In the past few years, cryptocurrencies have become a hot topic not only in the boardrooms of Wall Street, but around the kitchen table as well. This new type of currency has taken people’s imagination by storm. Although most of us have heard of Bitcoin or other popular cryptocurrencies, we don’t know much about them or how they work.
If you are considering investing in any kind of cryptocurrency, your best bet is to do your homework about what you are getting into. Take a look at some of the basics that we have listed here to get you started.
What is it?
Simply stated, cryptocurrencies are online money. They only have value online at this point and have no paper value. They are a currency that is not regulated by any world government nor supported by any banks. This fact in itself can make the cryptocurrency market very volatile and somewhat risky for investment. Companies such as Bitcoin, Ethereum and Ripple, among many others, sell you a “coin” to be used in the online marketplace. Cryptocurrencies currently account for a $4 billion share of the economy and it is growing everyday.
Where can you spend it?
At this time, you can currently use your cryptocurrency to pay for any number of products and services purchased online. There are limitations to where you can spend it at the moment, however more and more companies are coming on board and allowing you to use cryptocurrencies for payment in a number of areas.
Where do you keep it?
One of the most commonly asked questions is “How To Store Cryptocurrencies”. If there is no paper money or voucher to hold in your hand, how do you keep this type of currency safe? In many cases, the exchange company that you used for your initial purchase will allow you to store your currency with them. You can also create a virtual “wallet” that will allow you to have access to your currency as well as your account ledger. To gain access to your wallet you must have an intricate password or key that can be entered into the system to allow access. Without this key, if it is lost or stolen, there is no way to access your currency.
Cryptocurrency as an investment
Many people are looking to get into the cryptocurrency market. With prices rising rapidly in the past year, it may seem like the perfect investment tool. Be cautious — the market is far from secure as it is still a growing trend. There is no way to predict what the future holds for this type of currency as it is so new. As an investment it may be exciting, but it comes with a good amount of risk as well.
Cryptocurrencies are expensive
Although specific values tend to change on a daily basis, on average it will cost you $10,000 to buy one “coin”. For most people looking to get into the market, that can be a pretty steep price. The good news is that you don’t have to buy a whole coin all at once. The process is the same as how the dollar works — one dollar can be split up into dimes, pennies or quarters. With cryptocurrency you can purchase just a fraction of a coin if you wish. Instead of a whole coin you may want to only buy 1/10th of a coin instead.