A cryptocurrency is a digital currency, meaning it is transferred online. Since the internet is usually used to transfer information, cryptocurrency is also very similar to other types of digital information, like information on your computer or the songs you listen to on Spotify.
Cryptocurrency has been around for quite some time now, but it isn’t without its troubles. It’s complicated and confusing, and even if you have a solid understanding, there’s still a lot about cryptocurrency that may be out of your reach. In this article, we’ll teach you about the basics of cryptocurrency in easy-to-understand language.
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Some Financial Experts See Cryptocurrency as a Viable Investment
Cryptocurrency is not backed by a government or central bank but rather exists on decentralized electronic ledgers and trading platforms (known as blockchains) accessible to everyone in the world. Because of this, it’s seen as an alternative asset class that functions as an investment without being tied directly to the economy or value of any particular country.
When you purchase Cryptocurrency, you also act as a hedge against inflation: if you put money into bitcoin or another cryptocurrency, its value may increase over time while the currency against which it’s pegged loses value.
Cryptocurrency is Still Far from Being Mainstream
Cryptocurrency is indeed making headlines, but it’s still very much in the hands of those who are interested in nerd culture and early technology adoption. Despite its wild growth and buzzy reputation, cryptocurrency is still a niche market. A majority of people have heard of it (especially Bitcoin), but most don’t understand how to use it or why they would want to. Additionally, people who frequently convert cryptocurrency also are not likely to be able to eliminate their bank accounts.
Cryptocurrencies Come with a Lot of Risks and Volatility
Another thing to note is that investing in cryptocurrency is not something you want to do on a whim. Cryptocurrency is known for being highly volatile, and past gains are no guarantee of future returns. Unfortunately, there’s no way around this other than to avoid investing if you’re not comfortable with the risk. A good rule of thumb is to never invest more than you can afford to lose and always know your exit strategy before buying in. Also, to be safe, try to buy crypto with a credit card.
A few other important things to keep in mind:
- Cryptocurrency isn’t legal tender; it’s backed by nothing but the faith of its investors (which means it’s backed mostly by hype). This makes it hard for average folks like us to trust cryptocurrency as an investment vehicle since governments don’t stand behind it.
- Many cryptocurrencies are scams! Yes, even now, when awareness has spread far and wide about how they work and how they’re funded. Before putting money into a particular cryptocurrency, be sure to research its legitimacy thoroughly; there are plenty of resources online that can help guide your decision-making process here.
Different Types of Cryptocurrencies Have Different Merits and Demerits
If you’re interested in investing in the future of money, then you’ll want to learn about cryptocurrencies. If you’re still new to the topic and wonder what it’s all about, then I’m here to make sure that your questions are answered.
Bitcoin is a type of cryptocurrency that was created in 2009 by a developer or group of developers going by the name Satoshi Nakamoto. Bitcoin was one of the first cryptocurrencies, but there have since been many more created. The most popular ones are Bitcoin and Ethereum, but many others have existed as well, including Litecoin, Ripple, and Bitcoin Cash.
There is no central authority overseeing these currencies; they are completely decentralized. This aspect of them makes them relatively safe from hackers who would otherwise be able to steal funds from users. However, if one gets hacked, then other people in the network would also lose funds to compensate for the loss suffered by its victim.
Cryptocurrencies aren’t physical coins like regular currency or bills because there’s no need for such things when it comes to transferring value over distance (like sending money over the internet). As a result of this convenience, other uses for cryptocurrencies have begun appearing on the market, which isn’t present with physical currencies like Bitcoins or any other kind of coinage we’re familiar with today.
One example is MMORPGs, where players pay their subscription fees with digital currency instead of real-life money like dollars or euros, which provides substantial savings over time due to lower exchange rates.
Another example is online gambling, where bets can be made using virtual currencies instead of cash. Creating an online casino that’s much less likely to be shut down than traditional brick-and-mortar casinos operated outside regulations such as Nevada legal gambling laws.
Both types of examples show how economies have moved away from fiat currency toward digital alternatives. Both situations allow greater flexibility and security than traditional forms of payment such as credit cards or PayPal accounts.
Store Your Cryptocurrency on an Exchange or in a Digital Wallet
Bitcoin & other digital currencies are not going anywhere. They are here to stay.
The cryptocurrency revolution is here, and it is not going away anytime soon. For those who are curious about digital currencies, there are tons of pros and cons to consider before jumping in.
If you want to get into cryptocurrencies, the most important thing is that you do your research first. Ask a lot of questions online, read as many different articles as possible, and talk with a friend who has experience in this field and knows as much about cryptocurrencies as possible before you jump headfirst into the cold dark abyss of this crazy world of crypto!
Investing in Cryptocurrency is Similar to Stock Market Investment, But Still Different
Although the cryptocurrency market is similar to the stock market in many ways, such as it having volatile swings, its decentralized nature makes it different from traditional stocks that trade on a centralized exchange. As a result, the cryptocurrency market has several unique characteristics with its own set of advantages and disadvantages.
Advantages of investing in cryptocurrencies include:
- The price tends to be much more volatile than other types of assets because there is not an established value for them yet. This means you can make bigger gains and losses (depending on how lucky or unlucky you are).
- It’s open 24 hours per day, seven days each week, which allows investors who live in different parts of the world to trade at any time they want. This is especially helpful when you’re trying to buy low and sell high because no matter where someone lives, they’ll still have access to those opportunities!
Disadvantages include:
- Cryptocurrencies can be very volatile and difficult for even experts to predict what will happen next due to their decentralized nature making them harder for governments or regulatory agencies like the SEC (Securities Exchange Commission) to manage effectively.
Do Intensive Research Before You Buy Cryptocurrency
With so many ways to invest in cryptocurrency, it’s important to learn about the different methods and risks before putting your money at stake. It’s also a good idea to take time to understand what you are investing in, as this can help avoid disappointment down the road.
While the thrill of getting in on a hot new trend may be tempting, it’s best not to rush headlong into cryptocurrency without doing your research first—and if you do decide that crypto is right for you, it’s also wise not to put all of your eggs in one basket.
If and when you decide to purchase cryptocurrency, consider choosing an exchange that offers a wide range of options and makes it easy for you to get started. You might even want to look into putting some money into a “crypto fund” so that even if the market crashes or any individual currency takes a hit, you still have some assets left over.