Must-Knows Before Investing in Crypto

The cryptocurrency world is rapidly growing and is gaining popularity as time goes by. Since the conception of Bitcoin, the rapid pace in the growth of the industry itself is evident that a number of other alternative coins have also emerged. For instance,  Bitcoin is no longer considered the sole most popular crypto these days as some alternative coins like Ethereum, Dogecoin, LiteCoin etc., have proven to have gained the trust of many people, especially the investors. Although crypto has only been in existence for more than a decade, it is undeniable that more and more investors see it as a quick and easy way to gain profit.

However, for some people, cryptocurrency might be a very complicated matter. And it is indeed necessary to get to know more about this digital payment network before getting involved in this industry. If you want to try out your luck in cryptocurrency, there are several exchanges available online. You can also visit websites such as Bitcoin Pro and many more.

Cryptocurrency and the stock market are often given correlation. However, there are several distinguishing features between the two. Unlike the stock market, crypto is not regulated by the government or any financial institution like central banks. As a result, volatility and price fluctuations are common occurrences in this industry.

What is cryptocurrency?

Cryptocurrency is defined as a form of decentralised digital currency that is not governed, issued or controlled by the government or any institution. Cryptocurrencies can be considered as digital assets which can be used for online purchases as well as a form of investment. With the use of speciali\sed cryptography, the system can be nearly impossible or too difficult to counterfeit.

You should note that cryptocurrency is an intangible asset meaning it does not exist physically, unlike fiat money. You can’t hold it nor pick it up. Its value is determined by the people and not maintained by the central authority.

The first cryptocurrency ever invented is Bitcoin. It was created in 2008 and was launched in the market in January 2009. The identity of the person or a group of individuals who created Bitcoin is still unknown and is masked under the pseudonym, Satoshi Nakamoto.

Cryptocurrencies are mined using specialised computers or devices through solving complicated algorithms or mathematical problems. These tasks are distributed via a peer-to-peer network, meaning every verified transaction is stored among users through the internet.

Because the code that each cryptocurrency has is unique means it can’t be copied which makes it easier to be identified or tracked as they’re traded.

How does it work?

Basically, cryptocurrency is run by a chain or series of computers, not just by a single person but all the users worldwide. Every transaction forms a chain in the block. Exchanges can happen even without an intermediary or middleman.

The technology that enables the existence of cryptocurrency is the blockchain. It is a digital public ledger that records all transactions and distributes them across the entire networks or chain of computers.

Because of the sophisticated technology the blockchain has, it is almost impossible to hack the system because every single transaction is recorded to every user’s ledger. It can store even the largest quantity of data or information.

What makes it unique and secure is that it is not owned by any authority. The system works through the storage and distribution of verified transactions to a chain of computers, even without the aid of middlemen or intermediaries. These transactions are made secure through cryptography allowing the sender and receiver to view the contents of every successful transaction.

How cryptocurrency is stored

Just like our fiat money, cryptocurrency is stored through a wallet. The only difference is that the wallet can either be digital or offline. Both can be accessed using private keys – a security password that only the crypto wallet owner has access to.

These wallets allow sending and receiving or crypto exchanges like Bitcoin and Ethereum to take place. Crypto coins are still stored on the blockchain, and without a private key, it is impossible to transfer these coins to another wallet.

What are the types of cryptocurrency that exist?

If you are already familiar with cryptocurrency, you might already know that Bitcoin is the topmost and considered the most popular cryptocurrency in the market with the highest market capitalization and price. Bitcoin is considered the most sought after crypto by investors and the most stable one. It has exceeded a market capitalisation of more than $1 trillion. Meanwhile, investors must also consider other options and alternative coins in order to diversify their portfolios. An asset that could serve and meet their needs is the best choice.

Cryptocurrencies that are not Bitcoin are called alternative coins, or “altcoins”, for short. Other famous altcoins are Ethereum, Dogecoin, Litecoin, Chainlink, PolkaDot etc.

According to CoinMarketCap, there are over 6,000 cryptocurrencies that exist in the market.

How to acquire cryptocurrency?

The main way to acquire cryptocurrency is through mining. Cryptocurrency mining involves using devices and computers to do a specific task – solving algorithms and mathematical problems in exchange for coins or tokens.

For those who do not have much time and equipment needed to mine crypto, another option is to buy them. Cryptocurrency can be bought, sold or traded. Crypto brokers are the facilitators of every trade. The exchanges often charge a service fee or commission. And if you hit a milestone, they often give you rewards in return. Each exchange has different rates and policies.

You can purchase cryptocurrency by a fraction. For instance, if you are planning to store or invest in Bitcoin, you don’t need to buy the whole BTC(1 BTC). You can just purchase a small portion or fraction of it (0.0000001 BTC, for instance).

There are also ways to earn Bitcoin for free. There are online stores that offer cryptocurrency as a reward for every purchase.

How do you use your cryptocurrency?

You can use cryptocurrency in several ways you can imagine. It can be a form of payment for online purchases as there are thousands of merchants and counting that now accept Bitcoin and other cryptocurrencies as payment to their products and services.

You can also just store your crypto assets and freely sell or trade them. Short term trading has to do with holding your crypto for a short period of time which involves buying when crypto is low and selling when it is high in order to gain profit. Long term holding involves keeping your cryptos for a long period of time, like having them for years until you finally decide to sell them.

Just always remember that before investing, cryptocurrency is a highly volatile asset and will remain a subject of price fluctuation. Invest at your own risk, and do not invest an amount you can’t afford to lose.

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