Cryptocurrency for Dummies: A Guide to Investing
Cryptocurrency is the future of investing. It’s fast, secure, and offers an unprecedented level of privacy. This article is designed to give you everything you need to know about cryptocurrencies. You’ll learn how they work, why they’re so popular, and what makes them different from traditional currencies. You’ll also find out how to buy your first coins and which ones are worth considering for investment.
You don’t have to be a genius or mathematician to understand how cryptocurrencies work. In this article, we break down complicated topics into easy-to-understand language so that anyone can learn about cryptocurrency and get started with their investment portfolio right away. No matter what your background is, this guide will help make sure your money is safe and sound in the digital age.
What is cryptocurrency and how does it work?
Cryptocurrency is a type of digital currency that uses cryptography to secure transactions and control the creation of new units. It’s decentralized, meaning it doesn’t rely on banks or governments to create more money. You can use cryptocurrency as an investment, trade it for other currencies, buy goods with it, or even mine them if you’re lucky enough to have powerful computers!
The first-ever cryptocurrency was Bitcoin in 2009. Since then, there has been a huge increase in cryptocurrencies with many different purposes such as Ethereum, which is used for smart contracts, and Ripple, which is used by financial institutions around the world.
There are now over 1,000 cryptocurrencies available today. All of these coins are created on a digital blockchain, using cryptography to secure the information that’s being shared across an internet network. This means that you never have to worry about losing your money because all records can be tracked and traced back to one person – you!
How to get started on investing in cryptocurrency?
There are a few ways to invest in cryptocurrency, but they all start with buying the coins. The first thing you need is an account on either Coinbase or Poloniex which will let you buy Bitcoin and other altcoins like Ethereum or Litecoin. Once your purchase has been made, head over to Binance where you can exchange it for different types of cryptocurrencies!
The most popular way people get started investing in cryptocurrency is by mining them from home using a powerful computer as everyone tries their luck at earning some Bitcoins this way. Mining is the process of earning bitcoin for running a program that verifies transactions to be made on the blockchain. Bitcoin transactions provide security for the network and this is compensated for by giving them bitcoins.
What types of cryptocurrencies can you invest in?
There are many different types of cryptocurrency available to invest in. You can buy Bitcoin, for example, on either Coinbase or Poloniex which will let you buy this coin and other altcoins like Ethereum, Litecoin, Stellar, and Ripple. Once your purchase has been made, head over to Binance where you can exchange it.
The pros and cons of trading cryptocurrency over traditional investments like stocks or bonds
Trading cryptocurrency has two major advantages over traditional investments such as stocks and bonds.
- The first is security. As we mentioned before, cryptocurrencies are decentralized which means that it’s more secure than bank accounts because there isn’t a centralized entity to attack or hack into your funds.
- Secondly, you can trade cryptocurrency anywhere in the world! Stocks and Bonds on the other hand require an investment manager who may not be available if traveling abroad for work.
The cons of trading cryptocurrencies include the following:
- Volatility. With any currency being used by traders, this becomes apparent. But what makes cryptocurrencies even riskier to invest in is their high volatility – meaning they’re subject to huge swings in value within short periods.
- Difficulty in acquiring cryptocurrency. It’s relatively easy to invest in stocks and bonds. There are many brokers online that offer a service of securing funds for you. But when dealing with cryptocurrencies, this isn’t available. Investors need to be more proactive about finding providers who can exchange fiat currency for cryptocurrencies like Bitcoin or Ethereum.
- Security breaches within cryptocurrency exchanges. This has caused people significant losses due to their inability to access their accounts because personal information was lost or stolen (or exploited). There were also cases where customers weren’t able to withdraw money from some exchanges during periods of high demand such as after Brexit. This led to steep drops in value on these particular exchanges.
What are some pitfalls that beginners should be aware of when buying into this new market?
- There are many different cryptocurrencies, each with its own strengths and weaknesses. It’s important to do some research before buying into any particular cryptocurrency so you know what they’re used for and how much risk is involved in the investment.
- People who buy a lot of Bitcoin at one time may experience additional taxes due when exchanging it back for fiat currency because there isn’t an expected rate that applies all the time.
- It’s important to keep your cryptocurrency private keys and passwords safe. You don’t want anyone else getting access because they could steal everything you’ve invested in that specific coin!
- Cryptocurrency wallets aren’t insured by the FDIC, so it’s a good idea not to invest more than what you can afford to lose if something goes wrong with the wallet.
Why would I want to take my money out of the stock market and put it into cryptocurrencies?
If you’re looking for a new and exciting investment opportunity with the potential to make more money than what you can do with traditional investments such as stocks, then cryptocurrency might be just what you’ve been waiting for.
The price of Bitcoin has gone up several times in 2017 which means that those who invested early made a lot of money!