s Libra, EURx or other central bank currencies currently in development try to provide a digital gateway with the dollar or other fiat currencies, other cryptocurrencies like Ethereum, EOS or even Tezos develop the necessary tools to allow developers to create decentralized applications in an optimal way.
How and why was it created?
While the idea of crypto-currencies appeared in November 2008, it took until January 3, 2009 for the first block of crypto-currency to be mined, then on January 12 for the first transaction of 10 BTC to take place between Satoshi Nakamoto and Hal Finney .
That year, the United States was barely emerging from the subprime crisis and confidence in traditional players in the financial world such as banks was strongly called into question. Bitcoin was therefore born with the ambition of becoming a credible alternative to currencies such as the Dollar or the Euro. First used as an exchange currency on certain darkweb sites, Bitcoin quickly attracted speculators and financiers of all kinds thanks to its strong price variations.
Several people seeing the potential of this technology have subsequently decided to improve certain characteristics of the protocol and/or to create complementary concepts.
Inspired by the success of Bitcoin, a Russian developer named Vitalik Buterin, for example, decided to create Ethereum, a platform allowing much more than just the exchange of cryptocurrencies.
Where Bitcoin has revolutionized the transfer of assets without going through an intermediary, Ethereum offers a complete platform allowing in particular the implementation of autonomous contracts called “Smart Contract”.
“Smart contracts” or intelligent contracts in French are therefore code that checks and executes the conditions of a contract in an autonomous way. Thanks to this technology, developers have now been able to obtain the tools necessary to create and launch decentralized applications.
The simplicity of the Ethereum protocol enabled the crypto-currency boom in 2017, in particular through the creation of Initial Coin Offering (ICO), a new way of raising funds through the issuance of ERC20 tokens, the most widespread standard in the Ethereum community.
Building on the success of Ethereum and Bitcoin, hundreds of projects then took advantage of the enthusiasm for this new technology to launch competing blockchains, each with their own standard. Among the famous competitors of Ethereum, we can for example cite EOS, which raised 4 billion via its ICO or the TRON blockchain.
Investing in cryptocurrency on eToro?
In order to buy or sell cryptocurrencies, you simply need to go to the “Markets” page and then click on the Crypto tab. You can also go to the page of a specific cryptocurrency by searching for the asset in question via the “Search” tab.
On this window you will be able to choose whether you invest at the market price or whether you prefer to open an order so that your trade opens at a predefined price.
Then all you have to do is enter the amount you want to invest. The minimum to open a cryptocurrency trade on eToro is $25, you can find the details of the minimum needed for each asset on this page .
Finally, you will have to adjust your leverage, your Take Profit and Stop Loss if you wish to exit the position at a predefined price. If you are not using leverage, you can choose to put no Stop Loss and no Take Profit.
Once satisfied with all the parameters of your trade, you just need to click on “Open position” in order to complete the operation.
Why this technology has the potential to change the financial industry
At eToro, we are convinced that this technology has the power to change a lot of things in the world and particularly in the financial industry.
To do this, we launched in 2019, eToro X, an independent division of the eToro platform which takes care of all our blockchain projects such as Good Dollar , the wallet , the eToro X cryptocurrency platform
Blockchain has the potential to revolutionize finance in the same way the internet has changed the way we communicate and inform ourselves.
Thanks to the expansion of this technology, it will now be possible to pay large amounts without paperwork, in an extremely simple and completely decentralized way.
For example, recently, Société Générale via its internal startup Forge issued 40 million Euros of AAA bonds on the Ethereum blockchain. Unlike its first bond issue of 100 million Euros on the blockchain, the Bank this time was able to settle this transaction using a central bank digital currency demonstrating the feasibility of the digital settlement and delivery of financial securities using the blockchain.