One of the worst things you can do with your hard-earned money is to let it just sit in your bank account, gathering dust. You could buy some real estate to sell later on or put some money into the stock market. Or you could invest in cryptocurrency.
Everyone reading this has likely heard of bitcoin before. It’s the mysterious online currency that somehow went from worthless to one of the hottest commodities out there.
But how does bitcoin or any of its competing cryptocurrencies work? And where did they get started?
Here are some things you need to know about the market, including tips for using cryptocurrency.
What Exactly Is Cryptocurrency?
Cryptocurrency is a form of payment or online currency. Think of it as an alternative to the standard dollar, except it’s not limited by nation or government. Some companies have developed their own currencies to be used for their services, much like a casino chip.
While some match the value of existing currencies, such as the U.S. dollar, others have significantly grown in value over the years. It all depends on the individual cryptocurrency.
Real money is exchanged for these tokens, and they work using a technology called blockchain. Blockchain is spread across multiple computers to manage and record transactions, and functions as a decentralized network. It’s not run or controlled by big tech companies.
How to Use Cryptocurrency?
Buying cryptocurrency isn’t as complicated as you’d think. Some of them, such as Bitcoin, can be purchased with normal money. Others are specifically traded for using other types of cryptocurrency.
To start, you get a “wallet” online to hold your currency. This is done through different apps or websites, such as Exodus or Robinhood. Coinbase is one popular option as lets you create a wallet and use its cryptocurrency trading exchange all in one website.
You trade cryptocurrencies directly with other users, and the prices are made up by the people trading them. If you know anything about the stock market, the concept isn’t that much different other than the fact that these investments aren’t tied to real-life companies.
Also, keep in mind that cryptocurrency isn’t sold necessarily by whole units. While some are tied to existing physical currencies, others are worth much more.
For example, because a single Bitcoin is worth much more than the U.S. dollar, they express their units in decimal exponents. You can visit this site to learn more.
The Top Options on the Market
When looking for the best cryptocurrencies to invest in, you want to keep an eye on what people are talking about and its history.
How long has it been around? What kind of cryptocurrency information is available on the internet? How secure is the platform?
You want a platform that works fast and can handle high transaction traffic. Here are some of the best options to consider if you’re jumping in.
Tether is an easy cryptocurrency to get into due to its stability, transparency, and minimal transaction charges. Designed to sync with the U.S. dollar, one token is worth one dollar. As such, it’s referred to as a fiat-collateralized stablecoin.
You can use tether to store money outside of your bank and exchange them how you see fit. It’s especially helpful to exchange them for other currencies that don’t accept government-issued currency.
Ethereum is another good option, as it’s the second-largest cryptocurrency in the world. It’s available on almost every exchange you can find, and it’s accepted by various wallets.
For High-Income Investors
Bitcoin continues to be the leader in cryptocurrency. With the longest history, most people have at least heard of it, regardless of whether they know of any other forms of cryptocurrency. To date, it still represents over 40% of the market cap.
Many businesses accept it, and larger banks are now incorporating it into their offerings. Bitcoin holds the most value, so you’ll want to invest at least a little into it.
Using cryptocurrency as popular as Bitcoin does have its drawbacks, however. Unless you can drop thousands of dollars on a single share, you’ll end up owning very small partial shares. The value also fluctuates wildly throughout the year.
There are numerous ways to invest in a cryptocurrency other than buying standalone tokens.
Investment trusts provide a product that can track the value of a bitcoin and provide security and liquidity. They help you manage your money better. There are also funds involved in bitcoin that trade on the New York Stock Exchange Arca and invest in blockchain companies.
Some of the strategies for investing include buying and holding your tokens as a long-term investment. Like the stock market, you can also play it to your benefit by selling bitcoins high and buying them back at a lower price.
While there are stable cryptocurrencies available, not all of them work the same way. Bitcoin, for example, has the most value and is a volatile asset. In a month, the value can fluctuate by thousands of dollars.
It would be wise to store your money in stablecoin first, and then make exchanges from there.
You should also be aware of an exchange’s history. Some exchanges have been hacked in the past or succumbed to glitches that altered the value of listed cryptocurrencies.
Using Cryptocurrency Safely
Before using cryptocurrency or making any investments, always do the research. While all the different types and exchanges can confuse you, your best bet is to use what’s tried and tested.
Bitcoin has the longest history and the best overall track record, so you can’t go wrong with that. Most likely, you’ll end up buying various different types of cryptocurrency so you spread out your assets.
Now that you know a little more about cryptocurrency, check out some of our other articles to learn more about other tech-related topics.