The Bank of Spain (BdE) defines cryptocurrencies or digital currencies as “payment instruments without physical support based on a mathematical algorithm, the blockchain or the chain of blocks”. Despite being considered as an alternative to legal tender, in recent years its popularity as an investment has grown.
And he stresses that it is an asset that is not backed by a central bank and values it as a “high-risk speculative asset.” The National Securities Market Commission (CNMV) also states that “the European Supervisory Authorities warned consumers that many crypto assets, due to their very risky and speculative nature, were not suitable as an investment or as a means of payment or exchange for the majority of retail consumers.
Despite this, the increase in the value of the main cryptocurrencies has become an attraction for investors. Currently there are many cryptocurrencies and their market capitalization is close to 1.2 trillion dollars, according to the Coinmarketcap portal, although in 2021 it reached close to 3 trillion. Bitcoin is the best known cryptocurrency, followed by Ether, but there are more than 7,000 cryptocurrencies on the market.
Its price varies, like other financial assets, depending on supply and demand. But in order to operate with cryptocurrencies, they are carried out in different markets. Specifically, to operate with cryptos you have to resort to a ‘wallet’. The eToro platform explains that it is “a tool that serves to store, administer and manage cryptocurrencies”. That is, a kind of digital wallet.
Through a ‘wallet’ or ‘exchanger’
In this ‘wallet’ the transactions that are carried out through keys, which can be public or private, are registered. From eToro they point out that these keys are the ones that really give the person the property and the right over the cryptocurrencies. These wallets can be ‘hot wallet’, platforms that operate online from a website or through an application, or ‘cold wallet’, which is characterized by storing private keys on a physical or hardware device that does not have an internet connection , like a USB.
Due to its digital operations, the CNMV warned about the risk of cyberattacks: “Several crypto asset issuers and service providers have suffered cyberattacks. Many consumers have lost their crypto assets or have suffered losses due to this type of attack or for having lost the private keys they kept, without the possibility of recovering their investment.”
In addition, another alternative to enter the cryptocurrency market is to resort to the so-called ‘exchanger’. It is an exchange market in which companies offer the opportunity to exchange physical currencies -for example, euros or dollars- for cryptocurrencies. Whichever option is chosen, the financial regulator recommends informing yourself before choosing who to invest in cryptocurrencies with: “Make sure that companies are not on the warning blacklist of the competent national authorities.”
In which cryptocurrencies to invest?
When choosing which cryptocurrencies to buy, it happens as with other financial assets: there are many and the choice arose from multiple factors. First of all, on many occasions investors attend only to profitability. Over the last few months, cryptocurrencies have registered great volatility and returns do not guarantee futures. However, if we take it into account, for example, bitcoin has almost doubled or ether has appreciated by almost 60%.
But, in addition, to choose, so that you can also take into account the projects behind each cryptocurrency and that each type marks. For example, ether, the second cryptocurrency by capitalization and the currency of the Ethereum system, which in turn is a blockchain system that works as a platform for other cryptocurrencies.
