Cryptocurrency is a digital currency in which encryption techniques are used to generate the generation of units and verification of transactions, control the supply of additional units, and verify the transfer of assets. With that said Cryptocurrencies like Bitcoin have taken off in recent years. After its major explosion in 2013/14 and subsequent collapse due to some bad PR moves by its founder, people have been unsure whether it will take off again or if we were all just sucked into the new internet bubble everyone was talking about back then.
It seems however after its incredible rise so far this year it doesn’t look like going away any time soon. So how do you invest? What should I buy? How do I buy it? What is a blockchain? So many questions!
Here is a list of things you need to know about cryptocurrency. It’s not for everyone and if you’re thinking of investing read the following advice first to make sure you understand what you’re getting into, where your money goes and how safe it really is. Before we get started let me explain the basics of cryptocurrencies:
What are Cryptocurrencies?
Cryptocurrencies are digital currencies in which encryption techniques are used to regulate the generation of units and verify transfers of funds operating independently from a central bank or administrator. There are a number of cryptocurrencies available today and they can be traded on exchanges for real currency. The most widely known cryptocurrency is Bitcoin, others include Litecoin, Dogecoin, Nextcoin, etc.
What do I need to invest in?
Cryptocurrencies can be purchased at online currency exchanges. In order to get the best price, you will have to shop around. And learn about different currencies, you should learn how to buy the dogecoin or how to buy shiba inu coin at the best price. Once purchased it is stored in a digital wallet from where funds can be sent or received using mobile apps or computers.
How much does it cost?
The price of cryptocurrencies changes depending on what you purchase and how many units of that particular currency you want. Generally speaking, their price will rise as people become more aware of them and demand increases. According to the Bitcoin Price Index, the average price of Bitcoin from January 2015 until June 2016 was around $450 per BTC.
How do I buy cryptocurrencies?
In order to purchase Cryptocurrencies, you will need to set up a digital wallet where you can store your funds. There are several available for this including Coinbase, Blockchain, and Mycelium. You will also need to join an online currency market or exchange service in order to trade one cryptocurrency for another or even real currency, depending on what you want to buy with it. The biggest exchanges at the time of writing include Bittrex, Poloniex, Kraken, GDAX (run by Coinbase), and BTC markets. Most reputable exchanges have good security practices that protect your privacy and cryptocurrency.
Risks to be aware of:
Before making a purchase you should do your research and understand the risks involved which include scams, hacks, market volatility, and government intervention. The market value of cryptocurrencies is highly volatile because it’s largely based on speculation. In fact, as I write this article Ethereum (second-biggest cryptocurrency) has lost 20% of its value in the last few hours as a major exchange was attacked by hackers stealing around $63 million worth.
Cryptocurrency doesn’t have an advantage over other currencies when it comes to spending because generally speaking most places don’t accept them yet. You can usually find somewhere that will let you spend your Bitcoin or Litecoin at online currency exchanges but there still aren’t many places that you can physically walk into and use them. There are people making huge amounts of money with cryptocurrency though, some by mining it but this requires an insane amount of computer power and isn’t realistic for most people (you usually need to invest in your own server) or simply trading through currency exchanges.
Clearly, this isn’t for everyone, if you’re considering it then do your research first. The best advice I can give is to look at the long-term potential of cryptocurrency, just like any other currency, and be ready to lose it all!
And remember, what goes up must come down. This is by no means financial advice but based on my own experience with cryptocurrencies. Please leave a comment if you have anything to add or ask.
ALSO READ: THE BASICS OF BITCOIN INVESTING