With the meteoric rise of Bitcoin and other altcoins this past year, investing in digital currency is no longer reserved for computer geeks and hackers. Buying and selling cryptocurrency has become a popular new way to invest your money, much like stocks, bonds or real estate. In fact, the market for cryptocurrency investments is growing so fast that it now rivals even the gold market in terms of its size.
What is Cryptocurrency?
Simply, cryptocurrency is digital money that is designed to be secure, anonymous and difficult to counterfeit. Cryptocurrency has become a new way to invest your money, much like stocks, bonds or real estate. The most common cryptocurrency is Bitcoin, which you’ve probably heard about if you’ve been paying attention to financial news in the last year.
How Does Cryptocurrency Work?
The idea behind cryptocurrencies is that people can use digital money to buy and sell goods, buy services and send money to one another in a secure way that avoids government regulation and control. The most common form of cryptocurrency is Bitcoin, which you’ve probably heard about if you’ve been paying attention to financial news in the last year. In the early days of the internet, many people thought it would be a way to replace physical cash altogether, but that never really happened due to a number of limitations. Cryptocurrency aims to correct those issues by creating a payment network that is decentralized, accessible, anonymous and secure. Instead of relying on a single authority like a government or financial institution, cryptocurrencies use a decentralized network to verify and transfer money. This means that there is no single point of failure or hacker target.
Why Should You Care About Investing in Cryptocurrency?
Cryptocurrency is still a very new asset class, and the hype and speculation surrounding it has led to massive volatility in price. You could make a lot of short-term money by day trading or shorting cryptocurrencies. However, you might also lose a lot of money if you don’t have a solid strategy to mitigate risk. Many analysts believe that the long-term value of many cryptocurrencies will increase as they become more widely used. If you buy and hold cryptocurrencies for the long term, you might see your investment grow massively. This could be especially true if cryptocurrency replaces government-backed currencies as the primary way to buy goods and services online.
How to Buy and Sell Cryptocurrency
You can use a cryptocurrency exchange to buy and sell cryptocurrencies, and many of these exchanges will let you use a credit card or bank account to fund your account. You can then trade your dollars, pounds or euros for Bitcoin or another cryptocurrency. While the process of buying and selling cryptocurrencies is fairly straightforward, you’ll need to carefully research the exchange you decide to use. You don’t want to use an exchange that is likely to steal your money or become insolvent. There are many different exchanges, each with unique features and pros and cons. You’ll need to decide which exchange is right for you based on factors such as security, ease of use and the cryptocurrencies they support.
Which Cryptocurrencies Should You Invest In?
There are many different cryptocurrencies, and you should carefully research each one before you decide to buy or sell. The best place to start is with the top 10 cryptocurrencies by market capitalization. You can find a list of the top 100 cryptocurrencies at websites like CoinMarketCap. Once you’ve found a few promising coins, you should read their whitepapers and business plans. This will help you decide which coins are most likely to grow in value over the long term, which is what you want to look for in an investment.
Where to Store Your Bitcoins and Altcoins
Once you’ve bought your cryptocurrencies, you’ll need to store them somewhere. You can store your digital money in a cryptocurrency wallet, which lets you access your coins anywhere, anytime. The most secure cryptocurrency wallets use a combination of software, hardware and paper to store your coins. You’ll need to carefully select a cryptocurrency wallet that supports the coins you own. While most wallets support several cryptocurrencies, you should make sure yours includes the coins that you want to hold long term. You should also keep your cryptocurrency wallet off of your computer or smartphone. This is because both devices are easier targets for hackers than a dedicated hardware wallet.
Final Words: Be Careful With Your Money
Cryptocurrencies are a brand new asset class that you should approach with extreme caution. While there are many opportunities to make money by investing in digital currency, you should be prepared to lose it all too. Despite increasing mainstream adoption and positive long-term predictions, the cryptocurrency market is still very volatile. If you are new to investing, you should approach cryptocurrency with a cautious strategy and only invest money that you can afford to lose.
